How important are serial entrepreneurs to a thriving startup ecosystem?
Well, Silicon Valley would not be Silicon Valley without a large and diverse pool of CEOs, CTOs and other entrepreneurial managers who have repeatedly founded companies.
Indeed, some folks say the Valley’s ability to churn out new generations of startups is in large part based on the predilection of some entrepreneurs to always be trying again. Due to their activity, new ventures benefit from market experience and the lessons learned from past successes and failures.
A 2009 Harvard Business School study gives weight to this argument. All things being equal, it found that repeat founders show “performance persistence.” Track records create an aptitude for judging opportunities and turning them into high-growth enterprises. And previous wins instill confidence in backers.
There is evidence that serial entrepreneurs have been substantially growing their presence in Canadian innovation hubs since the tech boom of the 1990s—especially in IT sectors. Several have been responsible for some of the hottest venture-backed companies to emerge of late. And if repeat founders do in fact show “performance persistence,” they might also be impacting the bottom lines of VCs.
One can trace the rise of the Canadian serial entrepreneur in the portfolios of some of our most established venture capital firms. For instance, the portfolio evolution of Celtic House Venture Partners, a 20-year-old media communications technology investor, and one of the deans of Canada’s VC industry, is illustrative of the trend.
While Celtic House sources deals with a mix of repeat and first-time teams, it has enjoyed particular success with the former. Not surprisingly then, repeat founders have featured in many of the firm’s recent deals. For example, in 2013, Celtic House, Rho Canada Ventures and BDC Capital IT Venture Fund syndicated a $6 million investment in Auvik Networks, a cloud managed network automation platform led by serial entrepreneur Marc Morin.
Morin has had a storied career. He was co-founder and CTO of PixStream, a digital video-focused hardware and software company. Formed in 1996, it received several rounds of financing from Celtic House and other VCs before being bought in 2000 by Cisco Systems for more than $550 million—at the time, one of the largest Canadian tech acquisitions on record.
Morin’s next startup was broadband equipment provider Sandvine. Launched in 2001 with funding from Celtic House and other investors, Sandvine did in 2006 what few of its Canadian technology peers even contemplated in that period—it went public, raising $40 million on the TSX. It continues to do well, reporting strong earnings in the past several quarters and a market cap of more than $500 million.
Auvik is the fourth Waterloo-based startup that Morin has helped build from the ground up. The art of serial entrepreneurship is “not just about repeating,” he said in an interview with peHUB Canada.
“For me, the most important thing is expanding experience, being bold with big ideas, and being able to choose what it is I want to build,” he said. “Experience is, along with skill and good luck, always worth something. It helps you read the tea leaves and anticipate emerging trends in technology, society and the environment.”
Morin said Auvik, like PixStream and Sandvine before it, is “all about building good technology.” Its software product is intended to make complex and tedious IT networking “dramatically easier” for small and medium-sized enterprises. Auvik’s traction in the market was increased last year with the recruitment of David Yach, the former CTO of Blackberry’s software division.
“David came on board because he saw our timing was right and the opportunity to disrupt was huge,” said Morin. He brought with him a cohort of “cherry picked” Blackberry staffers.
Auvik is currently moving from product testing and customer validation to sales and marketing, which should begin in earnest later this year. As things progress, Morin said he is glad for the continuing support of a smart investor like Celtic House.
“We lucked out in our relationship with Celtic House,” he said. “They have an approach that is quite complementary to ours. That’s very important because teams and team dynamics are key to early-stage ventures.”
The feeling is reciprocated at Celtic House. “We view ourselves as co-architects of startups with founders,” said Tom Valis, a Celtic House general partner since 1996. “And repeat founders such as Marc bring their cumulative experience and entrepreneurial drive to every opportunity.”
Valis said Celtic House typically whiteboards startup opportunities for up to 10 months. There is never any guarantee about how the process will turn out, but there is always “a much higher degree of trust when you are working with people who have done several successful tours of duty.”
Valis does not discount the energy and vision of novice entrepreneurs. “I’ve met a lot of impressive first-time CEOs,” he said. “Look at Shopify’s Tobias Lütke and Thalmic Labs’ Stephen Lake.”
Fresh collaborations with repeat founders have nonetheless been an increasingly vital piece of Celtic House’s investment strategy. Along with Morin’s Auvik, the firm in 2013 led the $4 million Series A financing of Ottawa networking hardware provider Corsa Technology, led by Bruce Gregory, the former CEO of Extreme Packet Devices. A semiconductor company seeded by Celtic House, Extreme Packet was only a year old when it was bought in 2000 by PMC-Sierra for $600 million.
By leveraging relationships with past partners, such as Morin and Gregory, and scouting experienced talent elsewhere in its space, Celtic House’s portfolio has over time reflected more companies driven by serial entrepreneurs. General partner David Adderley estimates that the portfolio share for repeat founders has risen from roughly 25 percent of Celtic House Venture Partners Fund II to 75 percent of the firm’s latest partnership, Fund IV.
“We believe that Celtic House has gained a clear, competitive advantage by applying the Silicon Valley definition of a repeat entrepreneur,” said Adderley. “This approach has brought capital efficiency and risk mitigation to our deals, and ensured that portfolio companies are more focused, better resourced and better able to achieve rapid progress.”
Adderley and Valis said Canada’s growing community of serial entrepreneurs has also attracted international notice.
“Celtic House’s portfolio has instant credibility in the Valley,” said Valis. “There is immediate recognition of the depth of talent in sector clusters in such regions as Waterloo and Ottawa.”
Celtic House was itself launched by one of Canada’s most celebrated serial entrepreneurs—Terry Matthews, the founder of Mitel Networks and Newbridge Networks, and the current chairman of angel VC firm Wesley Clover International.
Matthews is no longer an investor in Celtic House, following an MBO by Adderley, Valis and general partner Brian Antonen in 2001, but the firm’s investment pros think his spirit lives on in their work. “The values of Celtic House were defined by Terry,” said Valis.
Photo of visionary entrepreneur courtesy of Shutterstock
Photo of Marc Morin and David Yach courtesy of Auvik Networks Inc