Beating the Odds in Venture Capital With Canadian Technology Pioneer, Norm Francis
Entrepreneur Norm Francis was sitting pretty during the Dot Com boom, and even attended a private dinner once at Bill Gates’ house.
Francis co-founded and sold a top accounting software for the early personal computer era, then created one of the leading Customer Relationship Management (“CRM”) software companies.
But his biggest venture success began as a bust, and provides a valuable lesson to budding entrepreneurs: play the long game, and do right by your investors.
A tablet software startup Francis co-founded in 1991, PenMagic, attracted backing from famed venture capitalists Kleiner Perkins Caufield & Byers (“Kleiner”). Hardware could not keep up with PenMagic software, and by 1994 the company was running out of steam. Rather than fold and start over, Francis and his team pivoted to CRM software and rebranded as Pivotal Corporation, keeping old investors along for the ride. Pivotal went on to enjoy tremendous success in the late 1990s, IPOd on the NASDAQ, and was later acquired by a competitor.
Kleiner repaid the favor by inviting Francis to invest in their limited partnerships which in 1999 co-led a $25 million financing for a 20% stake in a little known search engine called Google. Today that stake would be worth close to $200 billion. Francis has been a semi-retired angel investor, philanthropist, and mentor since.
His front row seat to the technology boom and decades of hands on experience showed Francis how to beat the odds in entrepreneurship and venture capital. But it was his upbringing in a small Canadian farming community that provided him with traditional values and a stomach for risk.
At the persistent urging of family friend Tommy Humphreys, Francis shared his remarkable story on the CEO.CA Mentors Podcast on October 2, 2019. Topics included the early Canadian technology scene, building BSG and Pivotal, the Dot Com boom and much more.
Listen and subscribe on Youtube, Soundcloud and iTunes (coming soon).
About CEO.CA Mentors Podcast
Canada’s capital markets have been generous to CEO.CA founder and millennial investor Tommy Humphreys. Growing up in Vancouver, Humphreys was supported by many family and mentors working as entrepreneurs and financial professionals. Through the CEO.CA Mentors Podcast Tommy aims to share deeply personal interviews about entrepreneurship and wealth creation in Canada. These stories are for everyone, especially those who did not learn about these topics at the kitchen table.
Norm Francis Interview Transcript:
Tommy: His son Luc and I are lifelong friends. We were both chubby classic rock loving teenagers. One day in grade eight I noticed the teacher stared high-fiving Luc. It was the dot com boom, and his father Norm had founded one of Canada's leading software companies.
Norm is the recipient of the 2019 Fraser Institute Founders Award. Here is how they introduce him:
Norm was a pioneering technology entrepreneur in Canada. He co-founded BSG, which created ACCPAC and Simply Accounting. Two of the world's premier accounting software packages in the early personal computer era. Later he was co-founder, chairman, and CEO of Pivotal Corporation, which became a world leader in customer relationship management software. As president of Boardwalk Ventures Inc, he continues to be an active angel investor and mentor to early stage technology companies. Norm was a co-founder of Social Venture Partners Vancouver, and he and his family are active philanthropists.
In 1999, Norm was named the BC Technology Industry Person of the Year, and he was named 2001 Pacific Region Software Entrepreneur of the Year by Ernst and Young. He was honored as a fellow of the BC Institute of Chartered Accountants in 2005. In 2016, Norm was inducted into the Business Laureates of BC Hall of Fame. Norm holds a bachelor's of science in computer sciences, and is an FCPA.
I took advantage of my proximity to Norm growing up, and sought his advice many times in my career. He has been a major role model for me. I am honored and grateful to welcome Norm to the first episode of the CEO.ca Mentors Podcast. Thank-you Norm, for coming on.
Norm: Happy to be here.
Tommy: I want to talk about everything. But there's just one question I wanted to start with. Can you please describe the circumstances that led you to have dinner with Bill Gates? What was that all about?
Norm: Well we were a close partner with Microsoft in selling software on what was at that point a new client server platform. Bill and Melinda would periodically host dinners at their house for some of their partners. I was fortunate to be able to go to their house, and have dinner with a small group of CEOs. It was pretty interesting.
Tommy: What was the place like?
Norm: Well at that time, they had built a very modern, in that day, that was 20 years ago now, house. But the most interesting was his library. In his library, he has 40 pages of the Da Vinci codex. So I was able to see, it still sticks in my mind, to be one foot away from pages with Leonardo Da Vinci's diagrams and formulas on it. That was amazing.
Tommy: That's incredible. Is there anything else about that dinner you remember?
Norm: Martha Stewart was there.
Tommy: Is this pre-incarceration?
Norm: It was, yeah. That was in her heyday.
Tommy: They were hard on her.
Norm: Yeah. Phil Knight, the CEO of Nike was there. John Chambers, who was the CEO of Cisco. It was an interesting group. I was kind of the little guy in the group.
Tommy: So you've come a long way from a small town in the Okanagan, at that point.
Norm: That's true. That's true.
Tommy: Tell me a little bit about your early years. Where did you grow up?
Norm: Grew up in Oliver in the south Okanagan, when it was all fruit trees. Before grapes. Before the wine industry. Born there. Went all the way through up to high school before I left there.
Tommy: So what was the population of Oliver at the time?
Norm: Probably the whole surrounding area, under 1000 people.
Tommy: Where do you think your ambition comes from?
Norm: You know, I think farmers ... I think my love of entrepreneurism came from growing up in a farming community. Because farmers are, when you think about it, at least in those days, they're kind of little independent business people. They have to rely upon themselves. They have to help their neighbors. Hard work was always ... Every kid was expected to do chores at a young age.
Norm: Every kid, one you could go out and pick fruit, you were expected to work. You could go out and make money. Everybody worked, and I guess maybe that's where it came from.
Norm: Plus I would say my dad, who was a high school dropout. He always, he did extra things to help our family. He would buy a piece of land and he'd build a little house on it, and then sell the house. So my dad was kind of, was an entrepreneur. I guess it kind of rubbed off on me.
Tommy: Would you say he was your early mentor? Your father?
Norm: Oh yeah, absolutely.
Tommy: How did you get from being in a farming community, the focus into technology in your education?
Norm: Well technology didn't exist in those days of course. But when I had, we had a very good high school. Great teachers. It was kind of expected in my family, my mother and my father encouraged both myself and my younger sister to go off to school. So I came to the big city, to Vancouver, to go to university.
Norm: But all I knew was math and sciences. That's where I started. That was really pre-computers.
Tommy: So were you in the accounting program first? Or in computer science -
Norm: No, computer science. Really what happened is, in the late '60s is when that was...
Tommy: Dating yourself.
Norm: Yeah, for sure. That was when UBC first put in a computer science program, and I switched. What had happened actually, it was kind of fortuitous. Because after my first year, I applied to be an engineer. I thought I would be an engineer. After my first year I applied, and I got rejected. I couldn't get into engineering school, so I continued in math. That's when they offered computer science, and I said, "Boy, that sounds interesting". That's kind of how it happened.
Tommy: What was computer science like at that time?
Norm: Well, in today's terms it was relatively primitive. They had one big computer. It was an IBM 360. For my first year, you actually input, you keyed in punch cards. Then you'd take your program. It was all very low level programming, and you'd put it in a card reader and wait overnight. Then the results would come out. That's kind of ...
Tommy: Was it like learning a new language at the time?
Norm: Well it was. But the good thing about UBC in those days was, it was very theoretical computer science. So we learned the basics of how computers really operate, and how you really program them. Still the way they operate to this day.
Tommy: Were there many technology companies in BC at that time?
Norm: None. In fact, what happened with me was, when I graduated with a computer science degree, there were actually no jobs. You couldn't get a job as a programmer. Especially the kind of theoretical computer science that they happened to teach there. In that day and age, there were a few jobs out programming COBOL. Which is a distant, long lost language. But I hadn't learned that at university, and I literally, there were no job prospects.
Norm: Just because I knew some friends who were going into accounting, I knew nothing about business, I decided, "Well, I'm going to go and become an accountant". So that led me into becoming a chartered accountant. Articling to become a chartered accountant.
Tommy: So a chartered accountant, that was a joint degree that you were doing at the time? Or did you take two -
Norm: No, that was after university. It was after university, and it just happened totally by chance.
Tommy: Did you have to put in the grunt work like accountants do today when they're getting their designation?
Tommy: So you worked for a few years in audits, and that sort of thing?
Norm: As an article student, doing audits. Taking courses at night. Basically work and school constantly, because I had no background. In those days, the accounting firms, they were just starting to realize that computers were going to start to impact business. So they kind of had this idea that they'd hire a few computer science folks, and turn them into accountants. Rather than trying to take accountants and teach them about computers.
Norm: What happened is actually, I went to interview. Didn't know anything about ... I didn't know a debit from a credit. I went to interview, and the guy doing the interviews, he was from Penticton. Which was just immediately north of where I grew up. He looked at my resume. He says, "You're from Oliver". We talked about the Oliver and the Okanagan... throughout the interview. Lo and behold, they invited me back for a second interview. It changed, that one guy, whose name was George, kind of changed the trajectory of my career actually.
Tommy: Absolutely. What good luck. So did you spend a few years working as an accountant?
Norm: Yeah, I spent six years full time. Then again, somewhat fortuitously through, I left, it was with Peat Marwick. Now KPMG. What happened is, myself and another fellow started another accounting firm, doing small business books and tax advice. All that kind of stuff. Met a couple of guys who had started selling little computers, called micro computers in those days. This is in the late '70s.
Norm: Through that, they had the idea, "Maybe we could, little businesses could do accounting on these things". That's when we formed BSG, and we developed ACCPAC. It was kind of the marrying of early computers and accounting.
Tommy: How long was the BSG experience for you guys? Were you involved for it?
Norm: It started in the late '70s. We sold the company in the mid '80s to an American company called Computer Associates, now known as CA Technologies.
Tommy: The concept was simply accounting software?
Norm: Originally it was accounting software. But we also ended up doing word processing software, and a variety of other software. Because these little computers at that time ... Oh, and what happened was, in the early '80s the IBM PC came out. That changed the whole world of small computers. IBM professionalized the business, and that's when things really took off. A lot of other -
Tommy: You were in the perfect place at the perfect time.
Tommy: Was there other accounting softwares at the time?
Norm: Yeah, there was. One of the principal competitors was software out of North Dakota, of all places, called Great Plains Software. Which is, that company was later acquired by Microsoft. Today that's what people would know as Microsoft Dynamics. That came out of North Dakota. The guy, Doug Burgum, who was the CEO, who became a friend of mine along the way as a friendly competitor. He's now the governor of North Dakota.
Tommy: Wow. So how did you finance BSG? Was that through the accounting business on the side? Or did you raise venture capital?
Norm: Yeah. We had other business interests on the side. We were doing some real estate deals, and doing all kinds of stuff. Then we needed to raise a little money, and we did a little tax shelter limited partnership. My uncle invested, and a few other people we knew. It was $25,000 units. $175,000 in total, is how that started.
Tommy: Do you remember who your first customer was?
Norm: I don't.
Tommy: How did the commercialization go? I mean, you started with building a product. Was it for yourselves initially?
Norm: Well at that point actually, we had a couple of arrangements down in California. Where we licensed it to some of the early micro computer companies. A company called North Star, we had a relationship with. Those companies are long gone now. They eventually went out of business as the industry changed.
Norm: We actually also had a word processors called Easy Writer. Which we licensed to a company down in Sausalito, and became quite successful for us. But later we focused just on accounting.
Tommy: What were some of the biggest lessons learned during that first software company building experience?
Norm: Well I think again, somewhat fortuitously, we spent a lot of time in the Bay Area. Even though we were from Vancouver. Vancouver in those days, if you went around and used the word, "Software", in those days, people, you'd just kind of have a glazed, "What's software?". But because of this relationship with these little computer companies down in the Bay Area, in those days they actually weren't even what is now known as Silicon Valley. They were actually in the east bay over by Berkeley, because a lot of the original people came out of those schools.
Norm: So I think we kind of had the early experiences in that US, what became Silicon Valley market. So that was really, I guess learning that American style business, I'd call it. As that very rapidly growing computer business started to develop in the early '80s.
Tommy: What is the American style? Just aggressive?
Norm: More aggressive. More think big. Americans always think about hitting not just a home run, but a home run out of the ballpark. Just a faster paced, more competitive, more aggressive style of business.
Tommy: So that experience made you more ambitious, potentially?
Norm: I think more savvy about what the opportunity was, and kind of how to go about it. Then when we sold the company in the mid '80s, in '85, I became vice president of this company, Computer Associates. Which was based on Long Island. It was run by a guy who became quite famous, Charles Wong. He was a hard driving New York style business man.
Norm: I spent three years with Computer Associates, in a time when it went from what would now be considered small. But in those days it was, I think around $140 million in revenue. It was publicly listed at that point on New York. In three years the company went from $140 million to over $1 billion in revenue. Acquisitions, with a very, I'll call it that New York, more sales-y style of business.
Tommy: What was the purpose in the sale to them? Was it just to monetize and make some money for yourselves?
Norm: Partially. I think we were a bit, I don't know. Yeah, maybe worried is the right term. That the industry was growing, and competition was coming in. As being based in Vancouver, it was hard to finance something. To some degree we didn't know how. So it was kind of, "We'll take the money". Which is a bit of a west coast phenomenon.
Tommy: After the three years at, was it Computer Associates?
Norm: Computer Associates, yeah.
Tommy: Did you take some time off after that? Or immediately jump into -
Norm: Yeah, I sort of retired for a while.
Tommy: At what age?
Norm: Went traveling with, at that time a young family. So yeah, took some time off to kind of reflect and think, "What next?".
Tommy: Would you have been mid 30s at that point?
Norm: I think I was around 40. Late 30s, 40-ish.
Tommy: You didn't actually think you were done at that point, did you?
Norm: I didn't know what I was going to do.
Tommy: Interesting. So how did you end up deciding what it is you did?
Norm: Well what happened was again a bit of a coincidence. We had a call, myself and a fellow named Keith Wales, who had been at BSG. He was retired. He had a call from a guy we knew down in California. He'd joined a new company, and they were doing this interesting thing, which at that time was called pen computing.
Norm: The concept was to have a tablet, and you would write on the screen. It would interpret your handwriting, and it would do things. Today we know of it as the iPad. But this was the precursor to the iPad. It was a new company, it was called Go Corporation. It was one of the hot new startups, trying to pioneer this hardware and software technology.
Norm: The idea attracted us. So one thing led to another. Keith and I thought, "Well we'll jump back into this". We started a little company. One of the engineers that had been at BSG joined us. We formed a company called Pen Magic, and set off to develop applications that would work on this new style of tablet.
Tommy: What was the year of the incorporation of Pen Magic?
Norm: That was in '91. Early '90s. Just before, pre-internet.
Tommy: Was [Keith] Wales your partner at BSG as well?
Tommy: So you had started the company together?
Tommy: What was the dynamic of your partnership? How did you divide responsibilities between you?
Norm: Well Keith was a deep technical guy. He had come out of UBC also, and so Keith kind of ran engineering. I ran the business side. Because I had a computer science degree, I knew enough to be dangerous, and sort of relate to engineers. We did what often happens with a new company. We pulled in some of the guys that had worked with us before. Top notch engineers. We just kind of did it all again.
Tommy: How did you capitalize Pen Magic?
Norm: Oh, Keith and I, by that time we had the money to capitalize it ourselves.
Tommy: So personally put some money in. Were there tablets at the time?
Tommy: Or were you just hopeful that there would be this -
Norm: No, they existed. They were prototype.
Tommy: But your theory was that they were going to get a lot bigger, and that you'd be there in front of it, at the time?
Norm: Yeah. It was a lot of, it was kind of an interest. It was easy to publicize too, because it kind of had, it was very innovative. We would do these photo shoots, sitting in boats with a tablet, and writing on them. At that point the technology was rapidly developing. But still relatively primitive.
Tommy: But you could sense the market wanted it, and certainly the press liked it too.
Norm: Oh, it was an interesting idea. That you could have a tablet, and you could write on it. It would do all kinds of things that you wanted to do. Then it would have a modem built into it. It could transmit, and you could do email. It was an interesting idea, that was ahead of its time actually, as it turned out.
Tommy: Which applications were you focused on?
Norm: Oh, we did a spreadsheet. Which, you could, think of it like you're writing on a spreadsheet, but it would do the kinds of things that you think of that a spreadsheet can do. You could fold the paper on the screen. We'd do a database. Things that conceptually you could do on a personal computer, because personal computers were quite popular in those days. But you would be able to do it on a portable tablet.
Tommy: What was the hardware at that time? Which tablets were in the market?
Norm: Well the whole idea was pioneered by a company called Go. Which was a pure startup, and was heavily venture capital funded. They were in Silicon Valley. They were doing the hardware and the software. But then other companies, there was a company called Grid. These companies are all long gone now.
Tommy: Where did the Palm Pilot come into the picture?
Norm: Around the same time. A little later, actually. Because what happened is the tablets, for a combination, the technology just didn't come together. The screens weren't good enough. The battery life wasn't good enough. Not enough processing power in the tablets. That industry, it just kind of went flat.
Norm: At that point, the Palm Pilot, a guy named Jeff Hawkins had been in one of the early tablet companies. He had the idea that, "Hey man, let's just make this simpler, and we'll make a more simple device". He developed that little sort of shorthand language. The Palm Pilot really restarted the handheld market.
Tommy: Was your company, Pen Magic, was it slower to get traction than BSG was?
Norm: Oh yeah, because we never really could ... The industry never gelled. We would sell little bits of stuff. But essentially it was still that kind of beta testing early stage. After several years of doing this, everybody was running out of dough. There'd been hundreds of millions of dollars poured into the hardware companies. We really just had to say, "This isn't going to happen".
Norm: So we sat there and said, "Well, should we wrap his up? Or should we do something else?". It was literally like that.
Tommy: Was that pretty scary, to walk away from the time and money that had gone into it?
Norm: Yeah, it was disappointing. We had lots of colleagues that were ... It was like a community, all trying to create this new technology. Actually there were some good lessons from it. Because the people who were behind Go, some of them went on to found Netscape, and many of the other famous companies. I think it's actually, Go Corp is a good lesson, and failure's not bad. It happens when you're pushing the envelope, trying to create something new.
Norm: Many of those people went on to become key figures in the creation of the internet. Key people at Google. In fact, one of the fellows who became very well known after that, the CEO of Go was a guy named Bill Campbell. Bill Campbell, he has since passed -
Tommy: The famous coach?
Norm: The coach. In fact, he became the coach of coaching the young CEOs of Google, and Bill's famous -
Tommy: And Steve Jobs.
Norm: Yeah. In fact, there's a very excellent book. Bill was a fabulous guy, I knew him quite well. He was a fabulous guy, and became in fact a mentor to many of the really big famous tech companies.
Tommy: What was it about him that made him a great coach?
Norm: Well interestingly, the reason they called him Coach, he'd actually been a football coach. He came from a sales background. He had been senior VP of sales at Apple in the early days. He just had one of those infectious, positive personalities. Just a guy who everybody liked. He was just a really neat person.
Tommy: What do you think makes a great salesman?
Norm: Personality. Being genuine. Selling something you believe in. Being able to ... Especially in the technology business, I think being able to explain what you're selling. In the business market at least, kind of business person's terms. To understand how technology can bring value to a business. I'm talking about selling into a business market.
Tommy: Who was the best salesperson you ever saw? Other than Luc.
Norm: Well he's pretty good.
Tommy: He's very good.
Norm: He's very good, in fact. I don't know whether best, because there's different styles. I've dealt with a lot of sales people. There's a lot of names come to mind. But rather than mention them, because they each had their own style.
Tommy: Fair enough. Was Pen Magic venture funded?
Norm: Towards about the middle of its life, we had venture capital from a venture firm called Kleiner Perkins, in Silicon Valley. They were, in the '90s, one of the really famous venture capital -
Tommy: Were they then the great success they became, with Google and -
Norm: They were. They had been the original VC behind Sun Microsystems. They'd been involved in Intel, and many of the early, more hardware sort of venture -
Tommy: Who was the partner on the Kleiner side that was your liaison? Or who did you guys deal with there?
Norm: Well I sort of remember, the first time they really got interested when they saw our software, it was sitting in a hotel room actually. I demoed our early Pen software to John Doerr, who's still the head. He's very famous, and -
Tommy: He was instrumental with Google, I think too.
Norm: Yeah. He found Amazon. He was the first investor in Amazon. He was the first investor in Intuit. He was on the board of, he was the first board member from Kleiner Perkins in Google. So pretty well known guy.
Tommy: You met him before that.
Norm: Yeah. He was, John was one of these venture capitalists, when he saw something, he was totally enthusiastic. We were the first investment they did outside the US, actually. These little guys in North Vancouver. But I actually negotiated the deal with another fellow who became quite well known. Vinod Khosla was his name. He later split off and started his own -
Tommy: Khosla Ventures, yeah.
Norm: Khosla Ventures. He and a fellow named Doug McKenzie, who was kind of his understudy. Who eventually came on our board.
Tommy: That was really their heyday as a venture firm. What was their culture? What was so special about them then?
Norm: They had a group of 10 or a dozen really bright partners. They went looking for new trends. They actually bombed out of course on the pen. The whole pen computing. They spent a lot of money on it, and it didn't work out. But fortunately there were a few other things came along. Like this young guy named Mark Andreesen who walked in the door with this thing called a web browser, out of university. They thought, "Oh boy, we could maybe make a company out of that". That became Netscape. That sort of pioneered the whole browser thing.
Norm: I think they saw early trends, and they would bet on multiple companies. They saw the internet coming. They saw the opportunity for eCommerce I think in particular. On the internet, in the '90s.
Tommy: What did you learn about raising money through those processes?
Norm: Well I learned that you have to be a good pitch person, and you have to have, to deal with those people you have to have super good technology. Because they really want to know that you've got defendable technology. So a great engineering team. A big market. Potentially big market. Because they don't do anything, they're not looking for singles or doubles. They're looking for, as I said earlier, to not only hit home runs, but big home runs. Google and Amazon style home runs.
Tommy: Was it a big relief when they agreed to sign on and support you guys?
Norm: Well they did. But keep in mind, that was in the Pen days. Then that all kind of, as I referred to earlier, that kind of went flat. We were sitting in a room. Keith, myself, and Doug McKenzie on the board. Just the board of three, and said, "This isn't going to work. What are we going to do? Do we just take the money that's in the bank out, and shut her down? What do we do?".
Norm: So we kind of brainstormed, and we had an idea. We did a complete 180, and decided we would do enterprise software. We kind of had some ideas about this area, which at the time was called sales automation. We thought, "Well we could broaden this, and do client server". Because Microsoft was doing this new thing called Microsoft NT and SQL Server.
Norm: So we made the decision to, we developed. We went back to the drawing board. Spent a year developing a prototype. To their credit, Kleiner Perkins stuck with us the whole time. Keith and I decided we wouldn't just wrap up the company. Do that in a new company. We did what we thought was the honorable thing, and we restarted it. We ended up doing a down round.
Norm: Once we had the prototype, we did a down round with an additional venture capital firm. I think Kleiner Perkins appreciated that. That we didn't just sort of dump them and start the new business in a new company kind of thing.
Tommy: Was that about mid '90s? '95? Something like that?
Norm: Yeah, it was '94 actually, I think.
Tommy: So the concept for the new product, was that coming from customers? Or did you guys have a vision?
Norm: It was just I guess our knowledge of business, and some colleagues who were in the sales automation area. We thought, "Gee, we can do this in a much better way". Just, and I guess similarly to when we did accounting software. We thought, "Wow, we can do this in a different way, and we can disrupt this market. We can come out with something which is fresh and novel and innovative". So that's how it happened.
Tommy: How quickly did you get traction?
Norm: It took us a couple years to develop the product, and get those early beta customers and do a lot of evangelizing about how this could help their business. Then it started to take off. We went from basically no revenue, to $100 million plus US in revenue, and 20 plus offices around the world. We did that in five years flat, just about, and public on the NASDAQ at that point.
Tommy: What was the impetus to go public?
Norm: Well once you have professional investors, venture capital in the firm, and you've attracted a lot of employees and you keep them with options, you have to have a liquidity event. In those days, it was the heydays of the dot com era.
Tommy: What was it like, being a public company CEO?
Norm: Tough. Really really tough. A lot of people think it's ... Well at least in those days, a lot of it was going on. It was sort of, "Get rich quick", kind of thing. It's a very intense kind of life. That quarterly grind of making the numbers. Always being on analyst calls, and being on the road. It's a very intense life. Especially in the tech business where it's very quickly changing, and you're only as good as your last quarter's results.
Tommy: Just, that dot com boom. I always wish that I was just born a little bit earlier so I could have participated in it. What was it ... Were you so focused on Pivotal that you didn't really pay too much attention to what else was going on? I'm just wondering, what did it feel like, watching this tidal wave of capital and questionable ventures get funded? What were you thinking?
Norm: Oh no, we were very ... Because it was all around you. You couldn't avoid it. There were companies popping up, and new technologies. A lot, there were acquisitions going on. There were mergers. So you always had to be sort of seeing what was the next thing. Because keep in mind, at that point everyone was really, there were just so many new things coming up. Search had come up with the early companies. Yahoo was very successful. How do you do eCommerce?
Norm: I can remember sitting around in the mid '90s when we were changing the business plan. I can remember sitting around the table. We were thinking about, "Gee, could this new thing, the internet, could you do a store on this?". In fact, before we did CRM, we kind of rejected that idea. Shows you how dumb we were. "Oh, no. That wouldn't really work". Of course the rest is history.
Norm: I remember being at a Kleiner Perkins insider event, and Jeff Bezos was there. That's when this little thing called Amazon, selling a few books. When they had started it. People were still, in 1995 people were still unsure as to whether that would really work. That business model.
Tommy: Incredible. But by the late '90s I'm sure there were thousands of illicit companies, and questionable business plans getting funded. Did you pay much attention to that? I mean, everyone around you starting tech deals. Construction workers building tech companies -
Norm: Oh yeah, and I was given the opportunity to invest in some of them. Actually today with some of the things going on with the valuations of the so called unicorns, and some of the recent revelations about We Work and some of these others, there's a bit of deja vu. But if you put it that way, of questionable valuations and questionable business models, there's a bit of deja vu.
Tommy: But in the early days, I guess I was a tight community of really competent people?
Norm: Oh, well there were a lot of people coming into it. Because once ... Because the technology, keep in mind, these markets tend to happen when there's a convergence of, the right technologies become available. We had the internet. We had high powered computing. We had, wireless communication had come about, so it was possible to do handheld devices like the Blackberry. In the early days.
Norm: Once that convergence happened, it'll tend to attract investment. So there was money pouring into it. It was the wild west all over again. A little bit like in the mid '80s and the early days of the PCs.
Tommy: What would you say were the best days of the Pivotal experience?
Norm: I think the best days are when a market is just, you have the ability to create a market. Define a market. It is just, the customers are there. Once you're past the early adopters and you get into that mid adopter stage. People are telling themselves they have to have it. You're really just, your biggest problem is, can you hire enough people quickly enough? That's a lot of fun. It's very entrepreneurial. It's very fast moving. You feel you're creating something new that's helping people. In our case, helping businesses. So it's pretty fun.
Tommy: How did you keep your head on straight?
Norm: How did I keep my head on straight?
Tommy: I mean, you created one of the great Canadian software companies, and the valuations are soaring. I mean, I imagine that would have been heady times.
Norm: It was. We're getting all kinds of company awards. Fastest growing this, fastest growing that. Yeah, it can kind of get to you, in a bad way. I guess having grown up in a small farming town, I'd like to think of myself as being a pretty normal person. I didn't change my friends. I still hung around with the same people. I had family, still doing normal stuff. I guess that kind of kept me grounded to a certain degree.
Tommy: What was the success ... What did it feel like? Was there anything that you did? Anything fun that you did at first to celebrate?
Norm: Oh, I think you always go out and buy yourself, reward yourself with your first watch that costs five grand. Or your first decent car -
Tommy: I'm thinking the SL 500 you used to drive.
Norm: Your first decent car, kind of thing. Yeah, you do reward yourself a little bit, I think.
Tommy: Were there any big regrets of the experience at Pivotal?
Norm: I would say one of my regrets is, we probably grew too quickly. I think we got wound up a bit too much in the go go. That's just because it's all around you. The, "Grow at all costs", and I think maybe, probably there were a few instances where I felt, I take responsibility as the CEO, maybe you drop the bar a little bit. On things like hiring. You maybe drop the bar on not reinforcing culture as consistently. It's really difficult when you've got offices all over the place, and you're hiring people. We did a number of acquisitions to hold all that together, and have it consistent.
Tommy: What do you think were the toughest days?
Norm: The toughest days were right after 9/11. Because the market had started to flatten through early 2001, throughout the whole software space. The whole industry, and then the whole dot com was just booming at that time. But you could sort of sense the winds were blowing in a different direction.
Norm: Then when the planes flew into the tower on 9/11, the towers, everything went on hold. Because no one knew where the world was going to go. So all the buying, everything, all capital acquisitions in our potential customers, it all went on hold. We had to downsize, and that was tough tough tough.
Tommy: Could you see that happening -
Norm: By that time actually, I had retired as CEO just ... I was still chairman of the board. But I'd retired as, I had no operating capacity. But I was still the chair of the board. Obviously I'd been a co-founder, so I felt a lot of responsibility. So our numbers flattened and we had to downsize. That was tough. Real tough.
Tommy: Could you feel that immediately when you watched cable, and saw this horrific scene on TV? Did you know that that would happen in the market?
Norm: Well I don't think the next day. But within, as the feedback started to come from the sales force within a week. All appointments were being canceled. Everything was on hold. Interestingly, we were on a calendar year end. So September 30th was a year end. Sorry, a quarter end. Yeah, that was the start of some challenging times.
Tommy: What was the ultimate outcome for Pivotal? It was acquired later?
Norm: It was acquired later, yeah. At that point I was still chair of the board, and it was acquired, merged into another company. Merged with other companies. As often happens. We had had a number of ... Prior to that, we had had a number of merger and acquisition opportunities. Which we had not gone forward with. So it was kind of, there was a lot of deal making going on. Mergers of different companies.
Tommy: In the 15 odd years since, what have you been up to?
Norm: Well, I call myself a retired guy. Although my wife would sort of question that. I took quite a bit of time out just to enjoy life, and travel, and find the sun. Go and ride bike, and ski... and do things like that. Yeah. Attempt to golf. Then I got back into doing more, I was on a few boards. But then I got away from doing all that. I turned my ... Actually, right in 2001 I turned myself to some more community giving back, and helped to found an organization called Social Venture Partners of Vancouver. Which uses an engaged philanthropy model, sometimes called venture philanthropy.
Norm: I got a lot of satisfaction out of that. Where we all put in money and time, and donate it to, we try to find early stage non-profits. We'll take a risk on them, and help them with their mission. Whatever it might be. So I spend a lot of time with that.
Tommy: Which would you say were the most satisfying projects that you worked on with BC Social Venture Partners?
Norm: Well I'm very proud of recognizing and being involved with an organization called Take A Hike. Which has flourished in Vancouver and throughout BC -
Tommy: What do they do?
Norm: They help get kids who are out of school and on the street and doing drugs, and get them back into school. Often these kids have had, teenagers have had no chance in life. Maybe from foster homes, etc. They get them back into school with a very high touch program. Get them through school, and try to change the course of their life. That's been a great project. It's a great organization.
Norm: One called Kids Safe, that helps kids in the east side with the after school program. Another one I'm very proud of, One to One Literacy. That uses a volunteer model to help disadvantaged kids who have fallen behind in reading in schools. It's not throughout BC. It mobilizes volunteers, such as retired people, to go in and read to little kids to help them keep up with their reading. I'm real proud of that one.
Norm: Yo Bro, which is a program down in Surrey. Started with trying to keep young men, teenagers, out of gangs and going down the wrong path in life. Now actually has a program for teenage girls too. Trying to keep them out of the sex trade and all that kind of stuff. Run by a great guy, Joe Calendino, whose story is well known, as an ex Hells Angel, and -
Tommy: You're just coming from lunch with Joe, aren't you?
Norm: Yeah. He's a great guy, and I'm proud to know him. As a guy who came back from being a bad guy, and now is out there helping thousands of kids. It's been enjoyable for me doing that.
Tommy: I know you probably don't like the label, "Angel investor", and don't appreciate too much solicitation. But I'm wondering, how do you decide to get involved with ventures today? Because you do from time to time.
Norm: Yeah. Well, usually they're introduced to me by colleagues. There are many around, both Vancouver and Silicon Valley, and throughout North America. There are these loose networks of people who have typically been successful investors, or they come from the tech business. They're retired from the tech business often.
Norm: I'll get a phone call. Somebody will say, "I met this great entrepreneur. I'm going to invest in this deal". They've done a lot of due diligence. Then these loose networks kind of will put together a tranche of money, and back a young entrepreneur. Typically young entrepreneur, with a new idea.
Norm: Most of these angels have made and lost money, and they know how to take risks. I usually go by intuition. Both about the product or whatever they're doing, and usually about the person too -
Tommy: Do you always get to know the founders?
Norm: Oh yeah, always. Yeah.
Tommy: What expectations do you have of the founders that you invest in?
Norm: Just honesty, integrity. Be straight up with the business plan or whatever their idea is. It will never go according to the way you think you're going to go. Be straight up with your investors. There will be potholes in the road. Just look for somebody who's really trying to do something truly different. There's a lot of, "Me too", ideas about there. Personally, I look for things that are true disruptors. They're creating a new market, with some new kind of product or service that truly doesn't exist.
Norm: Usually I look for something personally that has some kind of real deep technology strength. It's something truly innovative and new.
Tommy: What do you think are common mistakes that founders make, that you've seen?
Norm: They go in too ... They try to compete against things that sort of already exist, and they think they can, with a few extra features, that they can go in and compete against something that already exists. Pretty common mistake, that they think they're innovative but they're not really.
Norm: I think founders often don't gather enough expertise around them. I always tell young entrepreneurs in particular, to go out and be a bit gutsy about making phone calls. Cold calling people and say, "Could I have coffee with you and solicit your advice?". People that maybe they read about that can help them. Get a group of advisors who can kind of challenge your ideas.
Tommy: Do you think that ordinary investors should participate in venture capital? If so, how?
Norm: Well I think that for, I don't know what you mean by ordinary investor. But -
Tommy: Just regular mom and pop people, or young people.
Norm: I don't think so. The only way I'd recommend doing it is, there are I guess a few ways to do it through a fund, where professionals are doing the venture or seed investing. That's the only way I'd recommend doing it. Where people who know what they're doing, you can get exposure to it. I don't think people should invest much more than maybe five percent or 10 percent of their investable assets in something like that.
Tommy: Do you follow that formula yourself?
Norm: Yeah, absolutely.
Norm: Yeah, absolutely.
Tommy: Okay, so let's assume you're starting over, and you're ambitious. What do you think are the best strategies for building wealth in a career? If it's not investing in venture companies?
Norm: Building wealth in a career? Well I'm a bit old fashioned. I don't believe in quick money. I believe that you kind of have to put in the hard labor, starting at the bottom so to speak. I think developing good, if it's, I assume we're talking about business here. Start at the bottom, work your way up. Work your way up by earning it. Build the right sort of skills before you get into the riskier make money quick kind of thing.
Tommy: But ultimately, do you think building business is the best way to build wealth?
Norm: Oh yeah, I do. Yeah. I'm a free enterprise small business oriented, I think it's the lifeblood of our country. It's the lifeblood of the US economy. We need more of it in our country. So yeah. But it's very, it's tough. It's really tough. A lot of people don't realize how tough it is. I think it's important for people to really understand themselves, and are they willing to go through that pain of starting a business? Knowing that a high percentage of small businesses fail. We all know that.
Norm: Be prepared for I guess the heartache that comes along with some of the success. It's tough.
Tommy: How did you personally manage the heartache in your own business ventures?
Norm: Well I think I'm just naturally a risk taker -
Tommy: Okanagan wine?
Norm: Yeah. I guess my comments earlier about growing up on a farm, I guess I'm a relatively independent person. I think I've had confidence in myself, and I'm not afraid to take risks. I understand that failure will happen, and that you can pick yourself up from failure. If you are that kind of person, then you should go for it.
Tommy: How did you manage stress?
Norm: Well I could try to get out and exercise, and try to take the weekends off. In my career it was easier to do, because you didn't have things like, cell phones didn't exist. Email wasn't as common. Kind of the instant communication that we have with something like text messaging today. It was easier to turn off the business.
Norm: Early on in my career there weren't even portable computers. So you couldn't even take your computer home. It was easier to maybe get away from it. Take the weekend, go to Whistler. Go skiing. That kind of thing. I think it's a real problem today, and I'm a bit of a technology addict myself. It is very tough to turn off the cell phone and put it aside. I think it's a real challenge to have a balance between work, and how you manage your life.
Tommy: Have you ever turned to prayer or meditation, or any of the spiritual -
Norm: You know, I haven't. I've sort of contemplated maybe doing meditation, because I know a lot of people do it. I started reading a few books. But to be honest, I kind of haven't -
Tommy: It's hard to sit still, Norm.
Norm: I kind of haven't. I haven't done it.
Tommy: So if you were a young person considering a career today, let me just say, I remember vividly in the entrepreneurship class that you spoke to when we were teenagers. You said, "I think that the most solid business education you can get is in the chartered accountant program". You also were really strong on computer science. You were talking, your book at that time. Do you still feel that's the best education to pursue today?
Norm: Well I'm biased, so I ... Well technology, certainly technology has invaded every part of our life, right? Your home runs off technology. Your car's technology. Airplane's technology. Medicine's technology. Technology is everywhere, and software. Again, my career was just totally fortuitous, as I've described. But software and related technologies are everywhere. That will continue into the future.
Norm: Whether that's, you become a graphic designer to design the interface on an automobile. Or to design a website. Or whether you're a musician, because music's got a part of it. Technology will be pervasive in the future. Even more pervasive as it is now. So certainly something related to technology, I would certainly encourage.
Tommy: Are there subsets of technology that you think are the most promising or exciting to be involved in these days?
Norm: Well I'd say probably the most exciting, which has been around for a long time, but is now coming into prominence, is machine learning. Sometimes referred to as artificial intelligence. We now have computing power and storage and data, that we can actually use software to actually make decisions. To understand patterns in data for example, that humans are not capable of. It's probably the most interesting area. It kind of leads into robotics, self driving cars, many others. It's a hot topic. That's probably one of the most interesting areas.
Tommy: Do you follow the quantum computing story?
Norm: Oh yeah.
Tommy: Can you explain it? Good luck.
Norm: Well I was an early investor in a company called D Wave. Which is coming -
Tommy: Still waiting for your money back, right?
Norm: Just waiting for my money back. Wrote one of the fist checks to D Wave, almost 20 years ago. Again, based on meeting a very interesting guy, Jordy Rose, who's still around town. Who's got a new robotics company. Just sort of believed in the idea. I guess at that point I was feeling a little flush, and felt a little obligation to help somebody with a dream. Which was a wacko idea, that you could create a computer using subatomic physics, and it would be able to do things faster than a conventional computer. That's yet to be proven, but they've made progress.
Norm: There are people like NASA using the D Wave computers. Several hundred million later in financing, they're still working at it.
Tommy: Did you see the Google news last week, about some breakthroughs potentially?
Norm: Well there's a lot of different ways to ... A lot of different technologies are called quantum computing. Yeah, there's a lot of competing technologies. But it's probably one of those things that we'll look back and say, "Yeah. It really did happen".
Tommy: What about Norm on Bitcoin?
Norm: Don't know much about it. Never participated in it. The only thing I have participated in is blockchain technology, which does, blockchain as a technology platform for other applications has promise. Through a few investment funds I'm involved in, or started participating in. But I've never owned one crypto currency.
Tommy: But I believe, Norm, you're a limited partner of a Boris Wertz’ fund. He's very focused on the crypto space, and he was one of the early investors in Coinbase, the biggest exchange… You may have some exposure you've forgotten about.
Norm: I do have some exposure that way. But that's only because I don't get to determine how those funds are, how he invests the money. Yes, he is in Coinbase, which is more infrastructure for the crypto world, and more in what I'll call real blockchain for business. Such as smart contracts, and that kind of thing.
Tommy: What attracted you to Boris?
Norm: He has a very interesting fund. It's early stage seed investing. He's a very astute guy who looks for new trends. A bit like we talked about earlier, the Kleiner Perkins. In the '90s. He focuses on certain areas. He focused early on marketplaces, and how marketplaces develop. It's great being, I call myself these days a lazy investor. It's nice to invest with somebody like Boris. Where I know that he's working 10 hours a day. He's looking at new technologies, and hopefully he makes the right decisions, and it's all super successful.
Tommy: Can you tell me a little bit about how you got involved with Traction?
Norm: I can. In fact, it's about nine years ago, I got a call from a lady I knew from philanthropy. Through Social Venture Partners. She said, "My husband has a little business. It's three guys. They're doing some consulting work. He doesn't know what to do with the business. His name's Greg Malpass". He drove over. She said, "Could you talk to him about his business?". He drove over to my house, and we started talking.
Norm: Again, he's one of these people, he was early on in business. I gave him my two bits worth. It was in an area, he was doing consulting on Salesforce.com. Which was the cloud based CRM, and of course is a very big company today. So I just started giving him advice. Now they're 750, 800 people. Doing great.
Tommy: Incredible. How do you choose mentees? Who is worth your time, and how does this relationship evolve from a mentor's perspective?
Norm: It usually always happens because someone knows me, and they say, "Would you have coffee with somebody?". It usually always happens through somebody I know. They're trying to give advice to somebody. They say, "I know some guy who knows about whatever", what I know about. Which is software, and how to build a company. So it's usually somebody refers. I'll always do it for a friend.
Norm: Then what happens now, I've been around so long that often now it's some friend of mine who's my age, my vintage, says, "My son or my daughter". So now I'm meeting all of these, they're all the kids who are the same age as my children.
Tommy: Is that satisfying for you?
Norm: Yeah, I enjoy it.
Tommy: How do you say no? How do you not get overwhelmed?
Norm: Well, because ... Well obviously my set of friends is limited, and my set of colleagues. So it's not like I'm getting five calls a day, kind of thing. But I don't generally meet with unsolicited people who hear my name, and phone me. Or ping me on LinkedIn or something like that. I only do it by referral.
Tommy: Where do you think the best business ideas come from?
Norm: Usually from personal experience. Meaning the person who comes up with the idea, they recognize something they could use. A product or a service. They just have that a-ha moment that says, "Wow". Often it's quite a simple concept. They just have an a-ha moment. Usually it's from some kind of personal experience.
Norm: It's like what's his name, Travis Kalanick, who had the idea of, "Gee, I could ...". He had a limo service. He just sort of had this a-ha moment that, "Gee. You could just do a little app. People would go on the app, and somebody could come and give them a ride because they were in the area". Right? It was, that was just a personal a-ha moment.
Tommy: So from personal experience.
Norm: Yeah. Usually personal experience, that's where I see most of the ideas. I just recently invested in a company called Embrace, which is developing a new technology for a knee brace. It came, the entrepreneurs had knee injuries as athletes, and personal experience. One of them was a biomechanical engineer and thought, "Gee, I could make a better brace than the one that I just paid $1000 for". Another example of personal experience.
Tommy: What stories or topics do you wish more young people cared about?
Norm: I think giving back to community. I know young people do care about their community. I think when people start businesses, and I think this is a great phenomenon that we see in the tech business and in other businesses in our own community. Building community involvement into their business model. I hope young people will continue to do more of that. More volunteerism. So more community involvement, as opposed to just making money. I do notice this in the millennial crowd, and I think it's a good thing. It's not just about making money.
Norm: I would hope that they learn more about politics, and be more knowledgeable about the details of business. How our economy runs. I find that lacking sometimes in younger entrepreneurs. Those are a couple of things that come to mind.
Tommy: What are your top passions outside of work?
Norm: I like to travel. I like to see different parts of the world. I've cycled, road cycled, for many years, and cycle with a group called the Tech Vets. Which are a whole bunch of older people from the tech business. We do all kinds of cycling trips, and -
Tommy: You still building hot rods?
Norm: I love hot rods. I still, I love muscle cars and hot rods. That's still a passion. I love going to car shows. I like art. I've always loved, so I have collected historic Canadian art. I love -
Tommy: Where are the bigger sharks? In the venture capital or the art world?
Tommy: How do you mean? For someone who's not familiar?
Norm: When I first got into the art business world, I was a neophyte. I learned that there was a lot of insider knowledge, and a lot of collusion that goes on. To some degree that happens in the venture capital world too. That venture capitalists collude a little bit with one another on deals. Although they tend to be more competitive with one another. So it took me a while to learn about that in the art world.
Tommy: You mean in the venture space, the partner funds or competitor funds are helping mark up the ventures of their competitors, and prop the valuations up?
Norm: Well they are often talking to one another, and talking about valuations. If they're going into, they share information often.
Tommy: Do you believe in karma?
Tommy: But why are you so principled yourself?
Norm: I don't know. It's the way I was brought up, I guess.
Tommy: For a closing question, Norm, what's your definition of a good man?
Norm: Someone who deals with integrity and honesty, and cares about their fellow human beings, I guess is what kind of ... That you leave the world just a little bit better than it was when you came into it, I guess. If you can help a small step forward with society, and how the world is, I guess that's my definition of a good person.
Tommy: It's amazing how much you can get out of giving back personally.
Norm: Yeah, it is.
Tommy: Thank-you so much, Norm, for years of friendship, and for agreeing to do this today.
Norm: Yeah, it's been fun.
Copyright 2019 CEO.CA
Special thanks to Jonathan Roth and Artem Biloborodko for the filming and editing!