By Glenn Drexhage

THE INTERNET BUBBLE HAD YET TO POP WHEN BARRY JINKS CO-FOUNDED VANCOUVER-BASED SYNCHROPOINT Wireless in April 2000. Dot-com and tech valuations were ballooning, pumped by a rash of dubious business propositions and unfounded hype. The Nasdaq surged, money flowed and times were terrific.

But like all bubbles, this one could only expand for so long.

For Jinks, the dream began to deflate in early 2001.Two potential venture capital (VC) deals he’d been chasing failed to materialize, and the markets were plunging.

Yet the president and CEO remained confident. After all, when times were rosier his mobile networking softwarecompany (recently renamed Colligo Networks) had raised a quick $2.3 million seed round from investors including GrowthWorks Capital, Sierra Wireless, PricewaterhouseCoopers (PwC) and select angels. Surely another funding fix would come.

Then something happened. His lawyer asked a simple question:

What if more money doesn’t materialize?

“Like a junkie who realizes he’s hooked, I thought ‘What are you talking about?’ It was the furthest thing from my mind that this round might not close,” Jinks said.

But by April, the Nasdaq had plummeted below 2000 points and throughout 2001, Jinks said, “I started to realize that things were way,way worse than I had really thought.”

Despite the many tragic tech downfalls that resulted, Jinks adjusted to the new realities and persevered. His determination won—at the end of August, Colligo closed a VC round worth more than $5 million led by the Business Development Bank of Canada.

GrowthWorks and Sierra Wireless were among others in the syndicate.

The timing was amazingly good—less than two weeks later, the awful events of Sept. 11 occurred.

Today, Jinks is a self-confessed but reformed bubble junkie, who ditched the rush of easy money for the more sedate staples of revenues and customers.

For other entrepreneurs wanting to learn from his ordeal, here’s his 12-step recovery program:

1. Reduce cash burnout to a minimum

“I think the first thing you need to do is look at every expense in the organization and ask yourself ‘Is this creating value for my shareholders? Can I really justify that expense?’ And if not, get rid of it.”

Re-examine supplier agreements and renegotiate if necessary.

Make sure that premises costs are at a minimum.

Other steps can also help. As soon as Colligo raised its round of venture capital, its executives took a pay cut. In addition, all employees are accepting company stock instead of pay raises.

Jinks said every expense has been scrutinized, and an undisclosed monthly burn rate has been set that will not be exceeded, “no matter what.”

2. Drive for revenue as quickly as possible, and

3. Validate early with customers

These two points are related. As Jinks explains, many “prebubble” companies were based on concepts, not customers.

But if you want to reduce dependency on external financing,

then ensure you have other ways of generating cash. An excellent way to do that is to gain valuable clients.

“Part of this is a self-preservation issue, but part of it is also a valuation issue. If you’re generating revenue, you’re valued a lot differently than a pre-revenue company. Because now you have customer validation of what you’re doing.”

Colligo has achieved revenues, and at press time had signed two contracts. Jinks wouldn’t give firm figures but said the amount is in the “hundreds of thousands of dollars.”

He added that Colligo sought revenues from day one, which likely helped win financing.“We started the company based on a business relationship and a customer [PwC] who was interested in the product.That was critical for us.”

4. Devote resources to milestones, not to raising money

Raising venture capital consumes valuable management time, so it’s crucial the company doesn’t get sidetracked. At Colligo, executives including Jinks, co-founder and CTOMichael Blackstock and finance director Ken Mair chased the VC cash. “Everybody else was focused on getting the job done. And we kept flowing information back to people asquickly as we could so that everybody in the company was aware of what was going on at every step of the financing.

I didn’t pull any punches; I made sure they understood the good and the bad.”

To drive goals, Colligo adopted a milestone bonus system in which the executive team and board of directors set quarterly targets. Some milestones were related to the recent financing, but most are focused on areas such as product and customer development.

According to Jinks, not every goal has been met: “If you meet every milestone then they’re not a stretch.”However, he said that in recent quarters the company has achieved 80 to 90 per cent of its targets, and that it will exceed those rates in the current quarter.

5. Improve productivity and efficiency

So you’ve reduced your cash burn to a minimum.That’s fine, but now you also need to make sure your resources are being used with the utmost efficiency.

“It’s important to look at how your team works together, how you make decisions, how you carry out processes—and make sure it is done with the least amount of resources, the lowest cost and maximum output.”

At Colligo, these topics are discussed openly in management meetings, and the company also retains a human resources consultant to improve team dynamics and uncover bottlenecks.

6. Improve management bench strength, and

7. Cull weak performers

Again, these steps work in tandem.Work on your strengths, and confront your weaknesses.

“Basically what you’re trying to do in this sort of environment, if I can be so crass as to say it, is to take advantage of the tough times and get yourself the best possible team you can. There are a lot of good people right now either on the street or looking to move companies.”

Indeed, the tech downturn isn’t all gloom—it’s also resulted in a wider pool of available talent. As a result, Jinks said Colligo has managed to hire some “stellar people.” (Colligo has 29 employees, and aims to have more than 40 by the end of 2002.)

But firings are also part of the process.This has happened to “two or three people” at Jinks’ company.

“In this kind of environment the last thing you want to be doing is forcing people onto the street. But the reality is that it’s tough times.

“I’m a firm believer in hiring and keeping and developing people. I think if you make the decision to bring somebody on you have an obligation to ensure that you provide them with an opportunity to develop their career.

“But when you have a conversation with people several times and they just don’t get it, eventually you have to say, ‘Hey, this is a tough environment, if you’re not prepared to put the time in and understand [that], then I believe you have to [go elsewhere].’”

8. Know your customers and competition

In the search for venture capital, be as informed and prepared as possible.

“When you’re making a pitch, an investor is going to want to know [if] you understand the buying patterns [and] the cares of your customers. And also who your competitors are and what they are offering.

“So spend time with your customers and validate your concepts with them. Be able to answer the questions from VCs— what do you do if Microsoft does X or [another] company does Y?”

9. Be honest, not promotional, and

10. Be humble

Honesty is the best policy. If you’re pitching what you think is the perfect company, then don’t expect many handouts.Today, investors are looking for truths, not fantasies.

“There was a lot of hype in the pre-bubble era,” Jinks said.

VCs are tired of that—they’re just not having any of it. It’s best to be completely honest, including all the warts you might have. And talk about the facts—don’t talk about what may be one day if the sun and moon align.

“It’s the kind of market where people are not going to suffer big egos. When you talk to somebody who’s financing your company, be very humble about your accomplishments.

Be proud, be confident, but don’t be arrogant. It’s the kiss of death.”

11. Work very hard

Throughout the financing process, it’s crucial that investors gain confidence in the company’s commitment. And that means putting in the hours.

“Good investors will spend a lot of time [on that], because it takes a long time to get your company financed in this sort of a market.

“And if they’re good at what they do they’ll be checking to see whether or not you’re there at 7 o’clock at night and in the morning and working weekends.”

12. Pray

“You have to hope that things will work out. Let’s look at an event like Sept. 11. The fact is that it’s an unforeseen event.

[Something] like that can have a devastating impact on your ability to finance your company. So there’s an element of luck in this stuff. And if prayer helps to make the luck go your way, then that’s what you should do.”

So, in the end, were Colligo’s prayers answered? “Yes.

Basically, I think I was fortunate in that regard.”

Today, Jinks is an optimistic, sober survivor who aims to raise another VC round later this year. After this struggle, what’s the most valuable lesson he’s learned? “Don’t get hooked on the junk of hype. Business is business, and it’s been done for centuries in relatively the same way. I think that real value is the same as it was a hundred years ago.”

And that means providing a product customers want or need in an effective, competitive way that generates revenues.

Easier said than done, of course. But “if you’re not doing that, you’re going to be eaten by someone else. And if you think business is valued on anything else but that, you’re crazy,” Jinks said.

“The fundamentals are the fundamentals—they have been and they remain to this day.”

Web recovery

BDC http://www.bdc.ca
Colligo Networks http://www.colligo.com
GrowthWorks Capital http://www.growthworks.ca
PricewaterhouseCoopers http://www.pwcglobal.com/ca
Sierra Wireless http://www.sierrawireless.com