This is Part two of a four part series – check out Part I from yesterday and stay tuned for Part III tomorrow.
There’s no doubt that driving innovation requires both capital investment and highly skilled and motivated workers. Fortunately, Canada has no shortage of skilled workers: almost half of Canadian 25-to-64-year-olds hold post-secondary qualifications and the proportion of the workforce in skilled professions is steadily rising.
In addition, Canada is home to numerous highly ranked science, engineering and business programs – from Waterloo’s acclaimed Department of Engineering to the top-ranked business schools at Western Ontario and University of Toronto. Year after year, Canada’s institutions of higher learning churn out sharp, eager minds – it is these graduates that should be leading the charge in technology innovation. But more often than not, the best and brightest opt not to pursue their own ventures, choosing instead more conservative corporate career paths. Those that do strike out on their own often end up Stateside, triple casualties of a lack of community support, venture financing and exit opportunities.
The conservatism that saved the Canadian banking sector in the recent global financial meltdown may yet imperil the fledgling cleantech sector. Can anything short of a seismic cultural shift motivate our highly skilled workforce to re-imagine success by risking failure? Federal and provincial governments have responded by providing investment in pre-commercial technology projects. Examples include Sustainable Development Technology Canada and Ontario’s new Emerging Technologies Fund.
However, government support only goes so far. Many ventures will not qualify for government assistance and still others will choose to direct their scarce time and resources toward brand-building instead of lengthy applications. This is where community support has proven so valuable in Silicon Valley. Whether it’s banks (such as Softbank or Silicon Valley Bank) that develop expertise in evaluating and lending to startups – or landlords that create a profitable niche for themselves in plug ‘n play incubator spaces – or service providers that accept equity instead of traditional payment methods – or local media that celebrates small successes (we have seed financing!) as well as blockbuster hits (we’re going public!) – Silicon Valley has created an infrastructure that nurtures the entrepreneurial spirit.
I am not suggesting that banks, landlords, professional advisors or media outlets lower their standards or act as charitable foundations for startup companies. What I am suggesting is that everyone benefits when community players change their one-size-fits-all approach and devise ways to serve the startup community. The rewards (for all parties) can be staggering.
One of my favorite stories is that of the Amidi family that owns the Medallion Rug Gallery on University Avenue in Palo Alto. The Amidis owned a two-story building in need of tenants and saw opportunity in the contacts they made through their rug business. What set the Amidis apart from other landlords looking to fill vacant building space was that they took payment in the form of equity in their budding tenants and then went about wiring and outfitting the space with an eye toward their tenants’ success. Landlord and tenant were motivated by the same goal of seeing the venture grow and flourish. And flourish they did: the Amidis list of fledgling startup tenants includes PayPal (which sold to eBay for $1.5 billion), Logitech (the computer peripheral manufacturer), Danger (makers of the T-Mobile Sidekick), and most famously, the now ubiquitous Google.
Who knows which of these businesses would have qualified for government funding or could have raised enough through private investment to see them through to maturity. Companies that we perceive as slam dunks today might never have gotten off the ground had it not been for the landlords, service professionals and banks that shared in the risks and therefore contributed to the success of these entrepreneurial ventures. A cleantech business like Utility Gateway System, with a proven technology and favorable customer reviews, nonetheless faces the challenge of wisely allocating scarce capital and human resources. Community support can focus those scarce resources toward growth instead of overhead, with the potential for enormous gain for all involved.
This is Part two of a four part series – stay tuned for Part III tomorrow.