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Where, oh where has Ottawa gone wrong?

By Leo Valiquette

There’s a very simple, and very valid, reason why Ottawa’s flow of venture capital has slowed to an occasional spurt, Celtic House’s Andrew Waitman told his audience at OCRI’s Technology Executive Breakfast yesterday morning.

The reason is that area companies haven’t proven themselves a good investment, if one takes stock of the new companies started since 1995 and tracks the results of the investment dollars that have been pumped into them.

While the managing partner of the local VC firm insisted he’s an optimist, since it’s impossible to persevere in his business otherwise, he nonetheless considers himself a frank fellow. Taking a frank look at the numbers demonstrated that the billions of dollars in VC pumped into the Ottawa area since the mid-1990s have failed to generate a single home-grown success story that has reached the $100-million revenue mark, his benchmark for being a mid-sized company. (He raised the bar to $250 million when talking about U.S. companies.) Never mind that none of them have gotten anywhere near the kind of returns that that level of investment should have returned to the VCs.

Now, while the erosion of deal flow may be simple enough to understand in theory, why the return on investment has been so poor is infinitely more complex, Waitman said. One of the obvious reasons is the irrational exuberance of the boom and how much of that cash was pumped into startups that proved to be utter flops. That tends to skew the statistics a bit. On the other hand, the region has plenty of strong and growing companies, many of whom have done just fine without any VC cash at all, so it’s not like Ottawa is utterly inept in terms of building and sustaining a vibrant tech economy.

But while the reasons for Ottawa’s tepid performance may be complex and difficult to distill down to a few key factors, I think an underlying cause is that same old issue of executive bench strength. It’s a combination of too many executives having an engineering rather than sales and marketing-oriented background, and the complacent sense of entitlement that comes of being a government town. When I’ve harped on this before as a journalist, one reader wrote in to criticize my griping, claiming that he had spent time in Washington, D.C. and found that city to be no different than Ottawa. He suggested that the bureaucratic and corporate cultures can’t really co-exist in a city like Ottawa and expressed his preference for a sleepy old government town. “Move somewhere else, if you don’t like it,” he wrote.

For those of us who actually do care to see a strong local economy built from more than our tax dollars at work, that’s the kind of sentiment we need to escape. On the surface, it appears that it may be limited to a specific segment of our population. But Mr. Waitman’s frank assessment of Ottawa’s track record over the past decade would suggest it’s far more pervasive and caustic than we think. It’s the kind of sentiment that smothers the tenacious and scrappy attitude that defines true entrepreneurship.

I think the lack of VC dollars is a good thing, a harsh slap in the face that may prove positive. It forces startups to bootstrap, to push out into the global market to identify potential customers and generate early streams of revenue. (See our excellent guest blogger, seasoned start-up veteran Jason Flick, who wrote on this here yesterday.) In other words, become a sales and marketing-centric, rather than engineering-centric, organization. There’s already ample evidence to prove that engineering a product for it’s own sake is a recipe for disaster. It’s a fact that’s been dogging Ottawa for years. Any company today must look at itself as a services business tapped into what potential clients want and need and figure out how it can distinguish itself from the competition. And of course, that all starts with screaming its existence to the world and understanding how to get its message out.

Insights from the other side

By Leo Valiquette

For the first time in almost eight years, there’s a different employer cited on my voice mail and e-mail and that comes as a far greater shock at this point than realizing my transition to the Dark Side is complete.

If you have had a chance to read Francis’s post below, you already know my background as a journalist, most recently as editor of the Ottawa Business Journal. Last week as I bid a fond farewell to the OBJ, my former colleagues teasingly referred to my career change as “The Quest for the Bling” with a mock front page that featured me as Frodo in a still from “Lord of the Rings.”

Well, I can’t say that income had nothing to do with my decision to take the leap, but of far greater importance was finding a shop with good people with whom I shared a common philosophy in terms of how PR should be done. The technology sector was obviously a key area of focus for the OBJ, but the paper is not a trade publication. How technology works, the minutiae of bells, whistles, and compatibilities, is not the focus of the paper’s coverage. What’s important is the business case for a particular product or technology. What need does it fill in the market? How does the company intend to exploit that need and build a sustainable stream of revenue? Those are the kinds of questions we wanted to explore at the OBJ.

When I started casting the net for career options, it didn’t take long to find kindred spirits at inmedia, where there is a similar emphasis on how clients’ stories are told. In fact, it was a breath of fresh air after enduring reams of poorly researched and ill-prepared pitches while working as a journalist. Nothing burned my bacon more than junior PR flacks who tripped through their delivery as if they there reading a script that had just been handed to them, or more seasoned professionals who should have known the OBJ was the wrong kind of media outlet for what they were peddling. My thought was, if you haven’t taken the time to figure these things out, why should I take the time to listen?

But a PR pro who understands the importance of personal, hands-on service is only half of the equation. The other is the company executive holding the purse strings. Working as a business journalist gave me the opportunity to speak with scores of talent managers, headhunters, venture capitalists and sales and marketing gurus about what it takes to build a strong and successful company. A company that doesn’t rely on the “wow factor” of a product’s bells and whistles to drive sales and realizes that to settle for being “local” rather than global is to settle for mediocrity. Some executives get it, some don’t, and others never will.

In my new role with inmedia, I look forward to working with the ones that do and winning converts from among the rest.

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