Canadian Tech Out of Touch With Global Entrepreneur Ecosystem

Canadian Tech Industry Still Not Confronting Its Infrastructure Issues

This is yet another excellent article questioning the Canadian tech industry’s appreciation of its significant deficiencies and challenges. It reflects my own view after much research and many interviews. It is also the view of UoT Professor Richard Florida who published a similar article in the Globe & Mail recently. Venture capital is anemic, but many also believe that there is a lack of scale-up management talent. Another factor is deeply-embedded Canadian conservatism, as evidenced by the bizarre entry of high street commercial banks’ debt offerings to entrepreneurs.

Source: Canadian tech needs to redefine its sense of scale

CANADIAN TECH NEEDS TO REDEFINE ITS SENSE OF SCALE/BetaKit

If like me, you spend a lot of time poring over the latest in Canadian tech, chances are good that you see both the huge potential of our technology companies and the simultaneous challenge: too often, they’re being held back by Canada’s scale-up deficit.

This, of course, isn’t news. In all the years I’ve participated in this sector, it’s been an ongoing challenge—one that has been the topic of countless discussions, panels, and debates. It’s an issue that has long challenged our innovation and technology sectors, and though it’s been talked about at length, it’s a conversation that deserves our full attention until we get it right.

Canada has become a launch-pad for early-stage companies, but, with a few notable exceptions, we are largely still lacking later-stage success stories.

PwC Canada’s recent MoneyTree report shows that our technology sector has seen a significant increase in funding deal volume in the last year—up 30 percent from 2017. But when one reads between the lines, it’s also clear that our homegrown tech companies are still largely stuck in a middle ground. In fact, of all the companies raising seed or early-stage funding during 2015-2017, only roughly 10 percent of them raised expansion or later-stage funding during 2016-2018.

Even if we leave room for successful shops that don’t need to raise further VC, that still doesn’t account for all of it. Many stall, naturally. They don’t continue to climb the curve and thereby miss the opportunity to hit scale. Of course, some companies shouldn’t scale and falter for good reasons. But many should and, for one reason or another, don’t. As a result, it seems that Canada has become a launch-pad for early-stage companies, but, with a few notable exceptions, we are largely still lacking the later-stage success stories we see in many other ecosystems.

Addressing this begins with challenging our very definition of scale. When we talk about Canada’s scale-up dilemma, we tend to focus on the obvious: raising capital, multiplying sales, and increasing market share in large, global, addressable markets. All of this is important but, in my experience, it’s only a part of the equation. Whether founders are on their first venture or their fifth, early-stage companies face many challenges to growth, and mature technology ecosystems support them by ensuring they see the bigger picture, beyond raising capital and increasing sales. It’s time to redefine our collective understanding of what scale means, and arrive at a new recipe that touches on all the moving parts companies need to master if they’re going to level-up.

To redefine scale, we need to take a closer look at the state of our ecosystems, which can become global hubs for highly skilled digital, creative, and leadership talent, and at the roadblocks that are currently preventing companies from scaling up. Let’s start by looking to the key stakeholders who will inevitably play an important role in shaping the future of the tech sector, including our government, VCs, and the public and private sector buyers of technology.

Government, of course, has several levers to pull when it comes to helping companies scale, like shaping policies and regulations that work to benefit our technology sector, while ensuring tax dollars are well spent through targeted incentive programs matched with data and IP policies that achieve the right balance.

Government(s) of all levels need to re-commit to working with Canadian technology companies at all stages of their evolution. They need to commit to procurement policies and practices that produce a real and predictable market for our tech companies to address and sell into. Federal and provincial governments of all stripes have made promises in this regard, but the velocity of, and commitment to, local sourcing hasn’t yet translated for our entrepreneurs.

Our government can also work to modernize our federal and provincial processes that foster the development and retention of IP, and continue to evolve tax incentives that support later-stage companies. These improvements would also encourage greater global investment in the Canadian ecosystem. According to the World Economic Forum Executive Opinion Survey, two of the most problematic factors of doing business in Canada are inefficient government bureaucracy and tax rates.

Data regulations and privacy policies, too, are of particular focus for governments worldwide. Ours can help us ensure that Canadian technology shops want to stay here, to do their important work, while being intentional about our data protection policies. After all, scaling does not mean scaling by any means, and protecting our data sovereignty is important.

Beyond government support, we should also look to VCs and other sources of private capital to enable companies to scale. Here, we often turn to Silicon Valley for inspiration, as investors there tend to be more willing to place big bets and write big cheques. Canada can learn from this. Any investor is going to have more misses than hits and, without higher risk tolerance, we won’t be able to finance the technological sophistication that will propel us to the next level.

According to the 2019 Canadian Startup Outlook Report, 56 percent of companies state that their long-term goal is to be acquired.

There is good news for Canada: CPPIB recently announced investments of $1 billion in venture funds, much of which will focus on technology companies. I’d love to see our wider investment community follow their lead. Funds like Novacap, Georgian Partners, OMERS Ventures, and more occupy the unique position of helping shape the future of Canada’s innovation economy. They’re already investing in some great home-grown companies, and their continued willingness to take bigger risks on innovative, growth-stage companies will help create the culture we need.

There’s even more good news when it comes to talent in Canada: we’re well positioned to become a hub for top tech and innovation talent. Our immigration policies, like BC’s Provincial Nominee Program and the federal Global Skills Strategy, are helping to draw the global talent stream north; our colleges, universities, and research hubs are world-renowned. Still, as I’ve seen with the corporate boards and senior leadership teams I’ve been involved with, companies need seasoned global talent if they want to become truly global players. It’s time we cast a wider net, finding ways to incentivize governance and executive talent from technology hubs like Boston, New York, Shenzhen, Dublin, Tel Aviv, and beyond to help Canadian companies reach their next stage and deliver on the promise of scale.

Established Canadian corporates have a big role to play here too. While our market is small by comparison to our neighbour, there is big buying power in our financial services, energy, retail, healthcare, automotive, and other major industries. Without a hint of protectionism, we can look to the Canadian innovation and technology markets each and every time we are procuring a solution, looking for new technologies or even looking for a problem to solve. In fact, according to the 2019 PwC annual CEO survey, 52 percent of Canadian CEOs surveyed see collaboration with start-up entrepreneurs as a key growth strategy.

Another way for companies to level-up and scale quickly is to reconsider some elements of the growth strategy playbook. Not surprisingly, according to the 2019 Canadian Startup Outlook Report by Silicon Valley Bank, 56 percent of companies state that their long-term goal is to be acquired. However, we should consider a shift in mindset that focuses on growth by acquisition rather than looking primarily at exit strategies or organic growth. This approach works well in dynamic sectors like fintech and healthcare. I’ve seen companies enjoy success by expanding into international markets or adjacent spaces, growing horizontally through acquisitions. Our tech leaders need to be thinking long-term so that, whether they’re building to grow, to expand, or to sell, they have the right structures and systems in place.

I am hopeful that these thoughts are provocative and assist some in considering strategies and actions that will lead to the scale Canada needs. True scale is critical if we want our technology companies to drive our GDP, provide high-paying jobs, and spur the innovations that will elevate us on the world stage.

This article was originally published on LinkedIn. Photo courtesy @dingle.

Mayo615’s Odyssey to France: Week 1 Update

Welcome to Mayo615’s Odyssey to France and the first of our Tuesday weekly updates

We invite you to subscribe to our YouTube Channel and to follow our weekly updates

In this Week One update we will focus on my first Big Idea, and how I achieved it.  I will also discuss my three most important key takeaways from that experience. We hope that you find this video helpful in achieving your own Big Ideas and goals. So here we go.

See The Launch Of The MAYO615 YouTube Channel Trailer Here

 

The launch of the Mayo615 YouTube Channel Trailer

 

 

On this YouTube Channel, we will share our Big Idea: our personal goal and invite you to participate with us, share your comments and questions and perhaps motivate you to achieve your own Big Idea. We will post an update on our project every Tuesday. We invite your comments and questions about your own Big Idea while you follow ours. We will both reply to all comments and will feature the best questions in our YouTube update videos each week.

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Are These Canadian Banks Simply Offering Dumb Entrepreneurial Venture Debt?

Canada’s Entrepreneurial Finance Industry Is Living In A Bubble

Bank ‘slugfest’ leaves the Canadian tech sector piled high with cheap debt offers

Canadian Entrepreneurs Are Being Exploited By The Banking Elite While VC’s Struggle To Raise Capital

In one of the more bizarre recent articles on the state of the Canadian venture investment market, The Globe & Mail offered this story of the entry of Canadian commercial banks like CIBC, RBC and TD into the world of entrepreneurial finance. Not more than a few weeks ago, Toronto University Professor Richard Florida also published an opinion piece in The Globe & Mail, in sharp contrast which is entitled “Canada is losing the global innovation race”, describing the long term decline of Canadian venture capital and decades of poor investment in basic R&D compared to its other OECD industrialized nations.  Recently, a colleague in Canadian venture capital told me of his retirement, citing the enormous difficulty his firm had raising capital from the Canadian financial industry. This is prima facie evidence of how disconnected Canada is from the reality of entrepreneurial finance and venture capital. The Canadian financial industry mindset is Problem One. Name another major entrepreneurial ecosystem that operates like this.

JOSH O’KANETECHNOLOGY REPORTER

PUBLISHED JANUARY 6, 2019 UPDATED JANUARY 6, 2019

Source: Bank ‘slugfest’ leaves Canadian tech sector piled high with cheap debt offers – The Globe and Mail

Banks spent 2018 fighting to give Canada’s fast-growing tech sector something it hasn’t had much taste for in years: debt.

Canadian scale-ups and venture-capital-firm partners spent much of the past year watching offers for debt financing pile higher than they can ever remember. In interviews with The Globe and Mail, founders, partners, and lenders used phrases like “slugfest” and “arms race” to describe the phenomenon. Both Canadian and American banks are racing to serve young tech companies, by improving loan terms and shoving down rates. This has reshaped how Canadian tech startups secure financing: Debt is so cheap that some small companies that would have never considered it are taking it on as a cushion, giving them extra runway between equity raises without diluting founders’ ownership.

The trend is partly a reflection of Canada’s tech sector’s coming-of-age after its post-financial-crisis doldrums. But it’s also the result of deliberate moves by two major players – one established in debt financing, the other making its return.

California’s Silicon Valley Bank is taking steps to formalize its ability to lend to Canadian clients and hopes to be fully licensed here early next year. Meanwhile, Canadian Imperial Bank of Commerce bought the private specialty-finance firm Wellington Financial in January with ambitions to better serve early- and mid-stage companies with broader banking services. In Wellington, CIBC found a team of experienced tech bankers after Canadian institutions largely shed that expertise in the long tail of the dot-com bust; in CIBC, Wellington found a lower cost of capital thanks to its scale, making debt cheaper to sell for clients.

While both players offer a suite of banking services, it’s been their debt offers that caused jaws to drop in Canada’s tech community in 2018 – and has pushed other lenders, including Royal Bank of Canada and Bank of Montreal, to try harder to entice startups with similar offerings.

While no one interviewed for this story would share numbers on specific rate offers they’d seen – rates vary across lenders as well as by company size, stage and revenue model – they all agreed that the past year saw remarkable drops in cost of capital. Two sources ​who were not authorized to share confidential rate proposals said that interest rate offers had fallen from 15 to 20 per cent a year ago, but now hover between 10 and 15 per cent, sometimes falling as low as 6 per cent.

“Entrepreneurs 10 years ago wouldn’t have known about venture debt – now they know about it,” says Mark Usher, the veteran technology banker who is managing director and North American market leader for CIBC Innovation Banking – Wellington’s new moniker – and chair of the Canadian Venture Capital & Private Equity Association.

Mr. Usher cautions that founders should be careful and seek the advice of their investors and board when considering debt financing – and warns, too, that the super-competitive Canadian market is not sustainable in the long run. “It will normalize back to historical returns and rates,” he says. “Venture-debt lenders will take losses at some point, then they’ll realize that they weren’t charging enough to make up for the losses, and that’s how it corrects.”

Many in the sector suggest the first sign of the shifting Canadian venture-debt ecosystem happened in March, when Vancouver social-media company Hootsuite Media Inc. signed a $50-million deal with the newly minted CIBC Innovation Banking, having previously largely worked with Silicon Valley Bank. (The American bank says Hootsuite also remains a current client.)

“Even if we never use it, it’s just a nice cushion, and it really doesn’t cost that much to have it,” says Sid Paquette, a managing partner at OMERS Ventures, who oversees the firm’s investment in Hootsuite. “At almost all of my companies … I’m doing a disservice if I don’t encourage them to take on a little bit of debt right now, because it is so cheap.”

Since then, venture-capital partners and tech executives say, the debt rally in Canada has been adopted by firms of all sizes and stages. Janet Bannister, general partner at Real Ventures in Toronto – which focuses on early-stage investments – says that many companies in her portfolio and on her radar are taking on debt financing, largely to accelerate growth without diluting owners’ stakes.

“The banks are increasingly saying, ‘We need to be the banking partners of these young companies, because some of them are going to grow up and be the next Shopify,’” Ms. Bannister says. Still companies need to be prepared for the debt, she says. “If the interest expenses become so onerous that they are impacting growth by forcing the company to curtail spending on things such as development, sales and-or marketing, that can become a problem.”

Bryn Jones, the co-founder of PartnerStack, a Toronto firm that helps software companies grow through partnerships, has spent the last few months evaluating term sheets. “The only banks that really cared before were from the Bay Area,” Mr. Jones says. Now, he continues, “everybody wants to get into it.” The phenomenon has been helpful for companies such as ChatKit, a Toronto e-commerce chat-marketing startup, which did a debt-financing round with CIBC Innovation Banking last July, says founder and chief executive Mazdak Rezvani. “To build a successful Series A round, you need metrics to appeal to an investor. A few extra months of runway really helps.”

Since the debt-rate battle began earlier this year, “all of the banks now have a tech-lending focus and strategy,” says Mr. Usher. His own firm, CIBC Innovation Banking, even hired tech financier Robert Rosen away from American rival Comerica Inc., a long-time leader in offering debt financing for Canadian startups.

Banks’ embrace of tech companies has in some cases turned into a talent war. Devon Dayton, who’d been a part of CIBC’s technology push, left to join the Bank of Montreal in April, just three months after the Wellington deal. He says he’s now charged with “accelerating” BMO’s tech coverage, including both through banking services and providing debt capital to the sector.

Royal Bank of Canada, meanwhile, turned to established Toronto tech lender Espresso Capital in August to partner for venture-debt deals. Espresso has funded more than 230 deals since 2009, the company says, and recently established a new program to lend to software-as-a-service cloud companies up to 24 times their monthly recurring revenue in growth financing, to a maximum of $10-million.

“For the longest time we were the beneficiary of a massively under-served market,” says Alkarim Jivraj, Espresso’s chief executive. Amid what he calls a “slugfest” between banks to offer debt, he says, “we continue to grow, even with the noise around us.”

A rash of Canadian debt-funding options have emerged, in fact, offering loans on such highly specific terms. Toronto’s Fundthrough offers cash advances between clients’ invoices; Clearbanc, co-founded by serial entrepreneur and Dragons’ DenDragon Michele Romanow – and which just raised US$120-million – helps finance young e-commerce businesses by fronting online ad revenue. “How you fund your company probably ends up being the most important decision you make as a founder,” Ms. Romanow says. “With equity, you never get to give it back …. Coming up with as much alternatives around that is really powerful.”

Silicon Valley Bank, which serviced Canadian businesses for about a dozen years but until recently, did so largely from offices in Seattle and Boston, is looking forward to a formal Canadian licence from the Office of the Superintendent of Financial Institutions.

“What the licence will give us in the new year is the opportunity to have feet on the street [and] meet with clients and investors in a more proactive kind of way,” says Barbara Dirks, the bank’s Canadian head. Her colleague Win Bear, who long worked for the lender’s Boston office, says that it’s a historic moment for startup financing – not just in Canada.

“There’s a lot more competition​,” Mr. Bear says. “It’s really driven down pricing, much in the same way that increased competition on the growth equity side has increased valuations up to levels that some would argue are unprecedented.”

Another Silicon Valley Reckoning Is Coming: “Star Entrepreneurs” and Way Too Much Money

Another Silicon Valley reckoning is on the horizon.  We have seen cyclical events like this before, the 2001 bubble burst being the most recent memorable reckoning. The talk in 2001 was about too much “dumb money.” The coming reckoning, however, is on a massive, unprecedented scale, fueled by the same excess of global capital that has fueled the bubbles in housing markets in attractive locations around the World. The problems with Uber, Travis Kalanick, and the now obvious difficulty of the Uber Board of Directors to exercise meaningful governance should have been the “canary in the coal mine.” CNBC’s reporting on the excessive Silicon Valley “unicorn” valuations and media reports that New Enterprise Associates would divest $1 Billion in startup investments that cannot be made liquid has now made the situation blatantly obvious. After a long silence, the Wall Street Journal has finally joined the reporting on the crisis. What more does one need to take to the exit?

 

Source: In ‘Founder Friendly’ Era, Star Tech Entrepreneurs Grab Power, Huge Pay – WSJ

In ‘Founder Friendly’ Era, Star Tech Entrepreneurs Grab Power, Huge Pay

Silicon Valley financiers are losing leverage to star entrepreneurs

Two brothers who are co-founders of online payments startup Stripe, John Collison, left, president, and Patrick Collison, chief executive, have supervoting shares in the company, which was valued at $9 billion in its latest round of fundraising. PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS

The Wall Street Journal

By Rolfe Winkler and Maureen Farrell

May 28, 2018 4:25 p.m. ET

Founders of highflying startups are increasingly wresting control of their companies from venture-capital backers and extracting huge pay packages tied to going public.

Venture capitalists had long called the shots in startup boardrooms and continue to be the primary backers of private companies. But in recent years they have had to compete against new classes of investors including mutual funds, sovereign-wealth funds and now Japan’s SoftBank Group Corp. , which has a $92 billion Vision Fund investing in startups.

That has reduced their leverage, shifting power toward star entrepreneurs and adding pressure on VCs to cultivate “founder friendly” reputations that will help them get a piece of the next hot startup. The flood of capital also gives entrepreneurs the ability to pick not just their investors but also when and whether to go public. An initial public offering is the primary way in which VCs cash in on their gains from startup investments.

VCs say empowering founders—through special voting shares, governance rights and other tools—frees them to follow ambitious long-term strategies once their companies go public without having to worry that poor performance will bring pressure from activist investors that scoop up stock. They point to founder-controlled tech companies such as FacebookInc., where founder Mark Zuckerberg had power to make bold moves and resist early pressure to sell the company. Facebook, which went public at around $100 billion, is now valued at roughly five times that.

Venture-capital backers of Stripe Inc., whose software is used by businesses to accept and track digital payments, recently gave the company founders an incentive to go public: special supervoting shares. The move was meant partly to assuage the founders, brothers Patrick and John Collison, that they would keep significant control of the company they founded in 2010 if it went public, people familiar with the matter said.

Many of Stripe’s investors say the founders have earned the right to control the company because it has performed so well. It was valued at $9 billion in its last fundraising round. Until March, when Stripe added its first independent director, the Collison brothers’ only fellow director was Michael Moritz, a partner at Sequoia Capital, one of the company’s earliest investors. Stripe and Sequoia representatives declined to comment.

Glenn Kelman, the longtime chief executive of online real-estate brokerage Redfin Corp.that went public last July, said that in the run-up to the IPO he was pushed to be more disciplined with expenses by two big investors who traditionally buy public-company stocks but also back later-stage private companies. Redfin’s shares are up about 50% since the IPO.

“There is a new world of VCs who really can’t perform their governance functions on boards because they want to preserve their relationship with you,” Mr. Kelman said of the venture-capital industry.

Star founders of private companies often get to pick their own investors, but as public-company CEOs they can’t. Supervoting shares—typically a second class of stock held by insiders that have 10 votes per share—give founders more power to elect directors and approve other items up for shareholder vote and protect them from investors who may have different priorities.

Last year, 67% of U.S. venture-backed tech companies that staged IPOs had supervoting shares for insiders, according to Dealogic, up from 13% in 2010. The proportion of non-tech U.S. venture-backed IPOs with supervoting shares has stayed between 10% to 15% every year over that period.

The proportion rises as tech companies get larger: 72% of founders of U.S. tech startups valued over $1 billion that had IPOs over the past 24 months have supervoting shares, according to a Wall Street Journal analysis.

Empowering a founder has risks. Uber Technologies Inc. co-founder and former CEO Travis Kalanick built a ride-hailing juggernaut valued at $68 billion with a pugnacious leadership style, but that approach ultimately contributed to a series of scandals. His supervoting shares and de facto control of the board made it more difficult for investors to push him out.

They did so last year, and then abolished supervoting rights and adopted a “one share, one vote” policy ahead of a planned 2019 IPO, something Mr. Kalanick ultimately voted in favor of.

Spotify Technology SA’s shareholders issued special “beneficiary certificates” to its founders in February, in part because co-founder and Chief Executive Daniel Ek wanted to maintain control, a person familiar with the arrangement said. The certificates boosted Mr. Ek’s and his co-founder’s voting control to a combined 80.5%, double their economic ownership. Spotify listed its shares in April. A Spotify spokesman declined to comment.

Snap Inc., whose two co-founders control about 90% of its voting power, sold shares with no voting rights in its 2017 IPO, meaning public-market investors don’t have any say on corporate matters.

Evan Spiegel, co-founder and CEO of the Snapchat parent, received a $625 million stock package that vested with the IPO as an incentive to get it done, people familiar with the deal said.

Drew Houston, co-founder and CEO of online-storage company Dropbox Inc., in December got his own stock package worth potentially $590 million partly tied to his company’s March IPO, according to offering documents. The stock vests based on Dropbox’s share price, among other milestones, and he can earn the full amount only if shares reach $90, triple their current value. Mr. Houston already holds nearly $3 billion of Dropbox’s shares.

Bankers and lawyers who work on IPO deals say there is little precedent for big stock packages offered to founders ahead of public offerings, a reflection of venture-capital firms’ decreasing leverage. Snap and Dropbox representatives declined to comment.

Some star founders may even be emboldened to overstep boardroom norms.

WeWork Cos. co-founder and Chief Executive Adam Neumann, who has 65% voting control, is one of two members of his board’s compensation committee, along with longtime company investor Benchmark, according to WeWork’s recent bond-offering documents. Public companies aren’t usually allowed to have their executives on compensation committees—which set executive pay—to avoid conflicts.

A WeWork spokesman said Mr. Neumann takes $1 a year in salary and declined to comment on whether he receives stock compensation or recuses himself from committee discussions of his pay. It is unclear when WeWork will tap the public markets, but the company’s $4.4 billion investment from SoftBank in 2017 was seen as pushing out its need for a public offering potentially for years.

WeWork bond documents show that in 2016 and 2017, the company paid more than 1.3 million shares of class B stock compensation, worth more than $50 million at the company’s current valuation. Mr. Neumann controls 78% of class B shares, which come with supervoting rights.

—Eliot Brown contributed to this article.

Write to Rolfe Winkler at rolfe.winkler@wsj.com and Maureen Farrell at maureen.farrell@wsj.com

OECD Apparently Believes Global Tax Evasion Is A Legacy Issue: A Pigs Will Fly Moment

Tax avoidance is allegedly a ‘legacy issue,’ OECD’s Angel Gurria says

• Gurria was Speaking at the Confederation of British Industry (CBI) conference in London
• He said governments were working hard to stop tax avoidance and evasion
• U.K. Prime Minister Theresa May said her government is continuing to work against tax evasion

Published 12 Hours Ago CNBC.com

Photographer | Collection | Getty Images

Amid another leak of documents revealing large-scale international tax avoidance, the secretary-general of the Organisation for Economic Co-operation and Development (OECD) said Monday that tax avoidance was fast becoming a thing of the past.

“When we’re talking about the ‘Panama Papers’ or ‘Paradise Papers’we’re talking about a legacy that is fast disappearing,” Angel Gurria said.

Speaking at the Confederation of British Industry (CBI) conference in London, Gurria said governments were working hard to stop tax avoidance and evasion.

“When we talk about ‘Double Irish’ or ‘Double Dutch’ (tax avoidance schemes) we’re talking about structures which are no longer there,” she said, adding: “This will not be repeated because of the work you and your governments and the OECD have done in the last few years.”

“There is quite literally no place to hide,” he said, noting that 50 countries had implemented automatic information exchanges regarding tax and that more nations were planning to do the same.

Gurria’s comments come after a leak of millions of documents revealing large-scale tax avoidance by high-profile individuals and companies via offshore financial services companies. The latest tax avoidance leak has been dubbed the “Paradise Papers” and comes after a similar leak in 2016 called the “Panama Papers” that showed how a Panamanian law firm allegedly helped its clients to avoid taxes by using offshore tax havens.

Speaking at the same business conference on Monday, U.K. Prime Minister Theresa May said that her government had continued the work against tax evasion that her predecessor David Cameron had begun.

“He started this work, not only in the U.K. economy but on an international stage. So we have seen more revenues coming into HMRC (the U.K.’s tax-collecting department) over the last few years, with £160 billion extra since 2010,” she said.

More work was being done to ensure “greater transparency” in the U.K.’s dependencies and British overseas territories, May said, and HMRC was already able to access more information about so-called “shell” companies.

“We want people to pay the tax that is due,” she said. That sentiment was echoed by the leader of the opposition Labour party, Jeremy Corbyn, who said that society was “undermined” by anyone that did not pay the tax they owed.

Trump’s Policies Are Already Sending Entrepreneurs to Canada and France

Canadian and French Policies to Attract Entrepreneurs and Researchers Impacting Silicon Valley

Last week, the U.S. Department of Homeland Security delayed the International Entrepreneur Rule to next March, and it is currently accepting comments on plans to rescind it altogether. The agency cited logistical challenges in vetting these new visas. The International Entrepreneur Rule was designed by the Obama Administration to support Silicon Valley and the high tech industry’s need for immigrant entrepreneurs and engineers. Immigrant entrepreneurs in the U.S. account for 44% of all startups.   The news has prompted a backlash from immigrant entrepreneurs like PayPal cofounder Max Levchin and leadership at the National Venture Capital Association, who argue that rolling back the rule will drive would-be job creators to other, more welcoming nations. This is already happening.

Canada’s Global Talent Stream Visa Program For Immigrant Entrepreneurs Targets U.S. Immigration Policy

To Silicon Valley observers, Canada has always seemed incapable of igniting a technology-driven economy, despite years of the government support for telecommunications, and a byzantine maze of government grant programs for research and development. Canada has remained a laggard in R&D investment compared to other OECD industrialized nations. Venture capital and government tax policy in Canada seemed to have a focus on short-term tax deductions rather than long-term gains as in California.  Then there was the demise of Nortel and the decline of Blackberry. There may be a new opportunity to bootstrap Canada into the high-tech industry big league: Trump Administration immigration policies that are already impacting Silicon Valley.  Not long after Justin Trudeau’s Liberals came to power in 2015, Trudeau sensed the opportunity to exploit Trump’s anti-immigration stances and the Liberal government swung into action to create the Global Talent Stream visa program specifically designed for rapid immigration for entire entrepreneurial teams. Since that time Trump has fulfilled his promises by slashing the H1-B visa program and announcing the end of the Obama Administration’s Startup Visa Program. Immigrant enrollments at U.S. universities is already down over 40%. Startup Genome, the acknowledged global leader in entrepreneurial ecosystems rankings, currently ranks Vancouver and Toronto 15th and 16th globally in its 2017 study, but those in the know acknowledge that Canada still lacks crucial technology ecosystem capabilities.  Nevertheless, Canada may be on the verge of a technology tidal wave.

Source: Trump’s Policies Are Already Sending Jobs to Canada | WIRED 

Source: Macron Inspires Entrepreneurs to come to France – Financial Times

Source: Trump Administration to end Startup Visa Program – Government Tech

Macron Determined To Make France “A Startup Nation” With Major Technology Initiatives

In 2015, long before Emmanuel Macron’s launched his campaign for the Presidency of France, as a minister in the Hollande government, Macron launched a significant new technology initiative, The Camp, on a seventeen-hectare campus just outside Aix-en-Provence, designed to inspire new thinking on crucial technology issues, and to incubate new entrepreneurial companies. The Camp will open officially this Autumn.  Now that Macron has swept the country in a stunning Presidential victory, it is clear that technology and entrepreneurship are crucial elements of his vision for France, backing it up with a 10B € technology-based economic development fund. The South of France generally, the Cote d’Azur and Provence are emerging as France’s technology center.  France’s nuclear research facility, Cadarache, just northeast of Aix-en-Provence, is the equivalent of California’s Lawrence Livermore Labs, and the home of ITER, the European nuclear fusion project. Prior to Macron’s 2015 launch of The Camp, the government had already established the Sophia Antipolis technology park near Nice, as a center for advanced telecommunications research and entrepreneurial start-ups.

The Camp, Aix-en-Provence

As if to underscore France’s rise on the global stage, France has recently leapfrogged the U.S. and Great Britain as the world’s new leader in “soft power,”  the ability to harness international alliances and shape the preferences of others through a country’s appeal and attraction.

 

 

CMIG , new owner of Grouse Mtn. has ties to Anbang Insurance

From The Globe and Mail:

https://www.theglobeandmail.com/news/world/grouse-mountain-acquisition-just-the-start-for-chinese-investment-firm-banker-says/article35699906/

Via The Globe and Mail’s Android app

Uber is Enron Deja Vu: Culture Trumps Strategy

A Silicon Valley Tragedy

Remember Enron’s “Smartest Guys in the Room?”

An early photo of Uber’s management team

Why did Uber spin so wildly out of control?

For over a  year now I have blogged here about the red flags flying about Travis Kalanick and Uber. Many investigative articles have been published over this time, in the New York Times and other publications, which have raised disturbing questions about Uber, Kalanick and some members of his team. The Board of Directors has finally taken action but it feels like its a day late and a dollar short.  Why did it take so long?  I have bluntly used the epithet that “Uber is Trump,” but now on reflection, it is more apt to describe Uber as Enron the sequel, and “deja vu all over again.” Remember the audio of two Enron electricity traders laughing about “screwing grandma?” That is Uber.

Culture Trumps Strategy

So as the current management adage says, culture trumps strategy.  This is not simply about the bad behavior of a few individuals and that eliminating them will solve Uber’s problems. The aggressive, confrontational business strategy is itself an integral and inextricable part of the problem. Some have said that Uber has a good business model and deserves to succeed.  I dispute that.  Jeremy Rifkin’s Third Industrial Revolution describes his vision for a new sharing economy.  The book has been read by world leaders and praised for its insights into a bright new evolving economy.  Uber and other companies like it have morphed the sharing economy into something ugly.

Uber morphed the sharing economy into “the gig economy,” epitomized by jobs without security or benefits, and the now viral video of Kalanick berating an Uber driver who was going bankrupt. SFGate also exposed the Uber operating strategy of psychologically manipulating drivers to work more hours than intended. The central principle of Kalanick’s business strategy is what he euphemistically describes as “principled confrontation.” Uber enters a market without following any existing rules or regulations, simultaneously entering into negotiations with municipalities which are typified by stalling tactics from Uber, and no intention to conclude an agreement. Uber’s goal is to take over the market by force, making any agreements with municipalities unnecessary. While pursuing its strong-arm goal, Uber has used a software tool, Greyball, to evade law enforcement. Uber is now under criminal investigation for the use of Greyball. Even the notion that Uber somehow improves traffic congestion has been debunked by a Northwestern University study commissioned by the San Francisco Transportation Authority which found that ride sharing has a heavy negative impact on San Francisco’s traffic congestion. See www.sfcta.org/TNCsToday

Uber is also facing a major lawsuit from Google for expropriating Google driverless car technology by hiring one of Google’s engineers. Uber has now fired the engineer in question, but the firing itself may be a circumstantial admission that its intent was to steal Google IP.  In another case, nearly 200 Uber employees were encouraged to use fake ID, burner phones and credit cards to sabotage Lyft, by booking and then quickly canceling more than 5000 rides with Lyft. Then there is the matter of what can now only be described as pervasive sexual harassment within Uber. Adding to all of these issues, local communities have begun to resist Uber much more aggressively. In one example, a protest movement in Oakland is opposing Uber’s plan to open offices in Oakland. There are other examples dotted around the World. Finally, there is the unresolved matter of the status of Uber’s drivers as “independent contractors or employees” which is nearing a final decision in California state and federal courts.

Clearly, Uber’s business strategy is driven by its ugly corporate culture. Stepping back to consider the complete picture, Uber’s business strategy looks to me like a house of cards.

Uber’s Leadership Conundrum

Those who know me and my blogs here know that I am a student of Harvard Business School professor John Kotter and his philosophy of leadership with humility at its core.  Uber presents a leadership conundrum for me. I was interested to hear BackChannel journalist Jessi Hempel express the same point tonight on PBS Newshour.  Uber obviously urgently needs to change its culture, yet without the wild aggressive culture defined by Kalanick, the question remains whether Uber can survive? It is not clear to me that humility could turn the Uber cultural battleship. There have also been a number of business articles suggesting that changing a corporate culture is far more challenging than changing a corporate strategy. So I am left to ponder Peter Drucker’s Four Quadrants of Managerial Behavior, and Quadrant Four’s “high task, low relationship” model for Uber. I learned this in Intel’s M Series management courses years ago. The course used the case study of the film “12 O’Clock High,” a demoralized B-17 bomber unit as its example. Gregory Peck arrives as the new unit commander and begins by “kicking ass and taking names.”  A similar case would be George Patton’s arrival in North Africa to take command of a demoralized tank unit.  My sense at the moment is the only best hope is that somehow an interim leader at Uber will have the latitude to take whatever actions he deems necessary to right the ship.  Such a solution seems doubtful at the moment.

Business Ethics Missing in Action

This morning on NPR’s Morning Edition, Nina Kim interviewed the Director of the Markulla Center for Applied Ethics at Santa Clara University, Kirk Hansen. The Center is named for early Intel and Apple executive, Mike Markkula. Mr. Hansen said that “Uber will undoubtedly become one of the most important business case studies” to emerge from Silicon Valley. Hansen went on to point out that founders of startups are often not capable of taking the company to a mature large company, and that it may be necessary to remove or reassign the founder. In the case of Uber, this is impossible because Kalanick and his founder group have the majority of shares.  This contrasts with most startups legal framework, where the investors or Board may hold the right to remove the founder in specific circumstances.

The Smartest Guys in the Room

As a grey-haired Silicon Valley alumni, I am personally offended and outraged by what has happened at Uber. I am deeply ashamed. Over the years I have worked for some well-known SV companies, startups, VC firms, and my own consultancy. I have personal knowledge of things that happened that were not kosher, and I have been present in situations where the ethics were not the best, but nothing in my Silicon Valley experience rises to the level of Uber. Something has gone wildly out of control since my time with how we conduct ourselves in business, and it is now tarnishing the history and reputation of fifty years of Silicon Valley achievements. From my own personal experience working at one wildly successful company years ago, and after rewatching the Enron documentary video,  “The Smartest Guys in the Room,” the answer is simple: too much money.

 

Source: Uber CEO Kalanick likely to take leave, SVP Michael out: source | Reuters

TECHNOLOGY NEWS | Mon Jun 12, 2017 | 4:22pm ED

By Heather Somerville and Joseph Menn | SAN FRANCISCO | Reuters

Uber Technologies Inc [UBER.UL] Chief Executive Travis Kalanick is likely to take a leave of absence from the troubled ride-hailing company, but no final decision has yet been made, according to a source familiar with the outcome of a Sunday board meeting.

Emil Michael, senior vice president, and a close Kalanick ally has left the company, the source said.

At the Sunday meeting, the company’s board adopted a series of recommendations from the law firm of former U.S Attorney General Eric Holder following a sprawling, multi-month investigation into Uber’s culture and practices, according to a board representative.

Uber will tell employees about the recommendations on Tuesday, said the representative, who declined to be identified.

The company is also adding a new independent director, Nestle executive, and Alibaba board member Wan Ling Martello, a company spokesman said.

Holder and his law firm were retained by Uber in February to investigate company practices after former Uber engineer Susan Fowler published a blog post detailing what she described as sexual harassment and a lack of a suitable response by senior managers.

The recommendations in Holder’s firm’s report place greater controls on spending, human resources and other areas where executives led by Kalanick have had a surprising amount of autonomy for a company with more than 12,000 employees, sources familiar with the matter said.

Kalanick and two allies on the board have voting control of the company. Kalanick’s forceful personality and enormous success with Uber to date, as well as his super-voting shares, have won him broad deference in the boardroom, according to the people familiar with the deliberations.

Uber CEO Travis Kalanick speaks to students during an interaction at the Indian Institute of Technology (IIT) campus in Mumbai, India, January 19, 2016. REUTERS/Danish Siddiqui/File photo

Any decision to take a leave of absence will ultimately be Kalanick’s, one source said.

The world’s most valuable venture-backed private company has found itself at a crossroads as its rough-and-tumble approach to local regulations and handling employees and drivers has led to a series of problems.

It is facing a criminal probe by the U.S. Department of Justice over its use of a software tool that helped its drivers evade local transportation regulators, sources have told Reuters.

Last week, Uber said it fired 20 staff after another law firm looked into 215 cases encompassing complaints of sexual harassment, discrimination, unprofessional behavior, bullying and other employee claims.

SILICON VALLEY SHOCK

Even a temporary departure by Kalanick would be a shock for the Silicon Valley startup world, where company founders in recent years have enjoyed more autonomy and often become synonymous with their firms.

Uber’s image, culture, and practices have been largely defined by Kalanick’s brash approach, company insiders and investors previously told Reuters.

Uber board member Arianna Huffington said in March that Kalanick needed to change his leadership style from that of a “scrappy entrepreneur” to be more like a “leader of a major global company.” The board has been looking for a chief operating officer to help Kalanick run the company since March.

The debate over Kalanick’s future comes as he is also facing a personal trauma: His mother died last month in a boating accident, in which his father was also badly injured.

Michael, described by employees as Kalanick’s closest deputy, has been a recurring flashpoint for controversy at the company.

He once discussed hiring private investigators to probe the personal lives of reporters writing stories faulting the company. Kalanick disavowed and publicly criticized the comments.

Michael will be replaced as the company’s top business development executive by David Richter, currently an Uber vice president, the company spokesman said.

Alongside Uber’s management crisis, its self-driving car program is in jeopardy after a lawsuit from Alphabet Inc alleging trade secrets theft, and the company has suffered an exodus of top executives.

One Uber investor called the board’s decisions on Sunday a step in the right direction, giving Uber an “opportunity to reboot.”

Vancouver Technology Industry On Verge Of New Era

The Vancouver technology industry may well be on the verge of an extraordinary period of growth.  Global, national, and regional factors appear to be aligning in ways that could create an extraordinary economic opportunity for the Lower Mainland which could not have been anticipated.  Vancouver has been an endless topic of discussion about its comparability (or not) to Silicon Valley, the historical Canadian investment conservatism, and the lack of other resources necessary to create the “secret sauce” that makes a region achieve critical mass. That may be changing if only the convergence of factors is grasped and exploited.

In an expansion of regional cooperation, the University of British Columbia and the University of Washington today announced the establishment of the Cascadia Urban Analytics Cooperative.

Universities establish joint centre to use data for social good in Cascadia region

Media Release | February 23, 2017

University of Washington President Ana Mari Cauce, Microsoft President Brad Smith, and University of British Columbia President Santa J. Ono at the Emerging Cascadia Innovation Corridor Conference in Vancouver, B.C., September 20, 2016.

In an expansion of regional cooperation, the University of British Columbia and the University of Washington today announced the establishment of the Cascadia Urban Analytics Cooperative to use data to help cities and communities address challenges from traffic to homelessness. The largest industry-funded research partnership between UBC and the UW, the collaborative will bring faculty, students and community stakeholders together to solve problems, and is made possible thanks to a $1-million gift from Microsoft.

“Thanks to this generous gift from Microsoft, our two universities are poised to help transform the Cascadia region into a technological hub comparable to Silicon Valley and Boston,” said Professor Santa J. Ono, President of the University of British Columbia. “This new partnership transcends borders and strives to unleash our collective brain power, to bring about economic growth that enriches the lives of Canadians and Americans as well as urban communities throughout the world.”

“We have an unprecedented opportunity to use data to help our communities make decisions, and as a result improve people’s lives and well-being. That commitment to the public good is at the core of the mission of our two universities, and we’re grateful to Microsoft for making a community-minded contribution that will spark a range of collaborations,” said UW President Ana Mari Cauce.

Today’s announcement follows last September’s Emerging Cascadia Innovation Corridor Conference in Vancouver, B.C. The forum brought together regional leaders for the first time to identify concrete opportunities for partnerships in education, transportation, university research, human capital and other areas.

A Boston Consulting Group study unveiled at the conference showed the region between Seattle and Vancouver has “high potential to cultivate an innovation corridor” that competes on an international scale, but only if regional leaders work together. The study says that could be possible through sustained collaboration aided by an educated and skilled workforce, a vibrant network of research universities and a dynamic policy environment.

Microsoft President Brad Smith, who helped convene the conference, said, “We believe that joint research based on data science can help unlock new solutions for some of the most pressing issues in both Vancouver and Seattle. But our goal is bigger than this one-time gift. We hope this investment will serve as a catalyst for broader and more sustainable efforts between these two institutions.”

As part of the Emerging Cascadia conference, British Columbia Premier Christy Clark and Washington Governor Jay Inslee signed a formal agreement that committed the two governments to work closely together to “enhance meaningful and results-driven innovation and collaboration.”  The agreement outlined steps the two governments will take to collaborate in several key areas including research and education.

“Increasingly, tech is not just another standalone sector of the economy, but fully integrated into everything from transportation to social work,” said Premier Clark. “That’s why we’ve invested in B.C.’s thriving tech sector, but committed to working with our neighbours in Washington – and we’re already seeing the results.”

“This data-driven collaboration among some of our smartest and most creative thought-leaders will help us tackle a host of urgent issues,” Gov. Inslee said. “I’m encouraged to see our partnership with British Columbia spurring such interesting cross-border dialogue and excited to see what our students and researchers come up with.”

The Cascadia Urban Analytics Cooperative will revolve around four main programs:

• The Cascadia Data Science for Social Good (DSSG) Summer Program, which builds on the success of the DSSG program at the UW eScience Institute. The cooperative will coordinate a joint summer program for students across UW and UBC campuses where they work with faculty to create and incubate data-intensive research projects that have concrete benefits for urban communities. One past DSSG project analyzed data from Seattle’s regional transportation system – ORCA – to improve its effectiveness, particularly for low-income transit riders. Another project sought to improve food safety by text mining product reviews to identify unsafe products.

• Cascadia Data Science for Social Good Scholar Symposium, which will foster innovation and collaboration by bringing together scholars from UBC and the UW involved in projects utilizing technology to advance the social good. The first symposium will be hosted at UW in 2017.

• Sustained Research Partnerships designed to establish the Pacific Northwest as a centre of expertise and activity in urban analytics. The cooperative will support sustained research partnerships between UW and UBC researchers, providing technical expertise, stakeholder engagement and seed funding.

• Responsible Data Management Systems and Services to ensure data integrity, security and usability. The cooperative will develop new software, systems and services to facilitate data management and analysis, as well as ensure projects adhere to best practices in fairness, accountability and transparency.

At UW, the Cascadia Urban Analytics Collaborative will be overseen by Urbanalytics (urbanalytics.uw.edu), a new research unit in the Information School focused on responsible urban data science. The Collaborative builds on previous investments in data-intensive science through the UW eScience Institute (escience.washington.edu) and investments in urban scholarship through Urban@UW (urban.uw.edu), and also aligns with the UW’s Population Health Initiative (uw.edu/populationhealth) that is addressing the most persistent and emerging challenges in human health, environmental resiliency and social and economic equity. The gift counts toward the UW’s Be Boundless – For Washington, For the World campaign (uw.edu/boundless).

The Collaborative also aligns with the UBC Sustainability Initiative (sustain.ubc.ca) that fosters partnerships beyond traditional boundaries of disciplines, sectors and geographies to address critical issues of our time, as well as the UBC Data Science Institute (dsi.ubc.ca), which aims to advance data science research to address complex problems across domains, including health, science and arts.

Find other stories about: Cascadia Urban Analytics Cooperative, Emerging Cascadia Innovation Corridor Conference, Microsoft, University of British Columbia, University of Washington

Source: Universities establish joint centre to use data for social good in Cascadia region