If Kitchener-Waterloo, Ont., is Canada's high-tech hothouse, Tim Jackson is one of the head gardeners. He helped build one of the region's success stories, PixStream, which was sold to U.S. giant Cisco Systems for $550-million in 2000. He has since turned his hand to venture capital, mentoring and directorships. Mr. Jackson, 41, is a partner at Tech Capital Partners, a venture capital firm with interests in about 15 companies - and he continues to battle the Canadian orthodoxy that encourages saving face, instead of taking risks.
One of Canada's so-called deficiencies is the very area where you work - venture capital. What's wrong?
I think venture capital is sleeping - the best way to describe it. There is a shortage of venture capital today, but we think it will ultimately come back and people will reinvest in this space. It is not the best time to be raising money, but it is one of best times to be starting a company.
What do you mean?
Think about the large technology companies, which are cutting costs and trying to improve the bottom line. One thing they are doing is cutting research and development. So two or three years from now, when their customers are saying they need the next-generation product, how are these companies going to get it? They are going to buy some of the entrepreneurial activities that are starting now.
The reality is that most early-stage companies don't require venture capital - they just need to build organically. And downturns are great times for people to start their own businesses.
But we need to celebrate that spirit of entrepreneurship, and understand that failure is okay. You can't innovate without failure. That doesn't mean you reward incompetence, but to get from here to there the path winds, it goes up and down, but that's okay.
Think about all the four-year olds who go into Timbits hockey, put on the skates and have this goal to be an NHL player. We know almost all of them are never going to be NHL players but we say, 'That's okay, you did your best and that was the goal.'
We need the same sort of notion around entrepreneurship: Go start a company, it may not work but you are going to learn a lot from what didn't work, so the next time you do it you are going to be successful.
So if you are laid off from your job and have a business idea, what do you do?
You beg, borrow, steal and you get it going - and you find a customer.
I know that sounds overly simplistic and there are certain companies where you need a venture-backed business because it will take three or four years to develop the technology. But traditionally, businesses have been started by designing something or creating a service or a product.
Then you went and sold it, and you used the revenue from the first customer to get your second customer and improve the product slightly. The revenue from the second customer was used to improve it again and you get the third customer.
We saw 300 companies last year [and funded two] and the vast majority should never have been looking for venture capital. Our advice is just go and start the company. Go and sell this. If you have something people will buy, they will partner with you and you can build a business.
But don't you need bankers to fund you through the startup period? They're not lending as much.
In Canada, we have a great community of angels [individuals who fund startups]. One of the good things about wealth that has been generated in the tech community is many of those people in turn become investors.
And the notion of needing $4-million, $5-million or $10-million of venture capital, I would argue, is the exception. More likely, you are needing a quarter of a million dollars, and getting some angels to provide financial support, and help you with advice, is probably the way to go.
