Welcome to New Brunswick, Salesforce.com

One thing is certain. The film and TV production industry may be small but it has amazing heft for its size.  The entire film and TV production industry in New Brunswick represents 0.048 percent of the GDP but I have gotten more calls, emails and blog comments on this in the past few hours than just about any other concept I have thrown out there.

At the risk of alienating one more segment of my readership, I will express my congratulations to the folks over at Radian6 for their sale to Salesforce.com.   My first exposure to Marcel Lebrun was during my short lived stint at NBTel.  Lebrun was Gerry Pond’s protege and that status combined with a good management team has led to the sale today – I have no idea what the ownership structure was but my suspicion is there are a number of new millionaires in the province tonight.

This is wealth creation folks.

The reason this seemingly positive event is likely to generate additional rotten tomatoes in my direction is that a number of my peers do not like foreign companies gobbling up our best and brightest firms – moving the decision making out of the province.  They bemoan the loss of decision making here and see this kind of thing as weakening the province.

While I readily admit that decision making does migrate out of the province, what we have witnessed is an unlocking of capital – much of which will be put to good use in New Brunswick.  How many IT firms in New Brunswick with interesting ideas have gone under and all that goodwill was destroyed?  I can name a dozen firms right off the top.  This is one, Radian6, that made it and we should be happy.

It now becomes the job of economic developers to make sure Salesforce.com continues to grow the NB operation.    Just like Oracle, or GTech or RIM – when they make a buy in New Brunswick it flows new capital down here and plugs us into the big, global tech firms.

We need to embrace this.  Hopefully, there will be firms that eventually do the acquiring and become the next McCain Foods from New Brunswick.  But in the meantime, I’ll celebrate this stuff.

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10 Responses to Welcome to New Brunswick, Salesforce.com

  1. Or if Marcel decides that working for Salesforce.com is boring he might decide to invest in a start-up. If we can grow companies, albeit on a small scale, that’s a long-term wealth generator, even if head office is in SFO. Growing millionaires beats growing jobs, IMO.

  2. I agree that this is great news for New Brunswick. It establishes a beachhead for Salesforce.com to grow from and adds credibility for the NB IT sector.

    The proof is out now that you can build a valuable IT business in NB that is attractive to people around the world.

    As well, with the purchase of Chalk Media by RIM and now Salesforce.com buying Radian6, Fredericton is building a nice cluster of IT business which will hopefully attract more companies.

  3. mikel says:

    There are two issues here. I WOULD agree if there were HUNDREDS of Radians and Chalk Rivers. Then you have that ‘cluster’. It’s of course good for him, but canadian winters are pretty brutal, so if these guys say “Bermuda here I come” and pack up and are gone next winter, and if Salesforce says “why in gods name are we keeping this in NB? You think I want to fly to Fredericton from San Fransisco for meetings?” So IF next winter both that money is gone, those guys with the ideas are gone, AND all those jobs are gone-how exactly is that a GOOD thing again?

    You need a large enough ‘cluster’ of ‘idea companies’ that WHEN that happens (and it will), the province doesn’t feel it. In fact, to mirror the film thread, did you notice that as soon as it was announced the province basically said “we’ll do whatever we can to keep them in the province”. Again, that’s not necessarily a GOOD thing.

    I don’t know the structure here, but I know a local couple of guys sold their company to Google, but basically Google left the entire company with the exact same structure. Then you get all those wonderful things where money comes in and the jobs stay, etc. We don’t yet know whether that will be the case in NB, so I think its a little early to say ‘yay’. Of COURSE its nice for those guys to be millionaires, just like its nice for whoever wins the lottery, but public policy should not be designed in order to make a couple of people millionaires if the rest don’t share in it.

    I don’t know the structure of Radian, but at least with something like microsoft, the shareholders ALSO made out like bandits. So if this were a PUBLIC company there would be more of benefit.

    Plus, its worth pointing out that IF the company pulls out of the province, and those guys move, there is really NO difference between that and bankruptcy.

    The best thing about this has nothing to do with Radian. Hopefully more people will look at this and realize “Hey, if I come up with a technical idea, then I can make a company that I can sell for a million dollars”. First you have to learn how to do that, but if more people do that, THEN that’s a great thing. I did notice that a company held a national competition to build ‘the next great app’, and I didn’t see ANY partners from New Brunswick.

  4. richard says:

    Some of the capital and expertise that lead to Radian6 came from Q1 Labs, an outfit that has some roots in UNB. A great example of tech spin-offs from a uni. There are some lessons there for Mssrs Higgs and Alward – R&D investments have a payoff in high-wage jobs and capital generation.

    Its way past time for the politicians to have a sit down with the unis and say ‘guys and gals, given our fiscal situation, we have very little new money for you, but, you know what, we still want UNB to increase its tech spinoff rate by 10x over the next 10 yrs. Shut whatever pgms you want that are outside the science / engineering R&D areas, transfer them to Slacker U across campus, whatever. We’ll support you, but do it.”

  5. oliver says:

    mikel: You make some odd points.

    First off, it’s safe to assume that many of Radian6’s employees have stock options (standard stuff in tech startups). If they do, they too may be making out like bandits, as you put it. And do you think that the people that started this company don’t have more ideas?

    Second, even if Radian6 does move, it’s not the same as bankruptcy. A good chunk of that sale price is going to people within this province. NBIF is an early investor in Radian6, I’m assuming they are making a pretty good return on what was likely a modest investment. And that means taxes collected on those profits.

    However, what incentive is there for Salesforce to move Radian6? Software developers in San Francisco would probably cost about double the salaries in NB. Radian6 proves that you can be extremely successful here in NB, and even be a market leader worldwide.

    It’s disappointing when great news like this is overshadowed by the cynics in the local media. The CBC story yesterday focused more on Paul Robichaud’s comments about how he hopes jobs will stay here, and how he will “entertain discussions” with Salesforce to ensure jobs stay here. He’s practically offering a handout without even being asked for one. How pessimistic.

    People don’t seem to realize that a lot of the people involved with Radian6 are serial entrepreneurs. Before founding Radian6, Chris Newton cofounded Q1 Labs, another Fredericton company that is doing very well and has been trying to hire a lot of skilled people. People like this will continue to either found new companies, or invest in other companies.

    An acquisition of this scale should be applauded and hopefully it will inspire more New Brunswickers to start and invest in high tech companies.

  6. When my kids were younger we watched the movie “Elmo in Grouchland” at least a dozen times. The slogan for Grouchland was “Welcome to Grouchland, now scram!”.

    The Minister should have been thrilled and talking up this deal rather than worrying about job losses. It’s about an attitude change. Skepticism of ‘foreign’ firms is in our DNA.

  7. mikel says:

    It’s NEVER safe to ASSUME anything. I could find nothing about outstanding shares, which leads me to think they are not publicly traded. So until I see something in print that TELLS me how many stock options employees have and what they are now worth, I’m not going to ASSUME anything (we have LOTS of stock options in a company whose shares have never gone above what the options are worth).

    As for NBIF, again, when I SEE any such amounts, then I’ll believe it. But given the past history of many NB investment strategies, I’m certainly not going to take it as given, particularly since nowhere in the announcement was any mention of the government as an equity owner.
    As for ‘ideas’, here’s from a review of Radian’s software:

    “I had a great conversation with a guy called Cory at Radian 6 today. He talked me through the their social media monitoring tool, developed internally by their guys in the States.”

    So for the ‘ideas’, we really don’t know how much was actually even DONE in NB.

    I don’t think its CYNICAL to talk about these things, there was virtually NO outcry when Radian bought that british company some months back. Everybody applauded it and thought it was great. This is different, and should be talked of as being different. It would be quite irresponsible for the government and media to talk about the selling of a local company to foreigners as an out and out wondrous thing. In case people missed it, the feds BANNED a foreign company from purchasing Sask Potash. That’s because of the simple realization that when the decision making MOVES, its very likely that companies can move as well.

    My wife works for a company that has been begging us to move to New Jersey for YEARS. And thats even though all the costs there are higher-taxes here are actually less, but all the executives are there and they are sick of travelling to Canada for meetings.

    So again, thats NOT to say that its definitely bad news, but it COULD be bad news. They MAY take their money and ideas and invest in new companies, and when they do and its announced, me and the media and everybody else will applaud it. Keep in mind though that buyouts like this contain non – competition clauses which prohibit the owners from developing any new products-and software in social media is a pretty big industry, so it depends just how strict the buyers are, that will determine what kind of ideas these guys can put into action.

    But it COULD be fantastic. They could get tons of money that they then spread onto new companies, the company COULD see the workforce in NB as a positive thing, although the recession in the US has hit most industries, so labour savings may not be what you think (I was wrong, it says this is a Delaware company, not SF). But the workers in NB could know the product inside out and this new company COULD invest even more, and maybe even bring in new opportunities.

    But the ‘cynical’ side is at least just as likely, and given past history, moreso. And to be even more cynical, I do have some knowledge of the NB tech industry, and what is often meant by ‘serial entrepreneurs’ is “guys (and girls) who know how to get government funding as long as possible”. Call it cynical if you want, but it comes from experience. And this cynic will at least venture out that hopefully such cynicism will be unfounded in this case.

  8. mikel says:

    If you look at todays CBC website there is some more grounds for optimism. As the poster above mentioned, the NB government does own equity, so will benefit, and it appears that there is about 40 million in stock that will be up for grabs-we still don’t have any amounts though.

    The current owner claims that they aren’t moving, and he isn’t moving, so again thats grounds for optimism, but they are being bought out, so there is no way to guarantee that they will be staying put.

    As for the company itself, I think its a good ‘benchmark’ case study, and if more people learned about it, then maybe more people would get into technology.

    They seemed to ride the ‘new technology wave’, where if you have the know-how in an emerging field, you can get the clients. Sort of like the way guys who could program with HTML in the early days of the internet could make big bucks, but five years later were obsolete.

    It also mentioned that it is a privately held company, and got venture capital from BCE Capital, Brightspark,and the BDC. So if these guys can connect more individuals to these venture capital firms, then its an even more good news story.

    An earlier story told of how the Venture capitalists came on board in the FIRST YEAR. It expanded last year into Halifax thanks to, once again, a payroll rebate program worth $800,000 on 40 jobs.

    And its worth pointing out that at its earliest stages, this company benefitted from ACOA funding. Of its 4 million startup, ACOA invested 3 million over four years-I dont’ know whether the AIF is an equity investment, loan, or grant, and I can’t find what the NB equity investment was. The company was expanding aggressively, but most of those positions were sales positions.

  9. mikel says:

    Ok, found it finally. The NBIF invested $50,000 in Radian6, and its venture capital investment was $326,000. Not sure how that gets paid back, but it certainly covers a few venture capital bombs.

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