Barrie Laver
Barrie Laver
Serial Entrepreneur, Investor
Barrie has been both a professional VC Investor and a versatile business leader. He has been part of several successful businesses and in his role as VC, seen many fail. This has afforded him a unique perspective which provides insight into what it is like sitting on both sides of the table. InsideSpin asked Barrie the following:
You have been both an active investor and an operational business leader. How has one helped the success of the other?
I have primarily been an active investor. However having run a couple of companies and worked with a number of others, I think each helps the other in a number of ways. As an operator the investment background is important because you can bring to the table the experience of having worked with numerous management teams in numerous companies across numerous market segments; there will not be many situations that you have not experienced at some level and this gives you greater confidence in terms of your ability to lead and manage. In addition the discipline that you learn as an investor can be tremendously valuable as an operator.
The operating experience is equally valuable in my role as an investor. Management teams that you invest with, respect the fact that you have walked in their shoes and that you have had to “make a payroll”. As such it is more likely that they will seek out your input on a range of issues. Also having the ability to roll up your sleeves and become actively involved with the company if required is valuable.
Finally the fact that one has operating experience provides a stronger foundation from which to assess management’s actions.
In your role as a VC, you have seen many companies fail, probably more than you would have liked. What are the two or three reasons for failure from the perspective you have had?
It largely does come down to management. While there are clearly contributing factors that can go beyond management, good management does have the ability to improve upon a weak product or market situation. Poor management can ruin a very good idea or company.
In terms of specific management attributes that can lead to failure, I would highlight a couple. The first would be a CEO who is unable to attract and retain exceptional team members. I find this is often because (s)he is unable to delegate and allow his managers to manage or (s)he is afraid to hire someone who might challenge them for their position. Another management issue that frequently arises is with CEO's who have experienced a run of success over a relatively long period of time. They begin to believe their own press, thinking that they can make no bad decisions and make no mistakes and they might tend to ignore information that is not consistent with their own views.
When meeting a first time entrepreneur, what are the traits you look for that would make you feel comfortable backing them with an initial investment?
There are a number of things that I look for. Principally would be that they are able to clearly display a strong and deep understanding of the market that they are going after as well as the customer needs; or put more simply what need does their product fulfill and how important is it to their potential customer. Beyond this you look for someone who you believe can lead and manage effectively. It will be critically important that the entrepreneur can attract and retain a strong team. If you can’t see this characteristic and desire to do so, then this may turn out to be a painful relationship.
Much has been said about the differences between the Canadian style of investor and that found in the US. You have been involved in companies that have a mix of both, what are the key differences that you see? Is a mix of both a good idea for a Canadian company or should they stay with investment from Canada if they can?
The real challenge with the Canadian investment environment, at least as it applies to early stage technology companies, is that it simply is not deep enough. The Canadian industry, for a number of reasons, has not been successful in developing a deep pool of funds, and fund managers, that have been around for years or decades. More worrisome is that of late the number of funds and pool of talent, has been decreasing. As such staying with investment from Canada is not always an alternative.
This being said it is hard to generalize about differences between VC's in Canada and the US; however, the markets are quite different. The size of the US market allows investors there to specialize in and have deep expertise in specific areas. Accordingly when they invest in a company they are often able to bring to the table a valuable network of potential management, directors, customers and partners. While this is also possible in Canada it is less common. Accordingly I believe that the right US-based investor can add tremendous value and therefore trying to stay with only Canadian investors may be shortsighted.
This being said, having a good Canadian investor is also important. In the end if the company is based in Canada, the local investor can be on the ground and often more easily accessible for the company. They will also being their own network to the company which should not be discounted.
Businesses that fail often hang on longer than they should. Is this true? What are some of the signs that perhaps it’s time to give up?
This is often the case. For both the investor and management there is a tendency to have a bias towards believing that the solution and better news are around the corner.…a little more money, a little more time will solve everything.
It is difficult to point to one or two things that provide clear evidence that a company will not be successful, because each situation can be different. One can simplistically break things down into two camps: the first is when you believe the product and market opportunity are there but the management team is not able to move the company forward and the second is when the management team may be seen as good but it doesn't appear as if the product can be successful (there is a third, when they both look weak but these are a little easier to deal with).
However probably the most significant indication that it may be time to let a company go is, perhaps obviously, tied to customer success. Many companies are able to achieve early success with a small handful of customers and this can give you the impression that the company is poised for success. However if the company is not able to take that early success and show steady progress in terms of building its customer base and pipeline in a reasonable time frame, then perhaps it is time to move on. Some signs that this is occurring may be that each sale process is protracted and the sale requires unique terms or concessions to get it to close. Furthermore if management is consistently not meeting its own forecasts it can be a clear indication that they don’t really understand their customer or the selling process, which may at least mean changes are required..
What has been your best investment experience and what are the main reasons for it succeeding?
I have been lucky to have a number of successful investments. In each case when you look back on the history of the investment, you can point to a number of times when it appeared that the company and the investment may not do well. This is simply to say that very few companies experience a smooth road to success; there are normally significant challenges to overcome at various points in a company’s evolution. Ultimately the successful ones succeed in large part to due to the commitment and focus of the management team, led by a strong CEO who is able to face both challenges and opportunities with the same balanced approach. A second important factor is that these leaders, often through some combination of luck and prescience, have found themselves in the right market at the right time. Average or good leaders can take advantage of market timing to create a good investment, but the truly great leaders surround themselves with excellence in terms of their management team, board members, investors etc. to create a great company.
