Mitel founder Terence Matthews on ICT start-ups By: Maria Cootauco, Info Executive
January 22, 2010

For a Copy of yesterday's Recorded Teleforum where Mr. Matthews discusses Wesley Glover, industry trends and opportunities and Canada's eco system for the Innovation Nation, please email Emily Boucher at eboucher@cata.ca


For billionaire Terence Matthews, an Ottawa-based high-tech entrepreneur, it all started with $4,000 of borrowed money, good timing, persistence and work ethic.

From that, Matthews went on to found more than 60 companies in the UK and Canada which include powerhouses like Mitel Corp., Newbridge Networks, a telecom switching company acquired by Alcatel, and Wesley Clover, an investment group that specializes in technology, real estate and leisure industries.

Recently, the Wales-born businessman spoke at a CATA Alliance teleforum offering up some wisdom on the thinking and tools that helped earn him a net worth of $1.49 billion in 2008 according to Canadian Business magazine.

“We got our timing right with a product that was one-tenth of the sale price of those products from Nortel and so on,” Matthews said of Mitel’s early days. “Getting the timing right and persistence and a hard work ethic and one other characteristic was almost all of the early people in Mitel were new graduates.”

Matthews said his “affiliate model” allowed him to establish and subsequently scale up his start-ups by partnering up with companies with proven track records. In the case of Mitel, the business model meant investors got back $2.5 million for every dollar they put into the company ten years earlier.

“I did the same with Newbridge,” Matthews said. “(By becoming) affiliated to the larger company, that means that you don’t have to concentrate on having sales people. The affiliation with the larger company means that contracts and clients are already in place. Credibility is in place. And you can use that to boot strap a start-up company into becoming something significant. I’ve done that over 80 times.”

Timing also played an important role in Matthews’ entrepreneurial success. And with the demise of Nortel in recent months, there’s no better time than the present to reinvest in the technology space, he added.

“This is a company that less than ten years ago was a $30 billion enterprise in the ICT telecom networking space,” he said. “It melted down after the bubble burst, to $12 million and now just in the last 12 months, has melted down to nothing … So think, Nortel gone. Think an ecosystem.”

Matthews implores innovators to look around at the workforce scattered across the country who once worked within the Nortel ecosystem. “Whether it’s R&D, project management, logistics, manufacturing, sales people, you’ll find that that company which at one time had almost 20 per cent of the R&D spend in the country -- it’s gone,” he explained. “But the ecosystem isn’t.”

But it’s not just the “grey hairs”, as Matthews referred to industry veterans, whom start-ups can benefit from – recent graduates eager to get a start in the technology sphere are an invaluable resource and have proved their worth in Matthews’ past ventures.

To get the cream of the crop, Matthews confessed to having key contacts inside universities who tip him off to the brightest stars. “In my model, I pay new grads $25,000 a year when they could be making $60,000 or $70,000 somewhere else,” Matthews said. “And it’s what they don’t get in income that becomes their sweat equity. Typically, after a year, the company has to be formed because it’s not making sales and buying things and so on. When the company formed, the new grads typically get 50 per cent of the company. That drives them and they know the formula up front.”

Matthews predicted mobility, virtualization and cloud computing will continue to be areas of major growth in coming years.

On the mobility front, Matthews noted the rise of the smartphone and related endpoints, citing the 700 per cent growth rate enjoyed by the iPhone. That growth could be aided as offloading voice network traffic via wildfire “is growing like wildfire around the world,” the executive said. “[Users] wanted to be free of wires,” he said.

And while still bullish on virtualization, Matthews noted one shortcoming of current environments, particularly when used to manage systems like unified communications. “It’s not a real-time environment,” he said.

But sometimes, even a good idea and a sharp business sense isn’t enough to catapult a business to success like Matthews has achieved.  And for that, Matthews points to the need for government to make it easier for foreigners to invest in technology start-ups.

“It simply has got to be fixed,” he said. “”You have to make the country a magnet for capital to be invested in start-up companies. And it’s not fair. In fact, it’s not in good shape … Serious thought should be given as to how you can attract capital in the technology areas which are in the growth parts of the society. The government can do a lot more.”

Undeterred, Matthews implored crafty entrepreneurs to take the (smart) leap. “Do your bit to help,” he said. “Do your bit to be bold. Help Canada become a star in terms of high tech.”