by Charles Plant | Oct 26, 2016 | Entrepreneurship
I was surprised that Finance Minister Bill Morneau warned Millennials that they should “get used to so-called job churn – short-term employment and a number of career changes in a person’s life.” Does this mean he’s giving up on the economy?
I looked around the other day and decided that as a group, my friends who had stuck with one job or one career all of their lives were on the whole, financially better off than the ones who skipped around between jobs and careers. Even the ones in lower paid jobs had done well financially as they could plan and save knowing how much they were earning.
So is Bill Morneau effectively stating that Millennials should get used to the idea that they are not going to be as well off financially as their parents?
Here’s what happens. If you don’t have a secure career, you won’t spend as much on a house or maybe you won’t buy one at all. After all, Bill’s saying that you better play it safe as you might not know when your next gig will start even though we’re going to train you so that you can keep switching careers regularly.
If you don’t buy a house or spend as much on one then you probably won’t need all sorts of furniture and will not be spending much on renovations. As for buying a cottage, to hell with that idea.
So what happens to the economy when all those job-churning millennials stop spending money? Well the economy tanks and who then will pay for all of us boomers to retire?
What’s the solution? Well it isn’t only training plans. Somehow we need to be de-risking this world of churning jobs so that millennials can plan properly for their future. (And in that way contribute better to boomer retirement – did I mention that it’s still all about boomers anyway?)
by Charles Plant | Sep 9, 2016 | Entrepreneurship
The lack of Canadian venture capital has been denounced consistently in studies and think tank reports, and by the media, entrepreneurs, and even venture capitalists themselves. Yaletown Partners completed a report on the state of venture capital in the country, stating among other things that:
“Yaletown found there is too little capital spread too thinly across Canadian tech companies compared to the U.S., and that the lower amounts of capital available for Canadian companies hamper their competitive position and dampen their value when they either sell out or go public.” Sean Silcoff |The Globe and Mail |July 12, 2016
The general view expressed in the press is that Canada is short-changed by the lack of venture capital; and this hurts our prospects as a world-leading innovator.
“Despite recent successes, tech firms in Toronto and the country at large still face funding challenges that hurt their growth prospects.” Shane Dingman | The Globe and Mail | Feb. 14, 2016
However, a sign of changing times was the recent report in the National Post that stated:
“Venture capital surged to a new record in the first quarter (of 2016)….The value of venture capital investments made in Q1 surged to $838 million, nearly double the amount recorded during the same period last year….The CVCA [Canada’s Venture Capital & Private Equity Association] said that it expects the frenzied pace of the first quarter to continue this year.” John Shmuel | Financial Post | May 18, 2016
Venture capitalists are funded by outside investors to provide capital to companies at three distinct stages. In the seed stage, small amounts of money (typically under $1 million) are used to establish a position in a market and ensure traction for an idea or product. Growth capital ranging from $5 million to $50 million is needed to accelerate growth for a business with a proven market. In the third stage of growth, amounts over $100 million are needed to create a significant international presence and to turn a company into a Unicorn or prepare it for public markets.
If Canada is truly underfunded in terms of venture capital, then what stage is underfunded?
- Do we lack funding to seed smaller enterprises at the startup stage?
- Is funding insufficient at the growth stage to establish solid mid-sized companies?
- Do we have enough later-stage funding to create world-leading enterprises and Unicorns?
This report attempts to examine how much capital Canada has available per business stage and whether Canada has enough VC funding to take its startups from inception to world-class companies.
Available data suggests that for seed- and growth-stage VC deals, Canada compares favourably with most other countries in the OECD.
However, if we want to have the capacity to create Unicorns locally and not rely on external funding, then we need to do one of two things.
- We could increase the proportion of funding available to later-stage deals away from seed and earlier-stage companies. We could do that either through reallocation of funding from seed to later stages, or we could do it by raising more dollars in the aggregate and allocating it entirely to later-stage funding. We would also need to create significant funds that have enough horsepower to invest larger amounts in select companies.
- Privately funded Unicorns are a relatively recent phenomenon. Only recently have US VC funds been large enough to fund later-stage deals entirely in private markets. One result of this trend has been technology companies going public at a much more advanced stage that they used to. When such large funding amounts were not available, companies had to rely on public markets, going public at lower valuations than Unicorns now command. Perhaps when combined with government incentives, Canada could establish a vibrant market for later-stage deals in public markets.
In addition to determining whether we have sufficient levels of Canadian venture capital funding available, we need to determine whether we have enough experience to be effective at managing larger funds (should we be able to raise them). We must also better understand whether we are investing in companies at the right time and in the right amounts to create Unicorns.
by Charles Plant | Jun 2, 2016 | Entrepreneurship
There was a great article on the Harvard Business Review site yesterday that said that companies that have a founder’s mentality deliver returns to shareholders that are three times higher than in other companies. It goes on to say that a founder’s mentality has three traits that are insurgency, an owner’s mindset, and a frontline obsession.
The article that goes on to show that as a company gets bigger, it loses its founders mentality. While I was reading it, I suddenly thought that there is another thing that happens as companies get bigger; they hire more MBAs.
Now before I get jumped on for inventing a correlation between the number of MBAs that a company has, the loss of its founder mentality, and inevitable slow decline to irrelevancy let me say that I have an MBA. Not only that, I actually taught MBAs at York’s Schulich School of Business for seven years. And what did I learn and what do we teach?
Well there certainly isn’t much in an MBA about insurgency. We’re more likely to teach students how important it is to understand and develop process and ensure it is followed so that we can have a consistent level of quality. I don’t remember any courses on insurgency, just frameworks like Porters Five Forces, the BCG Matrix. Lots of analysis and risk reduction instead of radical wild ideas.
As to an owner’s mindset, students are more likely to learn about accounting, finance, and driving shareholder value through short term profit maximization. I just checked Rotman’s site and even in their specialization in Innovation and Entrepreneurship, there is no course that looks like it focusses on ownership thinking.
As to a frontline obsession, an MBA will spend a lot more time understanding the concept of materiality and how to look at the big picture than to obsess over operational details. In fact people who obsess over frontline details are told they are too operational, not strategic enough and they don’t get promotions.
The article says that owners “abhor complexity, bureaucracy, and anything that gets in the way of the clean execution of strategy. They are obsessed with the details of the business and celebrate the employees at the front line, who deal directly with customers.” That doesn’t sound very MBA like to me. MBAs celebrate process and analysis, not details.
So my hypothesis is that MBAs are being taught the wrong things. They are taught the things that make businesses predictable and safe instead of dynamic and bold. And when companies hire too many of MBAs, they begin to lose their founder’s mentality, they become predictable and safe, and they begin a slow decline to a merger (aka death).
by Charles Plant | Mar 23, 2016 | Entrepreneurship
As time goes on, I become more and more convinced that logic and facts don’t matter. This is tremendously upsetting as I’ve grown up to favour the logical over the emotional. In fact I actually get turned on by facts. (Yes, how nerd-like can one be?)
The death of Rob Ford and the ascendancy of Donald Trump (Drompf?) brought this to the fore. Here are two politicians whose brazen manipulation and ignorance of facts didn’t hurt them at all in political battles. What they understand is that all that matters is emotions. And they did a great job appealing to the basest of human emotions.
I blogged about some of this this yesterday on LinkedIn which I’m experimenting with as a blogging platform. Today though I was reading an article in Harvard Business Review on the Science of Emotions which really focussed my thinking.
Because emotions are messy, hard to predict and difficult to use in marketing, this group created a standard lexicon of emotional motivators that can be used by marketers. This will allow companies to use data analytics to identify emotional motivators and use statistical modelling to determine the most profitable customer motivators.
This is all slightly upsetting to think that I am being manipulated like this all the time. But then I thought about what I buy. For some odd reason, I have an emotional attachment to Apple products because of their design. My hyper-logical son is quick to point out though that I’m buying a closed system at tremendous cost and that it doesn’t make logical sense. But I love Apple products. There’s that emotional reaction.
And I wear a lot of Patagonia clothing. Not because it’s the best manufactured outdoor wear but because I love the image they portray and how I identify with their image.
But does this mean logic and facts are dead? Maybe not dead yet but failing. If we can turn emotional appeal into a science then maybe we have merged emotion and logic in a way that will turn consumerism fully into a new wave religion.
by Charles Plant | Mar 8, 2016 | Entrepreneurship
Commentators have long criticized Canada’s inability to scale high-tech companies to world-class size. Could our habit of ousting the founder os scaling companies be the problem? According to the Centre for Digital Entrepreneurship + Economic Performance, “Canada continues to struggle to produce the type of sustainable, high-growth firms in knowledge-intensive sectors that policy-makers have identified as crucial to the country’s economic future. While the density of high-tech startups and entrepreneurs in Canada is among the world’s highest, the creation of high-growth Canadian firms continues to lag behind” (deepcentre, A Lynchpin in Canada’s Economic Future: Accelerating Growth and Innovation with World-Class Business Acceleration Ecosystem, 2015).
Although Canada has created an ecosystem that produces many startups, few of these companies grow to become Unicorns. These are defined as privately held companies with valuations in excess of one billion dollars. Certainly, we have had world-leading companies such as Blackberry and Mitel, and more recently Unicorns such as HootSuite and Kik Interactive. But most of our successful startups are sold before they reach world-class size. Overcoming this growth hurdle is crucial to positioning Canadian companies favourably in global markets.
In this study, we are looking at the professional history and experience of technology startup leaders to determine whether specific aspects of their backgrounds limit their willingness or ability to scale the company under their leadership. The analysis is guided by two questions:
- Is Canada limited by the amount of CEO talent needed to lead and grow successful technology companies?
- Do founders make good CEOs, or are they outperformed by professional CEOs?
The second question is based on anecdotal evidence; some of the most successful technology companies in history have been led by their founders well after the companies reached their world-class status. This includes Steve Jobs and Apple, Bill Gates and Microsoft, Mark Zuckerberg and Facebook, Larry Page and Sergey Brin from Google, and Ed Oates and Larry Ellison from Oracle . Many of these companies were founded by young people—some were even without undergraduate degrees—who became successful CEOs of game-changing businesses. We also looked at the issue of founder replacement and compared worldwide practices with those in Canada.
Our findings, while limited in scope by the nature of the data available, suggest that:
- Canadian Founder CEOs are just as experienced as the Founder CEOs of Unicorns in terms of prior experience as serial entrepreneurs.
- Our Professional CEOs are more experienced than Unicorn Professional CEOs in terms of prior experience as founders and as CEOs of venture capital-backed companies.
- Founder CEOs outperform Professional CEOs in Unicorns and Canadian companies.
- While Canadians have a habit of ousting Founder CEOs and replacing them with Professional CEOs 47% of the time, Founder CEOs are only replaced 18% of the time in Unicorn companies.
Our conclusion is that Canadian founders have the right backgrounds to grow successful world-class companies and that our reluctance to scale to that level may be attributed partially to our tendency ousting Founder CEOs and replacing them with Professional CEOs.
by Charles Plant | Jan 28, 2016 | Entrepreneurship
In a startup world full of ideas, it’s difficult to separate the Sitcom Startup Ideas from the good ideas. I must admit that I didn’t coin the phrase but am copying something that Paul Graham wrote in his post on How to Get Startup Ideas. To quote his post for those of you too lazy to click on the link, “Why do so many founders build things no one wants? Because they begin by trying to think of startup ideas. That m.o. is doubly dangerous: it doesn’t merely yield few good ideas; it yields bad ideas that sound plausible enough to fool you into working on them.”
And from the research I’m doing, it seems that most ideas that people start Techno with are ideas that could be classified Sitcom Startup Ideas. But there is a problem here as you could think of AirBnB as a Sitcom Startup. After all it was started by a few guys in San Fransisco who couldn’t pay rent so they put up a website to rent out three air mattresses. And Uber was started by another three guys who couldn’t stand waiting in the rain to get a taxi.
I suspect that Sitcom Startup Ideas are in the eye of the beholder. One VC’s sitcom is another’s documentary. After all, Bessemer passed on FaceBook, Google, and EBay. Not only did they pass, they ran away from these ideas and their founders as if they were nuts. You can see the list of all their epic fails here.
Paul Graham goes on to say that: “If you look at the way successful founders have had their ideas, it’s generally the result of some external stimulus hitting a prepared mind…..The verb you want to be using with respect to startup ideas is not “think up” but “notice.” “. Now I don’t want to criticize Paul Graham as he is much more successful than I will ever be but I don’t get the difference between thinking and noticing. After all, AirBnB and Ebay, were not noticed, they were thought up and then noticed.
I’m struggling to come up with a methodology of separating the Sitcom Startup Ideas from the good ones. (If I am successful in doing this maybe it will atone for my earlier bad ideas.) What I have seen as a trend is the good ideas are the things that come out of something the inventor or someone the inventor has actually talked to, would pay for in time or money. When founders stray from something someone would pay for then they risk creating a lousy idea.
And ‘someone’ is not a concept but a person, an actual living person who would put time or money towards purchasing whatever flows from the idea. I’m not married to this concept and still paying with it as it keeps me coming back to an expression I’ve been using lately: “Don’t find the problem, find the budget.”
I was surprised that Finance Minister Bill Morneau warned Millennials that they should “get used to so-called job churn – short-term employment and a number of career changes in a person’s life.” Does this mean he’s giving up on the economy?
