Investors must pick up the pace, director says
October 27, 2010
Quentin Casey
Telegraph-Journal, Published Wednesday, October 27th 2010
Capital Heady growth means startups can’t doddle in securing funding or wait for indecisive angels and other investors
HALIFAX – Maritime investors must pick up their pace in funding local startups or Maritime entrepreneurs will flounder, says a leading American venture capitalist.
Mike Grandinetti, managing director of Boston-based Southboro Capital LLC, says modern start-ups are now growing at impressive speeds that were unheard of in decades past.
That heady growth means start-ups cannot doddle in securing funding or wait for indecisive angels and other investors.
“The market is moving so rapidly and accelerating so fast that if you’re not really current, you’re wasting a lot of time and making a lot of sacrifices for no good outcome,” Grandinetti said following his keynote address at the Invest Atlantic conference in Halifax, which brought together investors and entrepreneurs for a day of speeches and seminars on raising capital.
Grandinetti pointed to a number of companies to illustrate the impressive growth now common among many start-ups. For example, Zynga, a computer game company founded in 2007, and Groupon, a discount website that offers daily deals.
Both, he noted, achieved US $500 million in revenue in just two or three years. “It’s unheard of,” said Grandinetti, an investment angel and entrepreneur coach who also consults governments and economic development groups on how to build innovation clusters.
His point: entrepreneurs must move quickly to fund and grow their businesses. “Therefore investors cannot do what they’ve done traditionally here, which is sit on the sidelines and wait and then wait some more. Entrepreneurs desperately need quick decisions and they need capital to continue to stay legitimate and relevant in the marketplace,” he said in an interview.
“The speed is increasing and that puts a lot more pressure on investors to make decisions more quickly.”
Grandinetti, who previously launched five software companies (all of which were sold to bigger companies like Oracle and AT&T) also encouraged local entrepreneurs to seek venture capital and angel funding in the lucrative Boston and New York markets – but only after proving their business model locally.
He also stressed that money is not always the answer for young companies. “People get so seduced by the notion that it’s all about raising capital. I know many, many companies that have raised $100 million or $250 million and have failed spectacularly,” said Grandinetti, who started his career with Hewlett-Packard in Silicone Valley.
“Sometimes raising too much money makes a company dumb, fat and happy. They get lazy. There’s something about living on the edge that focuses the mind. When you’re living with relatively limited amounts of capital, you’re forced to be very resourceful and very efficient and productive.”
Startups and young companies, Grandinetti argues, must be as good at raising capital as they are at marketing and developing their product.
And in Canada, companies must put more effort into getting their product to market. The country, he says, is highly skilled on the innovation and research and development side – but consistently lacks at commercializing and getting ideas to market.
“That’s a challenge Canada has faced for many years and it’s why Canada continues to fall through the ranks,” said Grandinetti, who is now working with Saint John-based tech firm ClinicServer in a coaching program funded by the Atlantic Canada Opportunities Agency.
“There’s absolutely a crying need for some symbolic success stories (in this region). It’s not that there haven’t been successes, but they haven’t been earthshaking successes that are… globally significant companies,” he continued. “You need a couple of big wins. These wins are symbolic and they serve as beacons to inspire the next generation to be successful entrepreneurs.”
