Ottawa’s Next $100 Million Tech Startup?
(Portions of this article originally appeared in Ottawa Business Journal, April 16, 2012: http://www.obj.ca/Opinion/Bruce-Firestone-5444.)
When you first meet Len Anderson in his company’s bustling headquarters—a capacious Kanata office building on Leggett Drive which looks more like a warehouse once you are inside—you are struck by his sense of humour and calmness given that he is in the eye of a storm which is taking Renaissance Repair from 0 to potentially $100 million in sales in just six or seven years.
Renaissance has an irresistible value proposition—for OEMs like Alcatel, Cisco, Huawei and Ciena or telecom companies like AT&T, China Unicom, Verizon, Bell, Sprint, T-Mobile, Vodafone, Telefonica, Docomo and Movil—about 80% of their networks run on legacy equipment, highly complex hardware, software and firmware that almost no one knows how to fix and repair anymore.
These companies all have huge teams of engineers and technicians but they focus almost exclusively on leading edge technology. Still they can’t afford to rip out tens, perhaps hundreds of billions of investment in their systems every time something goes wrong with their older equipment. And where can you find engineers who understand legacy equipment? Why in the city that designed it in the first place—Ottawa and Nortel engineers did that.
So Renaissance has a vast supply of engineering talent that can solve these technical issues plus an endless demand for its services, worldwide.
It sounded like an opportunity and a viable business model to Mr. Anderson when Nortel folded underneath him. He was there for nine years and five months running NT’s used equipment buyback, storage, remanufacturing, remarketing and recycling business. He was responsible for all used gear transactions globally which meant that when Nortel’s last CEO, Mike Zafirovski, cratered the business, Len was ideally situated to start out on his own.
“I got Renaissance off the ground with $20,000 from my credit card and an understanding wife,” he says smiling broadly.
(Mr. Anderson has used this line once or twice before, no doubt. His family lives to the east—in Rockland—so his trip to and from work each day in Kanata is one hour. He did not want to move them; they are settled in that community and plan to remain there so he uses his transit time for calls. We can only imagine what his cell phone bill looks like.)
During his first year in business he did what most self-capitalized entrepreneurs do—he hustled. He bought and sold (flipped) used equipment—not much different from what you see on TV when they try to flip houses at a profit. But in Len’s case, he actually had some expertise—he possessed asymmetric information that allowed him to value other people’s discards accurately. It’s a riff on buy low/sell high. By the end of year one, he was sitting on $1 million in cash.
His next step was to build a bigger pipeline—to rent and fit up a larger space. ‘How hard can that be?’ Len thought. Six months later, he had his lease and a few months after that they were operational in their new location having spent all their money and more on real estate. “It was ugly,” Mr. Anderson says. “We didn’t know anything about real estate but our Landlord certainly did. We negotiated uphill all the way. We didn’t even know how to spell ‘BDC’ when we moved in,” he adds with a laugh.
BDC is obviously Business Development Bank of Canada who came to their rescue with credit support as did Yves Tremblay, founder of Purple Angel and Cesar Cesaratto who runs their team, as well as friend, investor and confidant Larry Poirier from Nitro Microsystems.
Staff will double or triple in size this year to perhaps 60 or maybe even 90 people. Len has found that startups put so much pressure on everyone that some of his employees crumple and leave. Staff turnover has been at 50% although that is coming down as they cull the herd and learn to hire-up. They have brought in an experienced HR leader in Kim Waite who has made meaningful changes in this crucial area.
There is no doubt in Mr. Anderson’s view that the talent they need is here not in China, India or even the US, UK and Germany. Every time he learns that an OEM has declared another product line a ‘legacy’, you can hear cheering at Renaissance as well as at places like Pythian. Pythian* is another Ottawa-based success story that works with legacy products—they run database management networks for companies like CBS, Electronic Arts, Telesat, Forbes, Toyota and Nordion.
(* You can read more about Pythian, How to Establish a Sustainable Competitive Advantage, here: http://www.eqjournal.org/?p=2482 and Becoming an Entrepreneur by Paul Vallee here: http://www.eqjournal.org/Paul-Vallee-pythian-speech-30-march-2011.pdf.)
Mr. Anderson does yoga and kickboxing plus he cross country skis every night with a headlamp on his head—to try to unwind and relax. “You know I never expected to run my own company and sometimes wonder how I ended up doing this,” he adds, pointing with his arm to millions of dollars worth of equipment sitting on shelving or being worked on/repaired by engineers and technicians all in blue lab coats.
Asked if he is building the company to sell or hold on to, Mr. Anderson says, “We’ve already had three inquiries about that but I have a good support network and we want to see what we can do with all of this.”
Professor Bruce M. Firestone, Founder, Ottawa Senators; Author and Executive Director, Exploriem.org; Broker, Century 21 Explorer Realty; Entrepreneurship Ambassador, Telfer School of Management, University of Ottawa. Follow him on Twitter: @ProfBruce