Vancouver is the scene of a wonderfully diverse and burgeoning technology economy. One effort I am making to shepherd this along is with a film I’ve been producing in partnership with the Vancouver Film School, Microsoft Canada, BCTIA, VEDC, and BC Innovation Council. Another is of course the entrepreneurial endeavour begun by Patrick and I last summer, AppSocial Media. That said, I am quite excited about the arrival of Grow 2010.
Some have, in the past, argued that Vancouver’s large and growing technology talent pool is largely untapped. That’s patently untrue. Business Objects and SAP have made great hay from both the marketing/sales side and the engineering side. BOBJ founder and chairman Bernard Liautaud is rumoured to have declared that Vancouver, which during Business Objects’ boom period employed 1,200 people, was far and away the “engine room” of the business. Microsoft, Disney, Pixar (now a Disney subsidiary) and others are waking up to this reality as well… and of course Electronic Arts has long known that Vancouver possesses just the right mix of people to catalyze real market shifts.
So Vancouver’s tech wunderkind are delivering real, demonstrated value day-in and day-out in ways that affect us all. What is different here from places like Silicon Valley is how we benefit, both individually and as a community. Recently I sat down with the founders of two different local companies in the same day, and both had something in common. They had sold their companies to larger entities and were still working on that same product. One sold his company after a few months to a much larger organization, which gave his firm the capital and market reach to thrive and survive long development cycles. The other built his company over years to sell to financiers who assumed management and graciously kept him on as an employee. He takes a salary far below par and holds a single-digit percentage in his own creation. In Silicon Valley this is referred to as a “bunt”.
In each of these scenarios, the companies have gone on to create hugely impactful products and services, garnering tens of millions a year, in high-margin businesses. Neither of these founders, however, have profited substantially from these endeavours though. This is because for these companies, selling to another company wasn’t an exit strategy… it was a financing strategy. And in a city where capital flows on a pace that is best measured geologically, selling your company early is sometimes the only way to finance your vision.
Of course, any form of financing could be referred to as “selling your company”. That’s the process. You break a piece of your dream off in order to pull together other peoples’ money to fund its development. However, when greedy financiers break too much of the company off, leaving founders in single-digit territory or worse, we starve them AND the ecosystem.
Wanna know why the Valley is such a great incubator? Simple.
Girl goes to work for big company, learns proper business process and business rationale (this is called mentorship). Big company awards stock options/bonuses commensurate with growth and success. This has three main effects: 1) girl’s dreams grow bigger, and 2) girl is financially independent enough to start a new business, and 3) girl has a track record of success and knows (mostly) what she’s doing.
So the girl starts a business, is able to make it into something fundable, and there is ample supply (and some would say an oversupply) of capital to fund good ideas. Investors make sure that girl remains a large enough shareholder to remain engaged in the business, thereby nurturing part of what inspired her to do it in the first place. Girl hangs in there, the company grows and begins mentoring its own generation of future entrepreneurs, and maybe the company’s successful and gets bought, and girl becomes a millionaire.
Now, the girl is an investor. Maybe she’s an Angel with experience looking for proteges to mentor, and thereby further her own profit. This is the makings of an ecosystem. Lather, rinse, repeat.
Don’t think this works? Consider the story of PayPal. PayPal executives went on to found or grow LinkedIN, YouTube, Tesla Motors, SpaceX, Slide, and Yelp.. just off the top of my head. That was just 8 of the original pre-eBay core team of 50 people and leaves out major investors like Peter Thiel and Roelof Botha.
In Vancouver we have historically had two obstacles, but these are obstacles that are breaking down quickly with some thanks due to the folks I am fortunate to be working with above. As we attract larger companies we begin the cycle of mentorship. Folks go to work at SAP or Microsoft and they learn how things get done in the big game. As we begin to attract capital, then there are more opportunities for the bored, successful, experienced folks to break away from larger organizations and germinate new ideas.
That’s what happend with Don Mattrick’s Distinctive Software beginning in 1991, when it was acquired by EA. Like kicking a dandelion, the acquisition led over time to the spread of dozens of spores, laying the foundation for a vibrant and lasting Video Game industry in the city that is a must-join for any major player in the space and that opens doors for even the smallest of dev shops servicing that vertical. Now, the video game industry and its derivatives employ more than 3,500 people in Vancouver, according to the Georgia Straight.
The same effect will be felt in other areas. However, we need to (as a community) focus on three tasks:
- Lure the best talent in the world to Vancouver using our natural (literally) advantages, health care, and Canada’s relative economic stability
- Lure the technology industry’s leaders to the city and region by highlighting the advantages of R&D tax credit programs and the uniqueness of our existing talent pool, and
- Lure mature, responsible investment capital to the city by highlighting our more meritorious ideas and breakthrough technologies, and the people who created them
On all fronts the “Best in Vancouver” metric does not constructively apply. We need to compete on a grander stage and we will be measured against a higher, almost insurmountable standard. We will travel against the grain with regard to current groupthink. And we don’t simply need to be better than comparable Silicon Valley companies, we need to find ways to trounce them — top tier investors will always favour teams nearer to them unless they see truly unique differentiators.
We must fight against popular assumptions about this city as a destination for slackers, the idle rich, and as “Canada’s largest retirement community”. None of these prejudices is entirely false, but none are entirely true either. What I have seen glimpses of in this city over the eight years that I have been comparing it to my own experience in Silicon Valley is a large number of very creative and intelligent people trying to operate without substantial mentorship or capital. Some have succeeded, many have failed. In the aggregate, we will all get there if we muster our resources and work hard together while chasing our independent dreams.
For that reason, we should all be welcoming of any hands that reach North from the Valley or elsewhere and offer to help, as opposed to taking petty potshots. For her efforts to create a permanent bridge between here and Silicon Valley, in particular, I am deeply grateful to Debbie Landa and Dealmaker for bringing us Grow2010. This will go a long way toward reaching the above three objectives.
And here’s to the day coming soon when we will have more Club Penguins than we have flightless penguins here at the aviary.