I attended the Ready to Rocket 2006 session this morning, which was sponsored by Rocketbuilders , a Vancouver based market strategy and consulting firm that helps technology companies capitalize on market opportunities.

The presentation started with an overview of the successes from 2005. Next, Geoff Hansen presented an IT Outlook for 2006. This was followed by the Ready to Rocket 25 for 2006 and the “Ones to watch” – 40 emerging companies that might graduate to the full “Ready to Rocket” Top 25 in 2007. Along with those lists, Price-Waterhouse Coopers presented an overview of the M&A and IPO activity across North America for 2005, and Bill Koty, a professor from UBC presented a brief overview of a newly released Premier’s Technology Council report titled “Ahead of the Future” which gives a series of scenarios and predictions for B.C.’s technology economy development from 2005-2020. The summary notes are below along with some of my opinion at the bottom.

 

NASA should be in BC – we launched a lot of rockets last year.

 

Some interesting notes came from this session:

 

  • 2005 was a breakthrough year on the Rocketbuilders list.
  • These companies were successful because they had a laser focus on a niche market.
  • Key highlights of the 2005 list include:
    • PureEdge Solutions Inc. (Victoria, BC) was acquired by IBM
    • Over 45% of the 2005 Ready to Rocket companies received new investments
    • 100% of the 2005 Ready to Rocket companies exceeded 30% revenue growth
    • Over 60% of 2005 Ready to Rocket companies exceeded 100% revenue growth
    • Over 35% of 2005 Ready to Rocket companies exceeded 200% revenue growth

 

2006 – the rise of the phoenix

 

Here were some of the highlights of the predictions for the year ahead;

 

  • general projections seem to predicting that companies will increase their IT spending 5-6% across the board this year
  • SMB spending is double that and includes factoring in old hardware replacement cycles for hardware purchased before the collapse.
  • there is a trend away from cost-cutting measures and back to the value creation side in terms of prioritizing projects.
  • Key Themes that have been identified for 2006:
    • Choice: give the user what they want, where they want, in the form they want (Tivo, xFM)
    • Make it easy: make it simple to learn and use
    • Safe & Secure: ensure that they can store their data safely and people will trust you with that data
    • Search is king: there is a lot of work to do here
    • Microsoft Office enablement: now that Microsoft has opened up the APIs, companies are succeeding by building things that integrate into Microsoft Office, even more than they were before.
    • Storage is still hot: Networked attached storage companies (for example) are growing at up to 300%/yr
    • Make it portable: give people the ability to stay mobile: Blackberries, iPods, xFM
    • Ensure compliance: people are going to spend 30% of their IT budgets on compliance

 

For more information on the 2006 IT Outlook, contact Geoff Hansen at Rocketbuilders at 866-824-8785 or at gchansen@rocketbuilders.com.

 

Ready to Rocket 25 2006 list

 

Some interesting notes came from this session:

 

  • For the 2006 list, the selection team had great difficulty keeping it DOWN to 25, which meant that the Ones to Watch list expanded to 40 companies.
  • There were so many interesting technologies coming up that Rocketbuilders considered launching an “Interesting Concepts” category…but didn’t
  • Success factors. The Top 25 shared some key success factors:
  • they were heavily verticalized (we had 5 Financial service companies and 4 Healthcare companies on the list.)
  • they were well-funded to grow
  • Some of these companies are approaching $5 – 10M in revenues – a point at which they become a LOT more interesting as acquisition targets.

Here is the direct link to the Ready to Rocket 25 List. But they are here for review as well:

 

  • Abebooks
  • AirG Inc.
  • Axonwave Software Inc.
  • Bycast Inc.
  • Caelo Software Inc.
  • Colligo Networks Inc.
  • Convedia Corporation
  • Eyeball Networks Inc.
  • FinancialCAD Corporation
  • Flowfinity Wireless Inc
  • GaleForce Solutions Inc.
  • GenoLogics Life Science Software Inc.
  • IronPoint Technology Inc.
  • In Motion Technology Inc.
  • Layer 7 Technology inc.
  • MAKE Technologies Inc.
  • NewHeights Software Corp.
  • ResponseTek Networks Corp.
  • RewardStream Inc.
  • Sxip Identity Corporation
  • Tantalus Systems Corp.
  • TAP Solutions Inc.
  • TenDigits Software Inc.
  • Vision Critical Inc.
  • Vivonet Inc.

 

The Ones to Watch

 

This list was presented but the final list will not be out until January 13th, 2006.

 

Lane construction finally complete – traffic now moving slowly towards IPO exit lane

 

In this 2005 review of M&A and IPO activity across North America presented by Randy Garg of Price-Waterhouse Coopers , there were quite a few interesting tidbits:

 

  • The IPO market has finally been resurrected.
  • $100B of private equity was present in 2005.
  • Private equity funds are becoming more active in M&A (25% of $100B or 25B) which is a new development.
  • Local companies are going public…but not necessarily on the TSX. Some have gone to London or to the USA. This is a new development.
  • Debt and subordinated debt as financial instruments have started to appear and this is a new development which is being enabled by the fact that newer companies have (gasp) revenues that can support the debt and are more financially solid and lendable from a cash-flow perspective.
  • Public companies are going private again in order to lower their costs, and simplify their operations because the costs of compliance are huge (up to 30% of IT spending per above notes, not to mention other back-office charges.)
  • Rule of Thumb: if you’re looking to get acquired, make sure that you have audited financials
  • BC and Canadian companies are now on the U.S. radar but our prices have gone up and our currency has gone up, leaving us as less of a bargain than before.
  • The major M&A deals are still predominantly cross-border – U.S. companies buying Canadian ones or vice versa. There was very little activity in Canada between Canadian entities.
  • M&A is still a revenue purchase decision for companies. They are buying revenues, not necessarily technologies. Once a company crosses the revenue barrier, there are a LOT more suitors.
  • $5M seems to be a baseline deal size.
  • 2006 is poised to be the best year yet for M&A activity!
  • There is a ton of money out there – $100B raised in the U.S. in the Private equity markets in 2005
  • therefore money is not the problem
  • finding good deals and good teams are the problem
  • M&A is still the preferred route of exit when compared to IPO, but IPOs are now back as options.

 

I’d like a micro fuel-cell powered proteomics machine for gene therapy web research

 

William Koty of UBC presented some of the findings from the Premier’s Technology Council report on Emerging Technologies titled “Ahead of the Future”. It evaluated 39 emerging technologies, boiled those down to a short-short-list of 12 Emerging technologies and then presented two almost contradictory charts – one from the academics and one from the industry advisory board.  It was long on research methodology and somewhat short on conclusions.

I am hoping that they will do a follow-on or that it will feed into a larger discussion where they do indeed flesh out the scenarios that they discuss very tentatively in the report.

 

At the end of the day, what did they really say?

If I had to summarize the session, I would say it like this:

 

  • The tech industry is ramping up again. A lot of people had that gut sense but the numbers now prove it.
  • We are building some really kick-ass companies here in B.C.
  • Those companies are growing again.
  • M&A activity will be at an all time high in 2006 and the IPO markets are opening up again as exit routes.

 

“Your playing small doesn’t serve the world”

 

We build good companies here that are very capital efficient and that are still attractively priced for acquisition. And that’s not necessarily a bad thing. It brings money into the economy, it gives local entrepreneurs access to global acquisitors’ systems and training and talent, and spawns more entrepreneurial ventures. A year or two ago, one of the local entrepreneurs hosted a VEF event titled something like: “Why acquisitions are gutting B.C.’s economy.” The resulting talk though had every one of the entrepreneurs on the panel saying that their acquisition was a good thing and that in fact it had had a net positive benefit across the board on a bunch of different things. I remember the host lamenting at the end that he should have talked to the panel BEFORE naming the talk.

Another key point was that we are finally starting to grow our companies again to a decent size We need to keep thinking bigger. Even the statement that they are growing to a decent size is deceiving since we are referring to companies approaching $10M/yr in revenues, which is laughable in the U.S. But it’s a starting point. If you are an entrepreneur, don’t say, “We’re going to dominate the lower mainland”, say “We’re going to dominate the western world” or the whole world for that matter.

I am always reminded of the quote that was incorrectly attributed to Nelson Mandela but which was actually written by Marianne Williamson in her 1992 book, “Return to Love”:

 

Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourselves, who am I to be brilliant, gorgeous, talented and fabulous? Actually, who are you not to be? You are a child of god – your playing small doesn’t serve the world. There’s nothing enlightened about shrinking so that other people will not feel insecure around you. We were born to make manifest the glory of god that is within us. It is not in just some of us. It is in everyone. And as we let our own light shine, we unconsciously give people permission to do the same. As we are liberated from our own fear, our presence automatically liberates others.

B.C. entrepreneurs would do well to think about that and learn from it. Our playing small doesn’t serve the world. So get out there, think big, and serve the world.

Thanks to the good people at Rocketbuilders for the invitation and for all the hard work in putting this together!