I have been talking recently with a number of what you might call “Captains of Industry” and everyone agrees that there is a serious problem with available capital for new technology companies. The instant gratification model of the Internet generation seems to have migrated to Investors. If your start-up already has a product or will be able to be profitable in six months, then investors may be interested. If you fall outside of that criteria then you are probably out of luck.
The thing that these investors seem to be missing is that it takes longer than 6 months to develop anything complex and it’s the complex things that result in larger more long term companies. Instant gratification and blue chip companies are mutually exclusive so what are entrepreneurs supposed to do? Private investors are a possibility but you have to be very careful when it comes to the T’s and C’s.
I commented recently on the history of investment in science with respect to the overall economy of a country and there is hard evidence to suggest that we are on the edge of a slippery slope. If next generation technology companies cannot find suitable environments locally, they will have no choice but to seek greener pastures in other locations. That will not be good for the country or the people that live here.
Before the technology bubble burst, all you had to have was an idea and you could raise millions. We seem to have experienced a 180 degree shift where you now have to have a company that doesn’t need money to get the interest of investors. There is no doubt in my mind that the pre-bubble environment was ridiculous, but what we have today is just about the same in the other direction.
The question that I ask myself is what does the technology industry have to do to get back to a state where investors are willing to consider a 10 year return. That’s the kind of investment that produces blue chip companies like the Northern Telecoms of the 80’s and 90’s? I never worked at Northern Telecom, but I have worked with many people who did and those people are some of the most brilliant, consistent producers of innovation that I have ever met.
When you are thinking about what you want to do with your RRSP, take a close look at where you money is going. Tell your money manager that you want a portion to be invested in local tech companies that will produce jobs for our children.