Join us next Wednesday for Seminar #5: Basic Finance for Business Plans with Sean Hodgins of QCdocs Systems Inc. We’re back again at UBC Robson Square, 800 Robson St., Room C-180. Register online to attend in person, or tune in to the live webcast.

Mike Volker from Simon Fraser University spoke to a packed house at the Simon Fraser Segal Graduate School of Business (and president of WUTIF, the Western Universities Technology Innovation Fund) with his talk on “What Angels Really Want” at the New Ventures BC event held at the school on April 30th. With a background in technology start-ups, Volker was able to tie together advice between innovative entrepreneurs and the investors looking to take them to the next level.

Volker said that good companies will always get funded, but should try to avoid the “e-myth,” which is the assumption that technical-minded people have that they will also be skilled at business. Entrepreneurship and leadership matter, Volker said, and getting the two camps together is most important.

Current conditions, from low interest rates and R&D costs, to great infrastructure and easier financing and special incentives make it a perfect time to start a new business, he said.

New Ventures BC is a business competition, created to find new and innovative BC companies. The instructions to the New Ventures jury were to pick companies that are “the most likely to be commercially viable, with the greatest value.” Volker said the same principles apply when looking for investors.

But he added that it’s important for companies to decide if they’re creating a lifestyle business, built to be self sufficient and not require VC funds, or if it’s an attempt to create a next-level “high-growth, high-tech” company with a large eventual payoff.

Shareholder agreements are important to create at an early stage, he said, and it’s equally important to not rely on boilerplate and instead craft an agreement that suits their needs.

After deciding WHAT their business is, entrepreneurs have to figure out WHO they’re selling it to. They have to sell it to themselves, their staff and customers, as well as investors.

Angels want interesting opportunities, an attractive return (10X to 100X being typical), as well as a willing protege. They also want the 3 I’s (Intensity, Integrity and Immediacy) and the 3 G’s (Goodness, Greatness and Greed….for the company).

In order to achieve their goals, entrepreneurs have to surround themselves with the best possible people for their business, as well as being able to take their idea and translate it into revenue.

Fundamentally, Volker said, it’s all about profit and loss. What are you buying, who will buy it, and how much will you make? He added that a clear passion and understanding for an idea or product make s a huge difference, and will get investors on side.

Volker was an early investor at RIM, but he pointed this fact out to illustrate that the founders of that company were no different than anyone else in attendance at the New Ventures event. By crafting a business plan, RIM was able to reach their current dominant place in wireless, and they did so when they were a tiny start-up. Volker said the secret to that growth was confidence not only in themselves but in their business plan, which carried over to creating confidence in their investors.

In terms of product, the object itself or the service it provides is far more important than the technology inside the device. When addressing investors, explain what the product is, what it does, and how it can generate revenue, not the internal workings or esoteric code that makes it work.

Entrepreneurs should also be careful to protect their intellectual property, whether its through copyrights, or patents. They should also identify what stage they are at, from prototype to production model. And Volker stressed the importance of letting investors know what kind of time frame they’ll be dealing with.

Always be conscious of the status of your business plan, Volker said. Additionally, entrepreneurs should stay on top of both costs and potential competitors, because if they don’t, investors will and may find a better solution.

Distribution channels, strategic partners, and supply chains are all integral to moving the product, and shouldn’t be neglected.

Teams are also a vital component, especially when moving from angel investors to venture capital. Know your shortcomings, and bring in team members (including board members and advisors) who can compliment your skills. Finances, including a cash-flow projection to profitability, are also key to starting a new business.

Most importantly…who will buy the product? Why would they buy it? Can money be made, and if so, how much money? All simple questions, but absolutely necessary to ask, he said.

This Wednesday, April 30, Michael C. Volker, Director SFU Industry Liaison Office and President of WUTIF, on the topic of business plans. It’s back at the SFU Segal Graduate School of Business, 500 Granville Street. 

Also, by then, the list of companies moving on to Round 2 will be posted. Watch the Round 2 Companies Announcement post to see who made the cut.

First tonight, Bruce Edmond, Corporate Recruiters.

1980 - 20% of corporate value from intangible assets. 2007 - 70%

Current market conditions are strong. In BC, overall unemployment is 4.1%. In the scientific/technical sector, 2.7%. The dot com bubble has resulted in people leaving the industry and fewer graduates coming into the field. It’s only going to become more difficult to recruit talent.

Recruitment Process (of a recruitment agency). Build a recruitment plan by understanding the business, detailing a position description (early stage companies rarely give a description), and build criteria for the search. Sources used to find people include local contacts, use database (28 years), research, and web research. Mr. Edmond reminsces about his early days, that His job was a lot harder before the web. ZoomInfo and LinkedIn are two major directories of employees. “Who here knows about LinkedIn?” Many hands raise, laughs. Someone in the audience says “It’s the Web Two Point Oh!”.

What can you do as a new entrepreneur? If you’re in new territory, use a trusted advisor who has hired before. Keep an open idea of what you’re looking for. Use a recruitment plan and start early. In Mr. Edmond’s opinion, the most important qualities are, in order: cultural fit, experience, industry knowledge, product knowledge. Where do you find people? Peers and collegues, advisor/investor network of contacts, job postings, and schools.

Final tips: Hire someone who can bring a team. Have multiple interviews, with different people and settings. Have a sense of urgency. Testing is an option, and good for high ranking positions. Follow up references in detail. Don’t underhire, have high standards. Hire for the right stage of the company.

Question: Contract vs. Permanent employment. Which is easier to attract?
Answer: In his business, he only deals with permanent positions. Often early stage companies will have trial periods for new hires

Second speaker: Lorene Novakowski, Fasken Martineau, talking about the laws of employment.

Employment is a contractual relationship, distinct from others. It triggers right and obligations that exist including tax payment, IE payment, Worker’s Compensation coverage. Companies are liable to third parties for employee actions on the job.

Independent contractors vs. employees. The terms of a contract don’t necessarily specify the relationship, under the law the nature of the relationship is considered. Contractor: sets own hours, pay usually based on deliverables. Contractors are still required to be covered under Workers Compensation.

Question: Does it make a difference to have an external companies
Answer: Yes, that is a good way to do it, but it doesn’t change the relationship.

Question: What events could trigger a WCB audit?
Answer: Doesn’t happen often, usually would only happen because of a complaint.

Employment Standards Act; covers things such as minimum wage and work hours. Certain professions are overtime except, including high tech professionals. This includes engineers and developers, but not technical support. Hours still cannot be excessive. Break regulations also don’t apply.

Frequent employer errors: incomplete record keeping. Miscounting of commission earnings and other forms of pay. Overtime claims. Penalties are mandatory and increase exponentially.

Basic IP Law: need contractual protection in place to ensure proper ownership of works. If a work is made by an employee during the course of employment becomes the work of the employer. The best way to protect yourself is a well written contract.

Employment Contracts. Ensure terms don’t violate any laws. Have employees sign the contract early. If the employee is hired to be an inventor, ensure that IP terms are clearly stated. Employees should provide employers with a list of past inventions and patents. Confidentiality provisions should be included in an agreement and specific. Non-compete agreements need to be narrowly defined, restrict to time and geography. A non-solicit agreement can be more effective.

UPDATE:

Competition registration page isn’t showing up, but here is the direct link: http://www.gifttool.com/registrar/ShowEventDetails?ID=1404&EID=2236

Credit transactions are up and running!

A general update for everyone:

- We will have the seminar webcast videos online in the next 1-2 weeks. Sorry for the delay, but we’re working with a new webcasting system this year, so some kinks are being worked out. I promise, they’ll be up for your watching (and re-watching) enjoyment shortly.

- Presentation slides will be up in the next couple of days - just waiting for them to be emailed over by the speakers.

All slides & webcast videos will be here when up.

- For payment info, I’m really sorry on the credit card purchase delays. We applied several weeks (months!) ago, but for some reason we’re still stuck in the queue of approvals. We’re working to resolve this asap, but in the mean time cheque or cash will be accepted as payment to: BC Venture Society, 515 W. Hastings ST, 7th Floor, Vancouver, BC, V6B 5K3

Live here in the back row for New Ventures Seminar #2. This time around, I have wireless and will be posting live updates.

Live video broadcast at: http://webserver.lidc.sfu.ca/broadcast/

Introductions by Angie Schick. Reminder that next week’s seminar will be at a different location: UBC Robson Square. Another reminder: competition registration is due April 23.

Roger A. C. Kuypersof of Fasken Martineau DuMoulin LLP starts off. “Sorry that you’ll have to listen to a couple lawyers first”.

Copyright protects the expression of ideas. Work “is a catch-all term for anything: books, photos, websites. What are the requirements for copyright? Originality: requires skill and diligence. Fixation: must be expressed in some material form. The author of a work is the first owner of copyright. Freelancers and independent contractors are considered the author of their creations. However, if you are an employee, the company is considered the author.

Moral rights give the author of a work right to be associated with the work. They can only belong to people, and cannot be assigned, only waived.

Copyright is automatic. You can register it, but in Canada, there is little benefit to doing so. In the US, the benefits are more significant.

Question: does copyright in Canada transfer to the US?
Answer: No. However, most other jurisdictions still recognize your automatic copyright on works you’ve authored.

Trademarks are important because goodwill is associated between product and brand. Picking a good trade mark is very important; Distinctiveness is key. It should not describe your wares or services, and cannot be similar to competitors trade marks. You cannot register trade marks than describe the character or quality of your product. Also, the more descriptive it is, the harder it will be enforce. Examples: using “tech” or “soft” in a software company. Save-on-Foods is an interesting example; it is very descriptive, but their overwhelming brand power makes it descriptive.

Prior to choosing a trademark, search the trade marks registry. Pick a number of potential marks before searching as . In Canada: Canadian Intellectual Property Office Trade-marks Registry. Searching on the Internet is not necessarily complete.

Main search tools: Knock out search, full availability search, investigations, legal opinions. Knock out search: searching registry databases. Quick and inexpensive, but may miss marks that are close, but not identical. Most searches will reveal some measure of risk. Trade mark registration is per-country (except for the EU). Takes 1.5 years and costs about $2500 if there are no problems. Prioritize countries by value of market and likelihood of sales.

Question: I worked for a store that was very demanding about proper use. How important is this?
Answer: It is important, varying uses of marks dilute the claim to the mark.

Next speaker: Doran J. Ingalls of Fasken Martineau talking about patents.

If you disclose an idea to the public, others can use it unless you obtain a patent. It gives you the right to prevent others from marking, using, or selling the claimed invention. Lasts for 20 years.

Secrecy: keep your idea secret. Public disclosure prior to filling can be held against you. Use NDAs. In Canada and the US, you have a one year grace period, one year from the time of public disclosure to apply for a patent.

Not everything is patentable. It must be novel, new. Patent searching upfront can save you significant costs. You can search yourself online. USPTO, EPO, JPO. It must not be obvious, this is a bit of a grey area.

The first step is preparing an application. Working with an agent is recommended. If you’re only able to file in one jurisdiction, make it the US. Filing in multiple jurisdictions gets expensive ($100k+). A PCT application is the closest thing to a “world patent”. It is treated as a pending application in many countries. The US has provisional applications, which only serves to claim the date.

Question: Do I have to have a working model of my invention?
Answer: No, just having it on paper is enough.

Patents are assets. They can be sold, the value varies. Sometimes helps early stage companies be taken seriously, investors may insist on them.

Monopoly strategy: never license the patent. Must be willing to litigate, which may risk your patent.

Defensive strategy: Hold large portfolios. Don’t litigate unless defending self.

Licensing strategy: “Toll collection”. Have to be willing to license at reasonable rates. “Trolls” are companies that do nothing else than hold and license patents.

Problems with getting a patent: Expensive. Single US patent will probably cost $25K. Litigation costs money. It makes the subject matter public, 18 months after filing. Limited duration of 20 years.

Question: Should you patent something with a 3-4 year lifespan?
Answer: Depends on your goals. The process can be sped up. May be of other value.

An undisclosed idea is a trade secretTake reasonable efforts to maintain secrets. NDAs, office security. Trade secrets never expire, no filing is necessary. But that doesn’t mean it’s protected. It could be reverse engineered, or leaked. Security can be expensive to maintain.

Third and last up: Angus Livingstone, UBC Industry Liaison Office.

Good IP management starts at home. Do you have a record keeping policy? Security policy? Consulting agreements? Third party agreements? Employee agreements? Keep a due diligence binder of all agreements and IP documents.

Open Source: it’s a license, not public domain. Three types of licenses. Receiprocal: derivatives are subject to the same license. Academic: non-viral license. Commercial: combination of the two.

Holds up a bottle of Coke. How many types of IP protect a bottle? Trade mark, trade secret, patent.

Before a project: review patent and scientific literature. Create a collaborative research agreement. Educate your team about IP. For high value IP: identify inventors, confirm ownership, identify third parties, and document heavily.

Question: If you file a provisional application, can you state “patent pending”?
Answer: Yes.

Question: What about China, India, and other countries?
Answer: IP enforcement in China is improving.

Question: What about electronic data records?
Answer: Good security policies still apply.

At seminar #1, Dr. Daniel Muzyka briefly mentioned the importance of intellectual property: researching issues upfront, and using it to protect your opportunity. In seminar #2, this issue will be explored in depth with Angus Livingstone of the UBC University-Industry Liason Office, and Roger A. C. Kuypers and Doran J. Ingalls of Fasken Martineau DuMoulin LLP.

Last week’s seminar was a full house, so you’ll want to make sure you register early for seminar 2.

Also, a live webcast video stream will be available online at http://webserver.lidc.sfu.ca/broadcast.

It’s a full house tonight for the first New Ventures BC seminar. Tonight’s topic is “Conceiving and Evaluating Entrepreneurial Opportunity”. Dr. Daniel Muzyka, Dean of SFU’s Sauder School of Business, introduces himself quite exuberantly; this should be an interesting presentation. He states that he is a professor of entrepreneurship, but admits that you can’t teach someone how to be a good entrepreneur. You can, however, teach them skills and tools that will increase their chances of success.

What is a good opportunity? Based on four areas: 1) Customer need. Technology by itself won’t sell unless there is a need. Need can be created. 2) Resources. Competing with big players will require resources. 3) Desire. You have to really want to succeed, to “get out of bed at 3 AM for it” (Dr. Muzyka jokingly strangles an audience member). You’ll run into “monsters, dragons, and bankers”. 4) Capabilities. A skilful and knowledgeable team is essential.

There are different flavours of opportunity. Firstly, a new market. New markets expand fast, so you have to grow fast to keep up with it. They’re the type most pointed to for new ventures, but he doesn’t recommend going into one. Second, market imperfections. Unresponsive competitors or changes in need produce a opening for new ideas. While these ventures may seem that they lack longevity, Dr. Muzyka emphasizes that no business lasts forever, and no business needs to last forever for you to gain from it (”Three most important letters: IPO”). Third, international arbitrage: an idea has been successful in another country but hasn’t been moved to a new country.

Some realities: There is no “absolute opportunity”, opportunity requires a person that sees things differently. There is no symmetric opportunity, what works for one person won’t work for everyone. You don’t have to be the first mover, “Pioneers get arrows in their back”. The first person usual gets it wrong, so be a fast follower. “Boring is beautiful”, the simplest ideas can be the most lucrative.

Three factors to consider: Scale: is it big enough to satisfy everyone, in terms of customer need, identifiability, and financial returns. Scope: does it have enough value? Window: is the timing right, and is it going to last long enough to return value? Market decline can be an ideal time for a new venture, positioning yourself for the next market upswing.

Audience question: Opinion on intellectual property and patents, are they worth persuing?
Answer: Yes. Do your homework to ensure your idea isn’t already patented. Get patents as you invent; it doesn’t stop anyone, only slows them down. Effectiveness varies in different industries: less effective with software, quite effective for biotech. Defensive patenting is a good strategy.

Next section, “Venture Capitalists: Selection Criteria”. Dr. Muzyka helped conduct of study of what factors are most important to venture capitalists when selecting new ventures. He goes through the groups of factors they identified: product, management team, management competencies, strategic/competitive, financial, and fund-related. The results: management team factors unanimously came in first, followed by management competencies. Product/market factors came in fifth. Conclusion: The quality of your team is most important, even more important than the product.

Question: If the team is most important, are those of us without prior experience screwed?
Answer: No, you aren’t. Cultivate skilled people around you.

Question: An earlier slide mentioned seasonality as a risk, could you elaborate on that?
Answer: It’s not an overly important point. In industries that are very seasonal, like toys, you have to build up a large inventory before selling it off, which makes it a higher risk.

Wrap up slide: Ten Commandments of Entrepreneurship

Question: With a one in ten success rate, why are VCs doing so badly? Is there any indication that what they do works?
Answer: The success rate reflects reality. VCs aim for a high rate of average return, which can still be high if one in ten is a great success.

Question: With mainstream media talking of a recession, will that effect the attitude of VCs?
Answer: VC tends to operate counter-cyclically, investing when the economy is down. They might bargain hunt; since banks will be acting more conservative and new ventures will have fewer sources of funding. Thus, it’s not a bad time at all to be starting a new venture.

That wraps up this seminar, see you next week for seminar #2: “Managing your Intellectual Property”.

Tonight’s first seminar, “Assessing the Opportunity” with Dr. Daniel Muzyka, will be viewable to anyone online via video streaming.

Video stream page: http://webserver.lidc.sfu.ca/broadcast

Note: The page lists the start time as 6:30pm, but the actual seminar begins at 7pm.

Viewing the stream will require an up-to-date copy of Quicktime. If you expereience problems viewing the video on the page listed above, you can try opening it in the standalone Quicktime player. Choose from the menu File > Open URL… and enter the following: rtsp://lidc-streamlib.lidc.sfu.ca/downtown_hc.

Enjoy the seminar, and if you’re watching online, feel free to leave comments on this post.

New Ventures BC’s eight-part seminar series kicks off this week with their Assessing the Opportunity seminar on Wednesday, April 2nd at the SFU Segal Graduate School of Business on Granville Street. Presented by Dr. Daniel Muzyka, Dean of the UBC Sauder School of Business, this seminar will help new entrepreneurs evaluate their start-up idea with the business world in mind. Muzyka will help attendees examine their business ideas in terms of need, opportunity, and readiness.

NVBC seminars are open to both contest competitors and the public. The cost for all eight seminars is $100 per team or individual. This fee also covers the competition entry fee for anybody interested in joining. The fee to attend any individual seminar is $20 per team or individual. NVBC volunteers and students with valid ID cards may attend for free.

The deadline to enter the 2008 New Ventures BC Competition is April 23rd. Last year’s winners received $135,000 in prize packages and included local media darling TeamPages and Bean Services.

Watch the blog after for coverage of the event.