My Experience Mentoring TheNext36, They Can Pivot

Mentoring TheNext36 team yesterday was a free flow of big ideas. You do have to plant many flags to get a business going and the team triumf discussed a range of ways to focus their start up technology business. The two enthusiastic entrepreneurs, Paul Lee and Ethan Baron, had all the characteristics needed to succeed, particularly the ability to listen and add in their views. Having listening skill means they will be highly likely to be able to pivot the focus of their business as they get it running.
It reminded me of YouTube that began as a dating site and Twitter which began as a podcast sharing site. Also, Canada's Flickr also changed. Here is an excerpt from Fast Company on this very topic and it is from Al Reis, my all time favourite marketing guru:

PayPal's original mission was to beam IOUs from Palm Pilot to Palm Pilot. Flickr grew out of a massive multiplayer online game as a way for players to drop photos into text messages. Groupon emerged from a community promoting political action while online flash retailer Fab.comcame out of a failed gay social network called Fabulis. Instagram's founders created a check-in technology called Blurbn before settling on photos. Pandora was a B2B musicrecommendation service. Yelp transitioned from email recommendations from friends to a local search and user review website.

 These companies, like many others, are examples of startups that "pivoted" from their original visions. First articulated by Eric Ries, a Silicon Valley entrepreneur and author of The Lean Startup, "pivoting" has become part of the business and technology lexicon, the Moore's Law of startupology. Only a soothsayer can know what will happen before it happens, and only the savviest (or luckiest) entrepreneur can take an idea from the initial inspiration to market and beyond without a few hiccups along the way. So perhaps it shouldn't be surprising that pivoting isn't just common, it's become the rule more than the exception. History shows that it's more likely a tech company will undergo a steep course correction at one point or another than stay true to their founders' original vision. Pivots are rooted in learning what works and what doesn't, keeping "one foot in in the past" and "one foot in a new possible future," Ries says. Boiled down to its essence: It's all about survival.

Throughout business history companies have pivoted--we just didn't think of it that way. Nokia once manufactured paper and rubber boots, Nintendo sold playing cards, and the Gap was a Bay-Area record store that peddled Levis jeans. Forty years ago Richard Branson published an indie music magazine and Virgin Records was a modest record store with one London location. The Marriot began as a root beer stand in Washington, DC. And startups aren't the only enterprises to amend strategy to avoid their own creative destruction. There was a time not long ago that Apple Inc. earned most of its revenues from computers and not music players and phones, while no one would accuse Microsoft of whimsy until it created Xbox. IBM used to be a billion-dollar computer maker and now it is a billion-dollar seller of business services.

Govt. Loan given to Innovative Auto Technology Made in Markham

Novo Plastics Inc. is advancing the development and production of its innovative plastic muffler system for local and international markets, thanks to a federal investment of up to $975,000 announced today by Paul Calandra, Member of Parliament for Oak Ridges-Markham, on behalf of the Honourable Gary Goodyear, Minister of State for the Federal Economic Development Agency for Southern Ontario (FedDev Ontario).

“Our government is proud to invest in helping this made-in-Ontario technology reach global markets,” said MP Calandra. “Novo Plastics is expanding its facilities, creatinghigh-quality jobs and targeting new customers, all of which support the company’s growth.”

The contribution through FedDev Ontario’s Prosperity Initiative is helping Novo Plastics expand its Markham facility and buy new equipment, geared at producing the plastic muffler system to meet varied transportation industry client needs.

Compared to traditional metal systems, the plastic muffler technology is lighter, stronger,longer-lasting and cheaper to produce. This product will also help transportation industry manufacturers go green, as it helps to reduce help reduce carbon dioxide emissions and improve fuel efficiency.

The commercialization of this product will diversify the company’s product line, expand the company’s export market, and support its longer-term sustainability.

“We are very honoured to receive this recognition and endorsement of our company and our technology from the federal government and are proud that our Member of Parliament, Mr. Paul Calandra, is here today on behalf of the Honourable Gary Goodyear,” said Baljit Sierra, President and CEO, Novo Plastics Inc.

For more information about the project and the Prosperity Initiative, please refer to thebackgrounder.

The investment announced today supports the Government of Canada’s science, technology and innovation agenda, which is focused on increasing the country’s productivity, creating jobs and growing the economy.

Created in 2009, FedDev Ontario supports the southern Ontario economy by building on the region’s strengths and creating opportunities for jobs and economic growth. The Agency has launched a number of initiatives to create a Southern Ontario Advantage and place the region in a strong position to compete in the global economy. These initiatives are designed to encourage partnerships and support projects that help the region’s businesses and communities become more competitive, innovative and diversified. To learn more, please visit www.feddevontario.gc.ca or call 1-866-593-5505.

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For more information, contact:

Natalie James
Office of MP Paul Calandra
905-640-1158

Media Relations
FedDev Ontario
519-571-6879

Exempt market dealers struggling with compliance obligations

As the exempt market continues to come under regulatory scrutiny, dealers are being urged to ensure their suitability, marketing and other compliance practices are up to standard.

At the Strategy Institute's Registrant Regulation Compliance Strategies Summit in Toronto on Wednesday, regulators said they're heavily focused on ensuring exempt market players are familiar with, and complying with, the applicable regulations.

"We're trying to understand our exempt market. We're also trying to bring into registration those who should be registered," said Mark French, manager of regulation and compliance in the capital markets regulation division of the British Columbia Securities Commission. "We're going to be doing a lot of compliance outreach work, visiting these firms, doing what we call inspections – limited scope examinations."

Added French: "where we see risk, we'll take action."

Prema Thiele, partner at Borden Ladner Gervais, LLP, said exempt market dealers which haven't yet been audited will likely be contacted by regulators in the months ahead.  "There's a lot of emphasis on the compliance side," she said.

Exempt market dealers have been struggling to keep up with the ongoing regulatory changes that have been taking place since National Instrument 31-103 came into effect in 2009, according to David Gilkes, director of the Exempt Market Dealers Association and president of North Star Compliance & Regulatory Solutions Inc. He said there have been 10 regulatory staff notices, amendments and proposed rules affecting exempt market dealers since 2009.

"It is hard for people to keep in touch," said Gilkes. "I'm hoping that the regulators will appreciate how much is being pushed onto dealers at this time."

It's been particularly challenging for new registrants in the exempt market, which had to register for the first time in 2009 under NI 31-103, said Geoffrey Ritchie, executive director of the EMDA. "They're struggling to understand their compliance obligations," he said.

Regulators have identified plenty of compliance deficiencies at the exempt market dealers they've reviewed. Suitability has been a particularly problematic area, since many exempt market products are illiquid and considered to be risky. The onus is on the dealing rep to prove that the product is suitable for a particular client, given their risk tolerance and time horizon.

"You've got to think about liquidity as part of your suitability requirement," said Gilkes.

Regulators find that many dealing reps fail to appropriately document conversations about suitability.

"A lot of times we don't see the documentation of these discussions anywhere," said Janice Leung, lead securities examiner at the BCSC. "We're looking for stronger and clearer evidence that that's being carried out."

Marketing is another area where regulators commonly identify deficiencies in the exempt market. "It's a top of mind issue," said Ian Pember, chief operating officer and senior vice president of administration and compliance at Hillsdale Investment Management.

Specifically, Pember said regulators often find exempt market players using exaggerated or unsubstantiated claims on their websites, pamphlets and other marketing materials. 

"Unless you can point to some third party source to back it up, you just can't use it," he said.

Since many of these compliance requirements represent new territory for many exempt market dealers, much education will be necessary to bring the industry up to speed, Ritchie said. He's encouraged that regulators seem to be focused on helping to educate dealers on their obligations.

"We're really into a big education phase," he said.

Exit strategy time for private equity hurts those sellers who wait

Exit strategies are mounting as Private Equity and the Baby Boomers start to sell businesses - some good revenue spinners and many more as poor revenue earners. The challenge for business owners will be to compete in such a crowded market. Getting in private equity partners as a first stage in the sales process is the smartest move for many business owners.
The Wall Street Journal elaborates:

Private-equity firms globally, with $1 trillion in uninvested assets, are under pressure not only to put capital to work in new investments but also to return capital to investors through monetizing old investments."Private-equity firms will feel pressure to unload assets in 2012," said Hugh MacArthur, head of consultant Bain & Co.'s private-equity practice. "They have been slow to return capital to investors since the downturn."Bain, which advises private-equity firms and their stakeholders, said nearly $2 trillion in assets are on firms' portfolios.

Know your "mathematical fit" to attract private equity funds

"When you do the math and understand your figures," advised financial expert Jacoline Loewen, "then you will do well in business."    Loewen, a partner with Loewen & Partners and author of Money Magnet, was talking to over 120 women business owners who were gathered together to celebrate International Women's Day.

She highlighted several successful women entrepreneurs who had not only done well in their business ventures, but sold them for millions and encouraged the women in the audience to think big, to believe in themselves and pursue growth. (You can see Jacoline Loewen's presentation at the Exempt Market Dealers Association website here. Scroll down.)

And the panel of women entrepreneurs who followed had done just that.  There was a common theme in their stories - each had just leapt in and followed her passion, not always knowing what they didn't know, but confident that they would obtain the knowledge they needed to succeed.

Neither Chioma of AMOI magazine nor Marissa McTasney of Moxie Trades were shy about pursuing someone who could help them, and when they had successfully tracked down the right person, and won them over, it was as if the doors opened and nothing could hold them back.

Marilyn Sinclair of WordCheck and iContent, on the other hand, was a serial entrepreneur, with over four businesses to her name, including one she had recently sold.  When she reflected back on her finances, she admits that she had difficulty getting a line of credit in the early days, and that one bank had required her to have her father's signature.  As she said, had she been married at the time, likely it would have been her husband's consent that was needed.

Times have changed, but we still have a long way to go.  The first step, recommends Loewen, is to do your homework and determine the type of investor who would most suit your financial needs.  Next is to know your figures; to present yourself in a competent, warm but professional manner, and be able to articulate your unique value proposition.  She also suggested that women focus on growth, not on the actual product, as that could change.

The Honourable Brad Duguid, Minister of Economic Development and Innovation (MEDI) gave the opening remarks at Become a Money Magnet which was organized by Company of Women, EMDA, Enterprise Toronto, Microskills and WEConnect Canada, and hosted by Ernst & Young.  "We wanted to focus on women and money, because while more and more women are entering the world of entrepreneurship, their rate of growth is lower when compared to their male counterparts." shared Mary Anderson of WEConnect Canada.  "And a lack of financial literacy, confidence and knowledge of what is available are all part of the problem."

This International Women's Day event was one of 25 held across the province that was funded by MEDI. 

The Exempt Market Dealers Association was a proud organizer of International Women's Day. This is part of the strategy to reach female business owners and link them to financial expertise and sources of private equity.