Vincent Wright

Tech entrepreneurs & the innovation strategy

By Vincent Wright

What this country needs is more business leaders like Doug Barber and Terry Matthews. Both are successful technology entrepreneurs whose combined efforts have generated billions of dollars in new prosperity and whose companies are textbook examples of the evident link between commercial R&D and wealth creation. More important perhaps, both are passionate about the vital role of private sector leadership in shaping Canada’s Innovation Strategy.

Both individuals, not coincidentally, were also keynote speakers at the third annual RE$EARCH MONEY conference earlier this month. Their presentations and supporting documents — including views from 30 top executives of Canada’s most R&D-intensive companies — charged the conference with highly thought-provoking stimuli not normally experienced at innovation policy events. And if personal achievements and contributions are any measure of credibility, then the views of both Barber and Matthews — along with those of their peers — deserve serious consideration by federal innovation strategists and tacticians.

Matthews set the tone for the day with a spirited address, insisting on the need for capital gains tax relief for seed-capital or angel investors (see page one). Highlighting the return on angel capital, Matthews asserts that every dollar of early-stage investment in a successful enterprise generates almost six dollars in downstream tax revenue.

A self-branded “street fighter”, Matthews has the credentials to back up his claims. In addition to founding and piloting Mitel Corp and Newbridge Networks Corp to stellar market success and subsequent sale to foreign interests, Matthews has financed and mentored more than 40 technology firms, mainly through Celtic House Venture Partners.

Matthews seeded Celtic House in 1996 with a US$25-million investment. Within four years, the venture capitalist built its war chest to more than $1 billion under management. During the technology investment frenzy around the turn of the millennium, no fewer than nine Celtic House investee companies were acquired by larger networking equipment giants for an aggregate sum over US$2.8 billion. In one case, the sale of Vancouver’s Abitis to Redback Networks for US$780 million, Celtic House parlayed a $3-million equity stake into $250 million.

The key to Matthews’ success is simple: he sticks to his knitting. Celtic House, for example, is focussed on the opportunities Matthews knows best, including data storage and networking, Internet infrastructure, and communications applications.

By any measure, Matthews could easily be classed as Canada’s top supplier of knowledgeable or expert equity capital. The firms in Celtic House’s portfolio are exposed to a wealth of management mentoring from his years of experience engaging technology customers. Matthews understands as well as any technology-intensive executive that successful innovation occurs not simply in a lab, but at the interface of the lab and customer.

The customer interface, he told the conference, identified the opportunity for Mitel Corp to trail blaze the world in the digitization of analog telephony switches for enterprises. Importantly, he adds, Mitel’s early identification of the opportunity allowed the company to seize first-mover advantage and become a market leader in private branch digital voice and data switches involving 200 or fewer phone lines.

Market leadership also punctuates Barber’s business triumph. He and Walter Pieczonka created Linear Technology 30 years ago with the goal of leading the market in low-power microcircuits for hearing aids. Linear, renamed Gennum Corp in 1987, went on to dominate the business, capturing more than two-thirds of the world’s market.

Barber, who retired from Gennum’s top post in April 2000, told the luncheon audience his company continues to build on its core strengths, pursuing market-leading positions in high-end niche applications for high definition video and data transmission. Where possible, he says market leadership ought to be the over-arching goal of every Canadian technology start-up.

Barber is not only generous with his advice. On, the business front, he’s been instrumental in the formation of every major microchip industry association and pre-competitive research initiative in Canada during the last 30 years. As for duty to country, he’s served on the Governing Council of the Natural Sciences and Engineering Research Council, as chair of McMaster University’s Board of Governors and, more recently, as vice-chair of the Ontario Science and Innovation Council, to name a few.

For decades, Barber has been among the leading innovators in Canada’s engineering education and research community, promoting every mechanism that fortifies the industry-university linkage and a broadening of curricula to turn out better-rounded graduates. His devotion to changing rules (where necessary) and culture led to one of his most magnanimous gestures: a $1-million endowment for the Barber-Gennum Chair in Information Technology. To encourage fresh thinking and ideas, the research chair can only be assigned to an untenured person and can only be held for five years.

Since retiring, Barber has become even more active in higher education and policy circles. In January 2001, he joined McMaster University’s Engineering Faculty for a three-year stint as its first-ever, Distinguished Professor in Residence. Prior to assuming that post, Barber was a key player with eMPOWR Canada Inc, a business-led effort to triple over five years the output of engineering students studying microelectronic, photonic, optoelectronic, wireless, and radio technologies.

Although corporate and political will for eMPOWR appears to have waned in the wake of the tel-economy turbulence, longer term thinkers may wish to revisit the plan, particularly if they heed Matthew’s predictions. The next wave of information and communications technology development, Matthews says, will be marked by network convergence, the rapid roll-out of collaborative tools by software giants, and a disruptive leap in PC microchip clock speeds to 50 GHz.

Already Canada’s richest technology entrepreneur by a long shot, Matthews says he plans to add considerably to his wealth (and Canada’s) over the next two to three years at the helm March and Mitel Networks. Matthews has personally invested heavily in the R&D programs of both companies with a view to making a fortune from what he described as the “greatest opportunity I’ve seen in my entire business career”.

Vincent Wright is a freelance-based freelance writer, photographer and editorial consultant. He is the founding editor of RE$EARCH MONEY.