New Brunswick’s greatest Venture Capitalist: Gerry Pond’s maritime startup revolution
Gerry Pond is the former CEO of NBTel, chairman of Saint John-based IT provider Mariner Partners and former chairman of Fredericton’s Radian6 and Q1 labs, two companies which recently sold for nearly $1 billion combined.
Ten years into what is supposed to be his retirement, Pond has invested in 25 of the region’s top startups and is helping dozens more grow through his co-founding of the University of New Brunswick’s centre for social entrepreneurship and his work with the Launch 36 Startup Accelerator. He’s helping to create a world-class IT community in the maritimes, one that has the potential to dramatically alter the region’s economic future.
Rarely still behind his desk, Pond spoke with Star Business Club Editor Tom Henheffer while driving from meetings in Fredericton to his home outside of Saint John, New Brunswick.
Why do people so often underestimate New Brunswick?
It’s the backwater factor. Backwaters aren’t supposed to be successful. But now we’re proving ourselves — people that have the venture capital don’t care where they invest as long as they get returns.
Shipping has died, agriculture and natural resources aren’t doing great. Will the tech sector fill the void and carry New Brunswick’s economy in the future?
I don’t think IT is big enough on its own in the the next 5 to 10 years to reverse the situation. Fishery and forestry are big industries, they employ a lot of people, and they’re still a big part of the economy even if they aren’t growing like they used to.
But IT can provide a growth engine, pick up some of the slack from the other sectors, and over time become a significant part of the economy — probably 25 per cent of GDP vs. five per cent today. It’s got a good multiplier and the indirect effect is quite powerful — one IT job will generally supply 5 other jobs in the economy. Manufacturing is usually only 3.
How did you get your start?
I went from the University of New Brunswick to NBtel, and I worked there from an entry level job to CEO. I was lifer there. Ten years ago I retired from what is now Bell Aliant (formed in 1999 when NBTel merged with other telecoms in the region) and started a bunch of IT companies. At about the same time we invested in Q1 labs.
Which was recently bought out for about $600 by IBM, and was Chris Newton’s first company. His second one, famously, is Fredericton’s Radian6, in which you also invested, and which was purchased by salesforce last year for $350 million.
Both won deal of the year from the Canada Venture Capital Association.
Newtown dropped out of university to found Q1. He was young and inexperienced — why invest in him?
Chris and the team around him were very confident young men, very able, and had a sense of integrity. And Chris had a great idea. But ideas are a dime a dozen, you have to market it to the rest of the world, to people who will buy it. So we coupled the idea with some marketing expertise, and the traction was there.
And you’ve continued to invest in tech startups.
We’re at about 25 in ten years, including Mariner Partners.
How did you have the foresight to know this would be such a lucrative industry?
NBTel had a reputation internationally as a very technology progressive, albeit small, company. We started to diversify into IT ventures in the 90s with Nortel and Genesys, and we got a vision of how to become very good at it. When I and others retired or quit, we decided to make that our focus, it was like unfinished business we had to get out of our system.
We set out to build world class companies in New Brunswick, and there was enough talent in the maritimes that we just had to keep at it and bring in the capital. Now we’ve got this in our blood, we’ve got the success, and you know how success creates success.
What’s the government support been like?
IT is defined as a strategic sector, so it gets program money, both federally and provincially. There’s a good tax credit system for advancement and some startup money available for early stage companies.
But having said that, I don’t think anyone in government is prepared to create a ministry of IT. We have ministry of natural resources, of agriculture, of fisheries [federally and provincially]. We’ve made a very high standard of living in Canada by picking stuff out of the ground or water. But if you’re going to build a knowledge economy, if it’ll be your next growth engine, you have to get pretty serious.
Your education institutions need to play a role, your R and D facilities need to play a role, it’s a different process than fishing or farming. You’ve got to understand how to grow intellectual property like growing trees.
Israel, the state of California, the Scandinavian countries, they have natural resources too, but they’ve learned to mine their intellectual capacity in a very serious way. We’ve got to start playing catchup in the world stage. Public policy has got to get stronger, and it would if we had the ministries.
How do you help startups yourself?
We play when the company is just starting. You don’t have a lot of evidence at that stage, no sales, revenues, software probably isn’t built, so you have to go on other indicators. The first we use is the person or persons founding the company, we’re looking for fundamental characteristics of integrity. It’s very important we deal with someone we can trust, someone who’s hard working, determined, focused.
Then we look at the idea, try to put it in the context of where it might fit in the world of intellectual property. We try to support that company in its early stage growth, help build a team, help their tech build, their approach to capital, and their international marketing.
Any standouts at the moment?
A couple just got venture capital. One is LeadSift out of Halifax. They mine social media, mainly twitter, for sales leads. They raised $1.5 million in VC and are less than a year old.
[Another company], Clarify, announced their round of funding this week, $1.8 million, and that includes a fair amount of money out of silicon valley. They connect mentors with startups worldwide, it’s like a switchboard service for in-demand people.
The internet is obviously a huge part of why these startups are able to work in the region now.
Software is the ultimate way to get a product to market — we don’t have to worry about a container ship coming into Saint John to get our product out. That’s a recent phenomenon in the last five years, and it gives us access to world markets at a very low cost. That’s a differentiator that has helped this region grow.
And where do you want this to carry the Maritimes?
If you go back 30 years, Waterloo Ontario was known for agriculture and manufacturing. Now it has RIM, Google, Amazon, and hundreds of little companies. [There are similar stories] in Ottawa, Toronto, Vancouver and Montreal, our Canadian centres of excellence.
Right now, going east, that stops at Montreal. What I want to see is people including the Maritimes as a hotspot when they list North American centres of excellence in IT.
The elder class of wealthy New Brunswicker’s are known for being understated about their money. But Chris Newtown, the poster child for the new breed of rich maritimers, recently bought a Porsche 911 that he drives around Fredericton. Are you planning on any flashy purchases now that your investments have paid off?
[Laughing] I haven’t bought a sports car, I haven’t even bought my wife a new car. At my age I’m not interested in that type of thing. I put $2.5 million into the University of New Brunswick, into a centre for social entrepreneurship. That could have bought a pretty good sports car I guess.
I think that probably could have bought a few.
[Laughing] I’m trying to invest in intellectual infrastructure, I have enough to satisfy my needs on the material side, [although] I bought a modest condo in Florida for my wife and I a few years back. We have a house, a cottage, we have everything I need. At my age I want to invest in the next generation.