Building the Vancouver Innovation Community - An interview with Mike Volker

Steven Forth is a Managing Partner at Ibbaka. See his Skill Profile on Ibbaka Talent.

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As part of the combination of Ibbaka and TeamFit we raised an investment from the Vancouver angel investment funds WUTIF and eFund. WUTIF is led by Mike Volker, one of the most experienced angel investors in Western Canada. He has made an enormous contribution to the development of the innovation economy here in Vancouver and has demonstrated how to build a committed and engaged community. Ibbaka caught up with Mike during the summer of Covid-19 to learn how one becomes an angel investor, grows a community and how the WUTIF portfolio companies are adapting to the new normal.

Ibbaka: Can you tell us a little about your background and what was your career path that led you to your current work?

Mike: I started off in engineering at the University of Waterloo. I got a bachelor’s in electrical engineering and a master’s in systems design. As part of my studies, I designed a video display terminal, precursor to desktop computers, consisting of a keyboard and a screen, but without intelligence. Instead, the devices would connect to a remote mainframe and the mainframe did all of the computing. 

In those days it was very expensive to get access to computing resources and it was a very tedious process as well. Video displays were very, very expensive and being a student, I thought ‘this needs to be done in a way that is economical for students. My reasoning was that everyone pretty well has a regular television set, if we could display the information on a regular television set that would reduce the cost substantially for students. So, the device I developed was basically a raster scan technology and we were able to display at a low resolution but acceptable resolution, on standard TV sets. For programming purposes, that was quite adequate.  

Back in the 1970s, Volker-Craig was an ambitious growth company

That’s really what the impetus was for creating that product and it ended up really becoming a global company. Over the eight or so years that I developed that business, we had distributors and customers in all major countries. 

Then in 1981, IBM announced that it was getting into desktop computing, and I thought for us to make a transition into a new area of technology, would be quite expensive. We knew that the idea of using a remote mainframe would still be around for quite some time but that ultimately, we would have to put more intelligence into our devices. What we did was to merge with six other tech companies that all had complimentary pieces. We created one, new, much larger company and took that public on the Toronto Stock Exchange (TSX) in 1981. After doing that, I stayed with the company for about another year or so, and at that time I thought the transition was complete and it was time to do something else. 

I started doing what is now referred to as angel investing in the early 80s. It wasn’t called angel investing then. It was just called venture capital. So I started looking at other university technologies and spin-offs from universities and thought maybe I could use some of my experience and connections to work with entrepreneurs instead of being an entrepreneur which, as you know, is a 7-24-365 proposition. By doing it through others, I would have a little more control over time and not have to be quite as committed as you are when you’re the founding CEO of a tech company. 

So I did that throughout the 80’s, and got involved in social ventures as well. The one, in particular, that I would mention is the Shad Valley program, which is a program that originated at Waterloo around 1980, so it’s been going for 40 years now and is still going strong. It is a program that basically motivates and encourages bright young high school students to pursue careers in science, technology, and entrepreneurship. The idea behind it was that there a lot of programs to support and help students that were challenged in various ways, but there really were no programs that would encourage students who were highly gifted and talented, and that’s what was behind the program and I got excited about it because I knew that what drives tech companies is talent, and for me, it was always difficult to recruit talent while I had my company. 

That is what led me to British Columbia. We came out to UBC to start the Shad Valley program here. We actually did it across Canada and I was chairman for the first 5 years or so of its history. As part of my volunteer work, I helped set it up all the way from Acadia on the east coast to UBC on the west coast. Having spent the Expo 86 summer here in BC, I made a lot of connections with university people, and it turns out a former professor, K.D. Srivastava,  I had at Waterloo was then the vice-president at UBC. He was involved with an organization called the Advanced Systems Institute, and they were looking for someone to run that organization. 

What was interesting about it was that the feds and the province of BC each kicked in a sum of money, I think it was $4 million each. They had $8 million but they had no business plan, which I felt kind of interesting because usually it's the other way around. You create your business plan and then you get it funded. So I said I would come out for a couple of months and write a business plan. If the board likes it, I can execute on that business plan. I came out, I wrote the plan, they liked it, and then I entered a 2-year contract, which ended up becoming three, almost four years. 

I moved temporarily to BC and after being here a while and growing some roots here, we decided to stay. 

What I did at the Advanced Systems Institute was very similar to what I was doing as an Angel investor. I worked with academic entrepreneurs and others in the community to look at commercializing university technologies. We went beyond just commercializing and developed new technologies in the areas of robotics, expert systems and artificial intelligence. That was 30 years ago. This led to a lot of university interactions because UBC, SFU and UVIC were all involved with the Advanced Systems Institute

 After I completed my contract at ASI, I carried on with my own angel investing and that led to working with some SFU spin-offs. This in turn led to me working at SFU in the tech-transfer office. I have always worked with universities from the outside and I thought it would be interesting to work a little bit more on the inside. As part of my work at SFU, I created the Vancouver Technology Angel Network, which is referred to as VANTEC, and created a small investment fund - The Western Universities Technology and Innovation Fund (WUTIF)..

Ibbaka: Were there things that you learned in your early career at Volker Craig Limited that you have used in your follow-on career in angel investing and working with the ASI, SFU and creating VANTEC? 

Mike: That is a good question. I would say the number one thing would be the idea of collaborating. When I was building the company, working with other parties, stakeholders, customers, and suppliers, I felt it was really important to develop strong connections. I realized that you can start a tech company based on something relatively new, but after a few years how do you keep fueling that innovation? 

If I had to do it all over again, I would have maintained much stronger ties with my alma mater than I did. You get so bogged down and busy developing a company, that you may not have the time and resources to play in a sandbox of new technologies. What I missed was that the university could have been a major resource, to continually improve and develop products and ultimately, lead us to having the intelligence in a terminal, instead of the eleventh hour merging with a bunch of other companies. That is what really stuck in my mind working with ASI and with the universities here in British Columbia and the various tech companies that I was involved in. Realizing the value of maintaining those collaborations, not just on the business side, but also on the research and development side.

Ibbaka: I just want to probe on that a bit. Can you say more about why angel investing is important both personally and to the community that you live and work in?

Mike: Other than government grants, it's difficult for a very young company, a start-up, to get risk capital. Banks don’t do that. Institutional investors generally do not do that. In my roughly 30-plus years of angel investing, I believe individuals i.e. entrepreneurs, who have made some money with their companies are the main source of capital for start-up entrepreneurs. The nice thing about that is that they are so diverse. So, if an entrepreneur has difficulty with one potential investor, there are many others that the entrepreneur can go to, which isn’t really true in traditional venture capital. You will likely find that if one or two institutions turn down a project, others will too. They have a very similar mindset, they have similar objectives, their goals, their modus operandi, those are all more homogenous than what you will find with individuals. 

Individuals are so varied in terms of the risk they will take, the amount of capital they want to deploy, and the experience they bring. Angel investors, I firmly believe, are a critical resource for entrepreneurs and the good news is that  there are more and more being born every day, especially as companies exit or go public and provide pay-outs to those entrepreneurs.

Ibbaka: You have followed this as long as anyone. What sort of impact do you see angel investing having on Vancouver?

Mike: I think it is quite profound. We are seeing so many new ventures being created. That, of course, would not be possible without the risk capital to support them. Different organizations that I am presently involved with, like VANTEC, and New Ventures BC for that matter, point to that. We have a full slate of companies at every monthly angel meeting. New Ventures BC gets hundreds of applications each year. I believe that entrepreneurship is really thriving in the province. We also have lots of accelerators and incubators that support that activity, and very good mentoring programs. All these things are important, but for companies to flourish, capital is required. And that’s where angels take the very first step.

Ibbaka: Given the growth in angel investing and the important role that angel investors have, are there any common skills that angel investors need or should be cultivating?

Mike: The first big mistake I made when I first started being an angel investor was that I was too trusting and very quickly was fleeced by one individual in particular - an unscrupulous entrepreneur who just simply withheld key information from me, as to the health of the company. I did not do enough digging and due diligence on the company. The skill for investors is critical analysis. Learning to ask the right questions is the key thing. 

I tend to get very enthusiastic about new innovations and sometimes do not pay enough attention to the execution part. Taking that shiny object and really getting it out to the marketplace and all the things that go with that. A lot of it comes down to the entrepreneurs behind the venture and the thing that always amazes me is that angels, like myself, will invest in people that have absolutely no experience. For those who have read Malcolm Gladwell’s book “Outliers: The Story of Success” you’ll know he talks about the 10,000 hours that you need to be good at something. I would not want to go for open-heart surgery with someone that has 2 or 3 hours under their belt. I would prefer someone with that 10,000 hours.  Yet, we put hundreds of thousands of dollars into a start-up, and the start-up has only a few hours of experience behind it. 

When I say the start-up, I mean the people in that start-up. That is a big challenge. I think one of those skill-set questions that angel investors need to ask is how can this specific start-up deliver given that experience likely is not there. In some cases, companies acquire that experience by having good advisors, mentors, boards, and other employees. Hiring seasoned CEOs is another approach. The best example of that is the academic entrepreneur who comes out of a university lab who has the wisdom to team up with a seasoned businessperson who has that 10,000 hours of experience.

Mike Volker at a VenTec event

Ibbaka: I want to go back to something you said earlier. What is the role for collaboration in angel investing? Is it important, or is angel investing more of an individual thing?

Mike: I think it is very important. It is important to invest with a number of investors. By that, I mean, the collaboration on the due diligence, i.e. checking out the companies. If there are three or four investors who are thinking about investing in the company, one will perhaps have marketing experience, another will be more interested in operations, another in finance and so on. The investors can share that information. So instead of me trying to understand everything about a business, if there are others involved they can dig into the areas they are most experienced with. In tech investing, we are seeing the technology challenges become more esoteric. You need experts. You need people who really understand what is happening. Not just the technical aspects, but people who have a really good handle on the competitive landscape. Again, operations are another example. We had a meeting the other day, for instance, with a company and one of the questions that came up was “How are you actually going to make the product on a large scale?”. That again, is something that is heavily based on experience.

Ibbaka: My impression, and I think it’s much more than an impression, is that you’ve done a great job of growing and cultivating the angel and innovation community in Vancouver. What sort of skills did you use to do that? You have really made a difference in the city where we live.

Mike: Well, thanks for saying that. I consider myself a pretty good networker. I like to be inclusive in the sense that I like to get people involved in projects. I do a lot of recruiting if you will. When we built VANTEC for instance, reaching out to entrepreneurs who have become angel investors, trying to organize them, get them to come to regular meetings, and to work together with each other. When people come to town to set up shop in BC, it's always important to reach out to them and say “What’s your particular niche? Your particular objective? How can we work together? How can we avoid duplicating effort?”

One of the things that’s always frustrated me a little bit about the West Coast is that people like to reinvent the wheel. They sometimes start up a new program without realizing that similar programs are already in place. Rather than replicating something, first look at how and what is already there and can be improved or used. 

In the angel community, as an example, we have seen different angel groups form. That concerns me, because it means that instead of having one strong network, you have many fragmented smaller networks. You would not have the same impact and bandwidth to hear all the various opportunities that come along. Trying to work more with other players is what I mean by collaborating and working together, rather than just jumping in and starting up something that has been done before.

Ibbaka: You didn’t see that as much back East? Do you think that is more of a West Coast thing?

Mike: I hate to generalize, but yeah, I find there is that Wild West approach. Someone with an idea says “OK, let's set up an organization to do such and such”, and they do not really research what is already being done. When you look at all of the players in the Lower Mainland, for example, that claim to be providing support for entrepreneurship, there are just so many of them, and a lot of them don’t work together. I think they are missing opportunities by not doing that.

Ibbaka: How do you see the Vancouver angel community evolving? If you look forward, in the next three or five years, what do you think should happen? If you want to speculate a bit, what might happen?

Mike: What should happen is organic growth in the number of investors, as long as we do a good job of building new ventures and seeing successful outcomes with those ventures. Every time you have a successful outcome, it creates more potential angel investors. Not just the founders, but in many cases, early employees of companies that get five or ten percent equity for their participation. 

When you look at some of the recent success stories, one that comes to mind is Daiya Foods, the vegan dairy product company. They created quite a large number of new millionaires, who can now enter the angel world. One of the things that I try to do is encourage newly minted angels to get involved. That kind of organic growth will continue to be a resource for entrepreneurs. I think that will happen because, like myself, people who’ve gone through this are thinking, “What will I do with this new-found wealth?” They probably want to invest it in something they know but also to back entrepreneurship in general. Of course, a lot of these new angels will have been supported by an older generation of angels and like them, they may feel compelled to give something back to the community. 

I see also, potentially, more venues, more meetings, more groups. My hope is that they do not become too fragmented. 

In terms of what should happen, I would like to see more ways for angel investors to basically work together. If they collectively work on these start-ups, bringing some of the expertise to these companies will help them become successful exits.

The one worry that I have is that people will jump in and make a bunch of investments and all of those investments will fail. They then withdraw and leave the scene. A good friend of mine did six angel deals, and did poorly, not one of them provided any kind of return to make it worth his while staying in the business. What he didn’t understand was to be successful at angel investing, you’ve got to play the numbers and be in many, many deals. You can’t just be in two or three. Now, that might be different if you’re hands-on, if you’re actually getting very involved in one or two companies, perhaps where you have specific skills that you can contribute, then you’re not really being a passive investor. In those cases, you’re really being both an investor and an entrepreneur. The only difference is you are not the CEO. 

Then again, I’ve seen cases where the angel investor may end up becoming the CEO of a company. There is a big difference between investing in a company and stepping back, maybe providing a bit of advice and mentoring versus going in there and telling management how to do things. 

I think angel investing is going to certainly carry on and we will see more and more investors and probably more funds. We will see angels working together, whether it's in informal investment clubs, or more formal organizations. I definitely see more funds getting started.

Ibbaka: Is a proliferation in the number of formal and semi-formal angel funds a good thing for the ecology?

Mike: I think so. I say this because it's a good way for new investors to build their portfolios. These funds tend to reduce some of the risk. The other thing is to avoid funds from becoming too, for lack of a better word, institutionalized, where they lose some of their risk-taking propensity. One of the things that I have done as an angel investor, and certainly in my fund, is to take risk. We do not mind taking even a large risk with a good potential upside. I can think of many examples where we’ve gone into what appears as a very risky business along with several other parties, so rather than say, putting $100,000 into a certain venture, we may only put in $50,000 and put more in later if the company takes off and starts to deliver. So that’s certainly where I think funds can play an important role, as long as they don’t become too risk averse.

Ibbaka: Just to bring us up into the present, the impact of Covid-19 and the pandemic is on many people’s minds. What impact have you seen that having on angel investing and the early-stage companies that are in your portfolio?

Mike: It has had an impact. I know a number of angel investors who have reduced their activity level, some of them just because they do not like Zoom meetings. They just really like in-person touchy-feely meetings where they can meet the entrepreneurs and have face-to-face discussions. I know of a number of people, I can picture them in my mind that are not showing up on any of these calls because it's not for them. It’s had an impact that way. On the portfolio side, certainly any company that depends a lot on social interaction has been affected, especially those that need meetings and events. Those events and meetings have disappeared for all intents and purposes. So that has been a real hardship for some companies. 

That is why it's important to have a pretty diverse portfolio. So you don’t have too many companies that are directly impacted. In the case of our WUTIF fund (Western Universities Technology Innovation Fund) we’ve really only got maybe one company that was affected, because it was very heavily into event management and event support. By and large, the main impact on the portfolio companies has really been the inconvenience of not working as normal. Making that change to home offices has been difficult for a lot of companies, especially those with an engineering team who work closely together. When you are used to sitting together at a lab bench, testing, problem-solving, development and doing creative work, the transition to virtual can be difficult. The other impact that it’s had on portfolio companies is a reduction in sales, in many cases. Customers may not be there, maybe the customers aren’t there because their people are also suffering, maybe there are people who have been laid off and out of work. I would also say that, overall, many companies have dealt effectively with the crisis. They’ve worked through it and taken advantage of the government handouts. Touch wood, but I haven’t seen too many failures that are directly attributable to Covid. If I had to put a percentage on it, I would say it's certainly under 10%, but that is just my impression.

Ibbaka: How are you personally and your family coping with Covid?

 Mike: Just to very candid, I would hate to say that I found it a pleasant experience because, of course, Covid is not pleasant for anyone, but the impact on us - let me use a double negative -  hasn’t been unpleasant in the sense that working at home has been quite enjoyable for me. I’m always going somewhere, rushing to go to meetings. In June, for instance, which is the month that many companies have their annual meetings, I usually get a little flustered trying to get to all of them because many of them overlap or they follow closely to one another. Now, with video meetings, I have been able to have, in some cases, two or three meetings on at the same time with multiple laptops. I would never be able to do that in person, so that has been interesting. I must also say that the timing has been good in the sense that it's summertime and it's been nice not having to rush downtown. It's been great going out swimming and other things. I’ve been more relaxed - that’s probably the best way to describe my experience with Covid. It made me far more relaxed than I’ve been in a long, long time.