Bryan Kerdman - the Midas Touch!

KTY: Today, we are privileged and excited to present Bryan Kerdman, Partner at EdgeStone Capital Partners.
 
Welcome Bryan,

You’ve personally had a strong line of success stories from your first venture at age 19 as founder of Bryker Data Systems to holding executive roles in several technology ventures to selecting the winning companies you invest in today.

What makes you not only a survivor but a winner in this competitive arena? It seems that everything you touch turns to gold…you have the Midas touch!

Bryan: I fell into the entrepreneurial life as a teenager. I enjoyed it and found it easy to do. As the years progressed, it became even more fun. After 19 years in my first real venture, I sold it. The timing was right as I believed that I had saturated the Canadian market place. It was a smart call and I was not ready to branch out to US.

At that point in my life, at 38 years of age, I really didn’t want to run a full time, long term operation. I then decided to be an advisor so I could spend more time with the family.

In 19 years of running Bryker, I had built great relationships. Canada is a small market and you get to know everyone. These relationships are still important to what I do today.

I simply had followed what I liked to do and was fortunate to be good at it.

KTY: What kind of company would make you salivate if it showed up at your door?

Bryan: Just the other day, I met up with three young entrepreneurs with a bootstrap biz. They were realistic, technically oriented, were not under any illusion that they have all the answers, and they did their homework.

We hope to engage with them. They would probably make others salivate, too. We put them through the P.E.S.T. test…standing for Passion, Experience, Speed & Smarts and someone in which we Trust.

This group had it all - except the experience. However, they were open to accepting help.

We see 300 deals a year but only 2-3 of them, roughly 1.0% will get funded, which still doesn’t guarantee that they will become a star.

KTY:  Would you be willing to share a ball park figure on how much you would consider investing in that type of company?

Bryan: We target as little as $ 2 million and as much as $ 10 million. Given the current level of the group we recently saw, we will probably start off smaller since it is very early in the game for them…roughly $1,500,000. We would technically be “institutional angel investors” for them at this point.

KTY: What would make your job easier to discover those jewels?

Bryan: If only they were not intimidated by the process. It’s frightening for an entrepreneur to have their business plan reviewed by institutional investors. We try to be approachable. Anyone can pick up the phone and call or email us. We’ll take your calls. We’ll meet you.

KTY: What was EdgeStone’s – or your – proudest VC moment?

Bryan: We have many. One of our big success stories is Slipstream Data, Inc. We sold it to Research in Motion. Originally, it was unpolished, but we liked the fundamentals and stayed with it until its sale, believing in it all along.

KTY: OK then, so what was your biggest nightmare?

Bryan: Investing in a business whose technology did not work, but for which we were led to believe that it did. We thought we did our homework, asked all the right questions, but somehow we missed.

KTY: What would you say are the major trends in the VC industry? What are the subtle ones (the ones only apparent to someone in the industry)?

Bryan: In Canada, consolidation and fewer and fewer funds. Everything is going to shrink. There are less than 10 funds larger than $100 million who do early stage IT investing in Canada. There are only 115 people employed as investment professionals in early stage IT investing. This is not a large industry. We are going to see only the good funds, those with positive returns, survive and ultimately flourish.

KTY:  As a proven smart leader who has successfully helped grow quite a few ideas into thriving businesses, what do you think are the secret ingredients that propel companies towards success? What are the most critical elements you seek?

Bryan: To begin with, companies that pass our famous P.E.S.T. rule.

Also, we encourage and want domain expertise within the group. When we worked with Workbrain, the CEO, David Ossip, came with an industry background. He understood the marketplace having run a successful business before. He knew what his customers wanted and more importantly he knew how they bought. All that reassured us.

KTY:  In your opinion, who are the “best in class” small companies on the rise that inspire your continuing success – that is, the “diamonds in the rough” so to speak, who have impressed you with their ingenuity and smart thinking?  And, what did these “diamonds in the rough” do to come out shining?

Bryan: Well, I may be subjective…but
 
CIRBA…two smart founders - technical in nature who understand their market. Great technology!

KTY: In the spirit of the classic film, “The Good, The Bad and The Ugly”, we could say that we’ve talked about the GOOD above. How can companies on the rise avoid becoming the Bad and the Ugly?

Bryan: Well, if they have attained critical mass and can prospect for more sales, they should be careful not to get cocky and grow beyond their scale and risk not being able to follow up on sales promises, for example.
 
If they have not yet attained critical mass, fail, and if the market is not large enough, suffice it to say that a thousand things can go wrong. For example, we once invested in a technology company whose product offered triple the speed of the competition at the same price but the customers did not care.

Banks heavily invested in MONDEX and few people cared for the product…the story did not pan out as expected. Not truly understanding the customers is a good recipe for failure.

KTY: Would you care to share some of your favorite and best advice to companies seeking to follow in your entrepreneurial footsteps?

Bryan: Don’t be intimidated by prospect of raising funds. VCs are not all bad. There is funding out there for great ideas.

Be prepared to take criticism. In 19 years at Bryker, the business was in trouble three times. I learned from my mistakes but sometimes, we also got lucky.

Recognize that it takes skill, hard work AND luck to be successful. Don’t be cocky.

Be realistic about raising funds, and the slice of the company you get to keep.
 
Most investors have a 4-5 year horizon time horizon – work with it!

If a VC turns you down, go back to the drawing board, improve your offering, and go back! Prove the VC wrong!

Do your research. Be new and innovative, and tell us why you think you are better.

KTY: Thank you so much, Bryan, for sharing your wisdom with us today.  We wish you much continued success in all your ventures!