Beedie School of Business News

by Jonathon Narvey, Special to SFU Business

How does a business idea go from start-up to long-term success? The New Venture BC seminar series, hosted at Simon Fraser University’s Segal Graduate School of Business, gives a crash-course in entrepreneurship to the British Columbia business community at large – as well as to SFU Business students and alumni.

SFU Business was a founding sponsor for NVBC, establishing it in 2000 to help encourage entrepreneurship in B.C.’s technology sector. Today, the non-profit BC Ventures Society administers and operates the competition, with more than 100 B.C. business leaders acting as mentors and judges every year.

More than 1,100 aspiring B.C. entrepreneurs have entered the competition. Winners have built companies raising more than $67 million in financing and creating more than 500 jobs for British Columbians.

These include the likes of 2008 winner Saltworks Technologies – founded by two SFU Management of Technology MBA graduates, Ben Sparrow and Joshua Zoshi – which is delivering to the desalination industry a revolutionary, affordable and energy-efficient method for producing fresh water. According to Zoshi, the New Ventures BC competition forced the duo to think about crystallizing their business plan to accompany their breakthrough technology – an idea that The Economist magazine has referred to as “an ingenious way of using the heat of the sun to drive the (desalination) process.”

Presenters this year have included Mike Volker, Director of SFU’s University Industry Liaison Office, Dave Thomas of technology consultancy Rocket Builders, and Tanner Philp of Lions Capital. The seminars have also featured past competition winners such as Elisabeth Maurer of LightIntegra Technology.

One key theme of this year’s seminars was planning to succeed. When you put together your business plan, according to seminar presenters, don’t be skimpy with the details.

“Many companies can describe where they want to be in five years, but less can describe what they’re going to do to achieve this in the next year and a half,” says Rocketbuilders’ Thomas. “To plan well before you go to market, you have to have good market research.”

So what do you focus on? First, “how big is the marketplace?” Thomas says. “Is it growing? What are the trends? How do you divide it into segments?”

Understanding the customer pain that your product will solve is also key. And get a handle on how people normally buy your kind of product.

What about capital? How do you get investors to show you the money?

First of all, maybe you don’t need pesky investors getting their hooks into you after all. “Bootstrap,” says Vancouver-based angel investor Dr. Basil Peters. Dr. Peters was an Adjunct Professor of Engineering Sciences at SFU from 1985 to 2000. “The most spectacular start-up business models started with no capital. Most companies today really don’t need very much capital.”

“Plenty of Fish got started in an apartment,” he points out. “MetroLyrics (the online lyrics database founded by SFU Business EMBA graduate Alan Juristovski and undergraduate Milun Tesovic) started with no capital and is probably worth tens of millions of dollars. The world has changed. You’ve got resources even if you’ve got no money.”

If you do need to raise capital, start with those closest to you – but don’t sugarcoat it, says Philp of Lions Capital. “I’ve been very up front with family and friends. I tell them there’s a very high likelihood you’re going to lose every dollar you give me. Because I’m honest up front, I can talk to grandma after, if the value does indeed go to zero.”

Next, you can start looking for angel investors who can also provide expertise and critical connections. Venture capital companies have significant finances, but they’ll want a big cut of your profits and control of the company.

“Different sources of financing are compatible with different exit strategies,” Peters cautions. “$10 million to $20 million exits are not possible if you get money from VCs… Making a mistake about this can cost you the entire company.” Your exit strategy will guide your market research, business plan and funding process, he notes.

Many firms led by SFU alumni have used these types of lessons to get past the start-up stage to meet real success.

New Ventures BC Finalist Lungpacer Medical has also gone on to win further accolades, including an emerging technology award that came with a cash prize of $25,000.

Lessons learned through the NVBC competition will continue to help entrepreneurs turn their own new ventures into rising stars.

The 2010 winners of the New Ventures BC competition will be announced in September, with an awards ceremony held at the Segal Graduate School on September 23.

Learn more about New Ventures BC and upcoming events at: http://www.newventuresbc.com/

Growing functional-food demand yielding healthy bottom lines for local companies

Port Coquitlam’s Sequel Naturals posting steady 50% annual revenue increase

By Glen Korstrom

Stricter government regulation of natural health products is about the only thing likely to keep Port Coquitlam-based Sequel Naturals from continuing its 50% annual growth rate.

CEO Charles Chang expects revenue to top $21 million for the year that will end July 31. That compares with $14 million last year.

“We want to continue at 50% growth for the next few years,” he told Business in Vancouver. “Our revenue goal next year is about $30 million.”

Sequel Naturals produces “functional foods” – mostly powders that become nutritional smoothies when mixed with water or added to a fruit blend.

Functional foods have higher levels of antioxidants, vitamins or other nutritional supplements.

It’s a hot sector.

Canada’s nutrition industry generated $6.6 billion in 2008 and grew at an 8% clip, said Fenton Fong, who is a director at Vancouver’s Western Canadian Functional Food and Natural Health Product Network.

He estimated that about $1.12 billion of that $6.6 billion is functional foods.

B.C. had 94 functional food or natural health food companies in 2007, according to Fong.

That grew 99% to 187 companies in 2010.

“There’s a growing trend of understanding and acceptance by society that better nutrition, or lack of nutrition, has a direct correlation with health and chronic diseases,” he said.

Increasingly foods are falling into a grey area between being pure foods and being supplements.

Fong pointed to Vitamin C-fortified Tropicana orange juice as an example of how Pepsico Inc. (NYSE:PEP) is broadening its functional beverage line. It and competitor Coca-Cola Co. (NYSE:KO) are similarly expanding energy drink offerings.

“Our products are more like foods, but they’re being regulated and treated like natural health products. So, it’s very challenging for us,” Chang said.

His products tend to be regulated by Health Canada’s natural health products directorate not the Canadian Food Inspection Agency.

“With foods, you can sell anything you want. As long as nobody dies, you’re good. With food, it’s extremely liberal in how you can operate.”

Regulations and heightened scrutiny from federal inspectors have thus far failed to slow the rapid growth of Chang’s company.

The Simon Fraser University business graduate launched a failed venture with friends in 1995, worked for several years at the fast- growing Great Little Box Co. and then launched Sequel Naturals in his basement in 2001.

The company generated $140,000 that first year.

Now with 150-times those sales, Sequel Naturals is a shoo-in to be on BIV’s 2010 list of B.C.’s fastest-growing companies, which is scheduled to be published in issue 1090 (September 14-20). In 2009, it ranked No. 23 on the list.

Chang employs 50 full-time and 150 part-time staff. Production is outsourced, and he splits the staff in his 16,000-square-foot Port Coquitlam office into four divisions:
•sales;
•marketing;
•finance; and
•operations.

Each area is run like a separate company, and the four department heads report directly to Chang.

“We’re super-anal about statistics and what statistics deliver value,” he said.

“We’re really, really big on performance. We have a whole bunch of key indicators.”

He sets numerical targets for everyone.

The receptionist, for example, is assessed on what percentage of calls is answered before the fourth ring. Sales employees have more obvious targets.

Employees who meet targets are eligible to earn bonuses of up to 20% of their salary, which Chang said is on par with others in similarly sized operations.

In addition, Chang splits 10% of his company’s net profit equally among all employees.

Another of Chang’s key early decisions was to eliminate distributors and do all sales in-house.

“We noticed a big improvement when we went to our own direct sales force in that we could have a tighter relationship with retailers,” he said.

About 20% of his sales are in B.C., 50% are in the rest of Canada and the remaining 30% are in the U.S.

“In three more years, we’ll be bigger in the U.S. than in Canada.” •

gkorstrom@biv.com

Business in Vancouver (www.biv.com) has been publishing in-depth local business news, analysis and commentary since 1989. The newspaper also produces a weekly ranked list of the biggest companies and players in a wide range of B.C. industries and commercial sectors, monthly features and industry-focused sections that arm its subscribers with a complete package of local business intelligence each week.

How SFU Business fared in the news for the week ending July 16, 2010.

BC News

• Lindsay Meredith, marketing prof in SFU Business, was on CBC-TV talking about BC Ferries treatment of a customer whose assured boarding card expired with $731 credit still on it. BC Ferries refused to extend her card, and told her she should have read the fine print on the card and on the BC Ferries website.
  “Not a particularly bright move on their part,” said Meredith. “Not how you treat your best customers.

National and World News

• The Monday Morning Manager column in the Globe and Mail cited a couple of SFU Business profs on decision-making:
  “If you were asked which should come first—the decision or the evidence for the decision—you undoubtedly would pick the evidence . . . But we don’t always act that way. Sometimes we decide first, and then seek the evidence to back our decision.
  “In an article in MIT Sloan Management Review, Peter Tingling and Michael Brydon of Simon Fraser University call this approach ‘decision-based evidence-making,’ and say it’s more common than we acknowledge.  . . . The writers suggest it may have contributed to Enron’s downfall, as risk analysis became a charade when the company was determined to enter a blizzard of new fields.”
  (The MITSloan article is at http://at.sfu.ca/APEybd)

Athletics

• The Richmond News ran a story on how some SFU Business students are keeping the World Cup soccer fever alive.
  “The students are offering low-income children an opportunity to experience the game with a one-day camp. ‘A few friends and I are organizing a community event called Beyond the Game,’ said Tony Jing. ‘We are part of a project management course at SFU that requires us to host a community project.’ . . . .  Jing, along with his Richmond fellow SFU students—Alfred De Vera, Rafael Gi, Ivan Ma and Grace Hui—are hosting a one-day soccer camp this Saturday, July 17 from 9 a.m. to 3 p.m. at the Steveston Community Centre.”

SFU Releases

• SFU Business let business media know that The Journal of International Business Studies, the world’s top-rated journal in the field of international business, has appointed SFU Business prof David Thomas as its area editor for cross-cultural management. Thomas is director of the Centre for Global Workforce Strategy at SFU Business and a professor of international business.
• SFU Venture Connection told media how Joyent, Inc. of San Francisco has purchased Layerboom, a high-tech company started under the Venture Connection umbrella by executive MBA student Howie Wu. It’s the first protégé firm from SFU Venture Connection to score such a success.
• And the university told media about Project4Pets, a class project undertaken by five SFU Business students. Fourth-year students Whitney Law, Michael Liang and Lynzee Bewcyk and third-year students Reza Andalib and Kelly Pang are mounting Talented Tails. It’s a pet talent show in East Vancouver to raise money for HugABull, a non-profit rescue and advocacy group which has resettled more than 400 abused and abandoned pit bulls. (The show is at Britannia High School’s tennis courts in Vancouver on Sunday [July 18] from noon to 5 pm.)

Some local Simon Fraser University business students are keeping the World Cup soccer fever alive.

The students are offering low-income children an opportunity to experience the game with a one-day camp.

“A few friends and I are organizing a community event called Beyond the Game,” said Tony Jing. “We are part of a project management course at SFU that requires us to host a community project.

“Since all of us were concerned about the lack of sports for some children we decided on a sports theme.”

Jing, along with his Richmond fellow SFU students — Alfred De Vera, Rafael Gi, Ivan Ma and Grace Hui — are hosting a one-day soccer camp this Saturday, July 17 from 9 a.m. to 3 p.m. at the Steveston Community Centre.

Beyond the Game is also a fundraising initiative.

Jing went on to say that during the 2010 Olympic Winter Games, he’d seen a commercial about the free sports camps put on by the nonprofit organization Right to Play International (www.righttoplay.com/international).

“We all thought it was a good idea so we decided on that,” said the 21-year-old student. “Our aim is to empower disadvantaged children through sports.

“All of our proceeds from donations and sponsorships will go to Right to Play International, which tries to improve the lives of the world’s most disadvantaged children through sport.

“We have 50 children, between the ages of six and 12, who are registered.

“We will have arts and crafts, soccer balls and they will be taught proper soccer skills.

“If it all goes well, we plan on making this a yearly event.”

For more information about Beyond the Game, log onto www.beyondthegame.ca.

Howie Wu may still be working towards graduation but the Simon Fraser University executive MBA student’s start-up venture, Layerboom Systems Inc., has already made the grade.

Joyent, Inc., a San Francisco-based international inventor of integrated smart technologies, has acquired Layerboom, making it SFU Venture Connection’s first protege to be acquired.

Layerboom helps companies build and sell virtual private server ‘clouds’. Cloud computing refers to the new ability to shift physical technology infrastructure to a remote Internet hosting service, eliminating the need for companies or individuals to manage complex computing hardware and software in-house.

An active participant in the SFU Venture Connection program, Wu was convinced that cloud computing would offer great prospects for a new venture. He teamed up with Vancouver technical guru Trevor Orsztynowicz to form the business and won entry to Boot Up Labs, a Vancouver startup incubator.

Throughout Layerboom’s growth, SFU Venture Connection has provided Wu with support and guidance via its first mentor-in-residence Jim Derbyshire. Wu has also received advice and coaching from Danny Shapiro, dean of SFU Business.

“They’ve both been influential in helping guide the growth and positioning of Layerboom,” says Wu. “Jim brought the practical experience of managing and selling high tech companies and was the key supporter of the strategy change that led to the venture’s success.

“Danny brought a strategic view and sounding board that helped shape the venture.”

Janice OBriain, SFU Venture Connection’s manager, says: “It’s great to see our first participant exit the program after less than two years of operation.”

Launched in the fall of 2008, Venture Connection offers training and support programs for SFU’s entrepreneurs, linking student, faculty and local entrepreneurs with experienced advisors, funding opportunities, and other business connections. For more information on Venture Connection, visit www.sfu.ca/vc.

Project4Pets, a class project undertaken by five Simon Fraser University business students, will get tongues and tails wagging on July 18 from noon to 5 p.m.

Fourth year students Whitney Law, Michael Liang and Lynzee Bewcyk and third year students Reza Andalib and Kelly Pang are mounting Talented Tails. It’s a pet talent show in East Vancouver to raise money for HugABull.

The seven-year-old Vancouver-based non-profit rescue and advocacy group has resettled more than 400 abused and abandoned pit bulls, most recently 23 dogs found by Surrey SPCA in a potential breeding operation.

Project4Pets was looking for a fundraiser beneficiary as part of their SFU Business project management class assignment, when Law read about HugABull’s plight in a local newspaper.

The paper recounted how the organization had chalked up $10,000 in vet bills to treat the potentially life threatening wounds and respiratory illnesses of its latest pit bull refugees, aged two months to three years.

“As soon as I read this article, I knew HugABull would be the perfect beneficiary for our class project, which we had already decided would be a fundraising pet show,” says Law.

A dog owner with stories to tell about the pet abuse she has witnessed worldwide, Law says the staggering statistics on pit bull abuse and abandonment make this project management assignment all the more meaningful.

Talented Tails will be staged at Britannia High School’s tennis courts. The show will feature tricks by all dogs registered by their owners, music, information booths, raffle prizes, food and a paw-licking-good dog cake.

The registration fee for talented pets: $10 in advance and $15 at the door.

The admission fee for people: $5 in advance and $7 at the door.

All of the Project4Pets students live in Vancouver, except Andalib, who is a North Shore resident.

To see photos from this event, please visit:

Vancouver Sun online:
http://www.vancouversun.com/Photos+Dogs+take+flight+Talented+Tails+Vancouver/3293895/story.html

The Province online:
http://www.theprovince.com/Canines+compete+Talented+Tails/3294142/story.html

Metro Vancouver:
http://reader.metronews.ca/digital_launch.aspx?id=3744758e-2ee5-4c13-a052-56711bdbdc91

The U.S. State Dept and the Fulbright Program have awarded Ian P. McCarthy, Associate Professor and Canada Research Chair in Technology & Operations Management, a grant to study university research parks, incubators, and the associated technology transfer programs run by the Genesis Institute, BIO-RIO and the Technology Park of Rio de Janeiro. Keep reading…

How SFU Business fared in the news for the week ending July 9, 2010.

National and World News

• Marketing guru Lindsay Meredith of SFU Business was in a national Canadian Press story on the renaming of GM Place in Vancouver as Rogers Arena. He was also on the Early Edition show on CBC Radio and the Bill Good show on CKNW, saying it’s a savvy marketing move that will better position eastern-based Rogers in the Vancouver market.
  The Canadian Press story added:
  “Selling a building’s naming rights helps a team’s bottom line, but can erase some history, said Lindsay Meredith, a marketing professor at Simon Fraser University in Burnaby, B.C.  ‘When a favourite landmark gets renamed, is something lost by that? Sure it is,’ said Meredith. ‘No question about it. That is a genuine identity that sport fans have associated with for many years. There is brand equity there as well. Suddenly, you wiped it out in one stroke.’”
  Steven Kates, another marketing expert from SFU Business, was also on CKNW talking about the name-change, and how people will slowly get used to it.

How SFU Business fared in the news for the week ending July 2, 2010.

National and World News

• The Canadian Press quoted marketing prof Lindsay Meredith in a national story on the impact of the new HST on homebuyers and landlords. It noted he was one of many who poured funds into renovating his home before the tax took effect.
  “‘I suspect you’re going to see lethargy in the market for probably a good chunk of the summer,’ he said, explaining people will hold off making purchases while feeling poorer because of higher costs.”

And Earlier…

• The Globe and Mail and CTV spoke with SFU Business prof Peter Tingling about his studies of the success of NHL draft choices from 1997-2003. The Globe noted his company found the Detroit Red Wings “ranked 29 out of 30 teams in successfulness with North American prospects and just 12th with European prospects.”
  Tingling told the Globe: “Most teams don’t track the efficacy of their scouting and they should. If you’re going to pay for this, wouldn’t you want to know their track record? I’d want to make evidence-based decisions.” And he noted on Canada AM on CTV: “The issue really is finding superstars where other people don’t see them. That’s where teams are going to get tremendous value. And that’s where scouts can make a difference.”