The Three P’s of a Technology Company

I wear two hats – one as a Managing Director at OMERS Ventures and the other as an independent corporate director.  In both gigs I get asked the same question a lot: “What determines if a company is “venture fundable”,  post-seed financing?”.

It is certainly not black and white but here is my best shot at an answer.  I bucket company dynamics in three groups: people, product and progress.  

   People are the founders/operators of the company

   Product is the product vision, product market fit, and total addressable market

   Progress is traction and proof points validating the product

The first and most important threshold is product.  If a company does not have a massively disruptive product that attacks a huge global market, you are most likely not venture fundable.  That does not mean the company is not fundable.  “Friends and family”, angels and even debt financing are the typical instruments for good companies selling to good markets.

Okay, you have passed the first gate with a big idea for a massive market.  What’s next? 

People make or break the success of technology companies.  The technology ecosystem in North America does not suffer a shortage of great ideas from entrepreneurs.  The lower barriers to entry and a new-found spike in entrepreneurship globally has spawned thousand of startups.  The reality, however, is that it is far harder to scale a company than it is to start a company.  Entrepreneurs who have had one or more prior outcomes have a higher propensity to be funded by venture than first timers. 

How does a first timer overcome this bias?  Progress. A second time entrepreneur can sometimes get funded with a great idea with “proof points pending”.  A first timer does not have this luxury, even if the founding team has great “domain” expertise.  The “hockey stick slide”, which shows momentum and velocity for a first time team, needs to be extremely compelling when viewed “outside in”.  Whether the metric is revenue, client adoption, client proliferation, “uniques” or whatever it is that marks success, the hockey stick needs to be “at the blade” heading up fast. 

Competition for young companies looking to scale is not only the team in the Valley trying to do the same thing, although that is certainly a key focus.  The real competition for young companies seeking growth capital is another company, not in your space, with either a second time entrepreneur who has cache, or a hockey stick slide that is “off the charts”.  When the venture firm prioritizes their pipelines and their capacity to engage, the best progress story will likely get the dollars. 

First timers can and do get funded in technology (just ask the guys at Wave Accounting).  Almost all of these success stories had incredible momentum on a key metric. 

My suggestion for entrepreneurs seeking venture growth capital is to wait.  Wait until you have proof points and a traction story that is damn near breathtaking.  Wait until you have the slide you know will blow your audience away.  Create relationships and seed your story with venture, but wait for the ask until you know the answer to the question. 

Submitted by Howard Gwin

CES 2012: Theme Recap

We attended CES this past week and had the opportunity to peruse through the thousands of booths at the show, taking in everything from the practical to the practically nuts. While CES is generally known to showcase more than its fair share of demo products that will never see the light of day, there were at least three themes that resonated and are worth commenting on.

One of the pervasive themes at CES this year was the proliferation of 3D. While 3D was definitely popular at CES 2011, CES 2012 took it up a notch and went so far as to hand out 3D glasses as you walked into one of the largest conference rooms at the show. LG had a booth that was predominately 3D as did a number of the console manufacturers. Unfortunately, despite the focus and improvement in 3D technology, the hurdle with mass use of this new technology remains content and the delivery of that content into homes. One thing made very clear by TV manufacturers is that regardless of content, if you plan on purchasing a TV in the coming years, it will most likely be of the 3D variety. By far the highlight product of the show this year was Samsung and LG’s 55’ OLED TV, which were a miniscule 4mm thick!

CES also unveiled another interesting development – the shift of the leadership in the home energy management (“HEM”) space from the software and hardware developers to the home appliance manufacturers. While it was generally thought that the leaders in the HEM space would be IT companies such as Cisco, Microsoft or Apple, which already control a lot of the IT infrastructure in the home, this has proved to be a greater challenge than most had originally thought. With companies like Cisco and Microsoft either putting such efforts on hold, or at the very least, reducing the strategic focus in this sector, the home appliance companies have stepped into the fold in a big way. 

LG’s booth had a large focus on connected appliances and while this may be a way for appliance companies like LG to obtain increased margins, the thought of consumers paying more money for an interconnected appliance or paying a monthly service charge to an appliance manufacturer for the ability to control every appliance in their house, may be a stretch. The reality, at least here in Canada, is that very few of us have the time or inclination to significantly alter our lifestyles to realize a savings of a few dollars a year under the time of use system. Until electricity prices increase significantly, home owners will likely only make moderate changes, which would have likely been done irrespective of any HEM system.  

The last theme worth mentioning should come as no surprise to anyone – this is the year of portable control. The smart device – phone or tablet – is going to rule everything even remotely connected to consumer electronics. The ability to control everything electronic in the home from one device is upon us and manufacturers that can enable this control should see a quick upturn in sales.

More than anything else, CES serves as a great pulse on the worldwide electronics and technology community. Based on the 153,000 people that attended this year (a new record), we are happy to report that the technology community is alive and well!

Contributed by Sid Paquette and Damien Steel of OMERS Ventures.

Canary Century bike event

Hello cyclists!

Please join me and team DigitalPuck.ca in Palo Alto for the first annual Canary Century on May 28, 2011. This event is organized by the Canary Foundation, a non-profit formed founded by Don Listwin to fund research for the early detection of cancer. Winnepeg-based Listwin is the former CEO of Openwave and former executive VP of Cisco. All proceeds from this event will be donated to the Stanford Cancer Center.

Registration is now open.

Make sure you register with the DigitalPuck team.

Digital Puck Silicon Valley Summit-September

DigitalPuck Silicon Valley Summit – September

September 14, 2010 from 10 am to 8 pm

Bridgescale Office- Menlo Park

An event you can’t miss! Network with some of Silicon Valley’s hottest companies.

Every Canadian tech company and executive needs to attend.

Block this out on your calendar! Golf at Half Moon Bay! Network in the afternoon. More information to come.

Western Canada Bootcamps

Time: September 8, 2010 at 6pm to September 14, 2010 at 7pm
Location: 5 cities in 5 days
Street: Agenda tbd
City/Town: Various
Phone: 650-543-8821
Event Type: bootcamps
Organized By: Rick Rasmussen

Event Description: The annual slog across western Canada to find the best and brightest early-stage IT companies and connect them with the resources available through the Trade Commissioner Service. This edition features delegations from Silicon Valley, Los Angeles, New York and Tokyo. Dates are:

Sept 8: Winnipeg
Sept 9: Saskatoon
Sept 10: Calgary
Sept 13: Vancouver
Sept 14: Victoria

Each full-day program has a morning session, open to all as space permits, to provide lecture-style teachings on the business environment abroad. A select number of companies are invited to present (10-5 style) in the afternoon followed by a networking reception in the evening. We’re currently interviewing panelist/judges. Please contact Rick Rasmussen in the Palo Alto Consulate for more information.

GROW 2010 Conference

Time: August 19, 2010 to August 20, 2010
Location: Vancouver Convention Center
Street: 1055 Canada Place

City/Town: Vancouver, BC, V6C 0C3
Website or Map: http://growconf.com/
Event Type: conference
Latest Activity: Jun 26