LaBarge Weinstein Quarterly, Fall 2010

October 22, 2010

Tis the season…of bogeymen, howls and evil portents, of empty, harvested fields and creepy, lengthening shadows…so, of what possible wickedness do we speak, and do we fear the coming dark hours as laments for Canada’s venture capital and commercialization gaps accumulate like fallen leaves on our industry’s sidewalks? On the one hand, we have heard voices (OpenText’s Tom Jenkins and Deloitte’s John Ruffalo principal among them), approaching a clamour for Canadian policy makers to accelerate a possible legislative and budgetary response to Canada’s lack of venture capital and growing productivity gap against its peers. Worthy and actionable sentiments certainly, but our recent dealflow suggests that there is candy to be had behind that door. From profile buyers like IMS Health and Halliburton acquiring Ottawa-based Brogan and Permedia, to continued activity among local venture firms, including Rypple’s Series “A” round financing, Bridgescale’s investment in Dayforce and JLA Ventures’ follow-on investment in Toronto-based Netshelter, to a host of increasingly common sub-million dollar seed and investment rounds sprinkled around our networks from Montreal to Waterloo, it seems that the apples are plenty for those in a position to step up to the barrel. As important, we’re seeing a general trend among recidivist, post-exit management teams to more quickly shed founder fatigue, don again their startup costumes and hit the streets running, pillowcases in hand. With that, we’d love to help. If you’re wondering what to “be” this next Hallo’ween or if your team needs help sorting trick from treat in the coming months, feel free to contact any of our partners and we would be happy to assist.

Cool Again…

With the release of “The Social Network” this past week, not since Mark Zuckerberg’s sophomore year of high school (about 2000 or so) has it been so cool to be a geek. Folks are nearly falling all over their flip-flops to partner with (in Facebook’s case), replicate and improve upon TechStars and YCombinator models to access, attract and nurture the best, young talent. Witness the announcement of Montreal’s Year One Labs project this past month, and the coming out party of Ottawa’s Wesley Clover-incubated group of companies at the Banff Venture Forum, with each of Teldio, Magor and Benbria presenting at the event. Even our stars are getting into the act, with Vancouver native Steve Nash’s recent foray into the digital media venture capital game with his new firm, Consigliere, joining Ashton Kutcher (Foursquare is likely his biggest hit over the past few years) among the ranks of celebrity tech moguls. So, you ask, how do I get the bouncer to pick me out of the crowd, lift the velvet rope, and usher me up to the VIP area? Certainly, mobile and SaaS plays remain the sought after kids on the block, but don’t forget the stuff under the hood. Check out this Alex Benik article in a recent edition of Gigacom that argues networking can be cool again too…certainly the old Nortel campus here in Ottawa could use a little more Prada, and a little less Dockers.

Poor Eduardo…

Speaking of the Facebook movie…one of our partners, James Smith, gave a prescient presentation to a group of startup founders at Toronto-based Mantella Venture Partners in mid-September. The topic was how to use equity to build sticky relationships among team members and advisors in early stage companies (see the attached post for the substance of his presentation). Since then, ex-Facebook (semi)founder Eduardo Severin’s dilution fate in the film has spawned a virtual flood of entrepreneurs’ re-examinations of the vesting, tax and contractual structures among their key employees and contractors. If you need some help or would like a second look, please feel free to contact one of our partners and we would be happy to assist. In the meantime, what can you learn from Eduardo’s experience? Check out this link for a great Flowtown post giving its take on the film’s takeaways.

Analytics Rule…

Speaking again (and never again, we promise) of the Facebook movie…web comic xkcd released its newly minted social media map this past month (its most recent was 2007), and the changes in the web’s geopolitical landscape are pretty startling. Facebook is, of course, the new Russia, with MySpace receding to Turkey-ish proportions, and who knew that Happy Farm (yes, Happy Farm) would acquire India-like status over the past few years. Perhaps more interesting, the map no longer simply measures web turf by membership, but rather by the quality and frequency of user engagement. This echoes the focus of the digital media company boards that we listen in on. As important, it highlights the increasingly dominant role of analytics in the C-suite among Fortune 1000 companies looking to find ways to better worm their way into the “influencers” embedded in these networks (for a helpful article on untangling the social web, see the Economist’s recent technology quarterly). We’ve seen a number of clients take on this problem in different ways, from thinkSM to PostRank to iSentium to Chango, with a number of others, including Ottawa-based RareLogic, focusing on the database and infrastructure challenges associated with this new and dynamic information. Their timing is perfect, with agencies and traditional marketing intermediaries waking up and engaging the available tools out there, and even loosening the M&A purse strings with the acquisition of Toronto-based Sysymos by Marketwire and Ottawa-based dna13 by CNW Group over the past year. So, get used to the real-time campaign dashboards, the sharpening of web marketing spends, and a growing market for tools that Canadian companies are pretty good at developing. In the meantime, if you need help getting your venture on the map, or navigating its shifting landscape and waters, please feel free to contact any of our partners and we’d be happy to assist.

Blogs & Other

Time and again, we hear great advice from those in the know of the power of narrative in selling a “story” to advisors, investors, customers and acquirers. For a great starting point in thinking through your next PowerPoint, check out this post and a great YouTube video from This American Life’s Ira Glass.

We had the opportunity recently to tour the new digital media hub based in Kitchener, Ontario just south of Waterloo, which has been conscientiously and determinedly developed under the leadership of Kevin Tuer, and it is an amazing example of immersive collaboration. For a virtual tour, check out the attached link, as well as a link to Kevin’s national digital media initiative that he’s helped spearhead for several years.

Industry Canada recently announced what amounts to a federal government “app store” for companies looking to validate products before or while taking them to market. For more information, see the previous link, and we look forward to tracking all of our levels of government becoming a more accessible customer for early stage companies over the coming years.

Dealflow Report

Here is a sample of the publicly announced transactions that our lawyers have worked on over the past several months:

Events & Calander

Fall is the VC fair season, and our lawyers attended each of the Banff Venture Forum (co-hosting a terrific founder-focused event there with our friends at Vancouver-based Espresso Capital) and the Ontario Venture Summit over the past few weeks (and we would love to get participating companies’ feedback on their experiences, so pass them on if you have the chance). In addition, this past August, we attended the Vancouver-based Dealmaker Group’s inaugural “GROW” conference, which collated a terrific collection of speakers and dealmakers sans the “pitch” imperative.
Look for us at the upcoming MaRS Innovation Summit on October 28th, the Ivey Venture Forum on November 4th, and the CiX showcase on December 7th and if you are looking for any other events to attend, check out the following for the fall’s robust tech networking calendar: