In the News...

It's possible to work for a hot Silicon Valley startup without leaving Canada
By Wendy Stueck

When B.C. software engineer Mandeep Dhami set out to build a company, he had a strong team, an interesting concept and a pressing need for cash. A few months later, he's hooked up with a Silicon Valley startup in a deal that features money, talent and a company with roots on both sides of the border.

Mr. Dhami is now director of software engineering for Richmond, B.C.-based Inkra Networks Canada, a new subsidiary of Inkra Networks Corp. of Fremont, Calif.

It's a new twist on a model that's seen U.S.-based companies scoop up B.C. startups largely for their engineering talent. Inkra is made up of two teams that have decided to pool their resources almost from the start. The cross-border venture is the product of matchmaking by U.S. and Canadian venture capital firms.

His new U.S. colleagues "brought an understanding of how the market was working with startups in Silicon Valley -- and we were out of touch with that," Mr. Dhami says.

Inkra's strategy came about over the past few months. In California, Inkra founders Sanjay Dhawan and Dave Roberts formed a company in May to design technology which would allow Internet data centres -- which provide services like Web hosting -- to work faster and more efficiently.

Both men had successful industry track records, and soon were talking to an A-list of investors, including Battery Ventures, a venture capital firm which raised $1-billion (U.S.) for its latest fund.

In British Columbia, meanwhile, Mr. Dhami was working with a small team to design wireless networking technology, and courting potential investors to back his idea.

One of those potential backers was Vancouver-based Greenstone Venture Partners, which had talked to Battery before about other opportunities.

As good matchmakers should, the two venture capital firms began thinking that their two prot?s were meant for each other.

Partners at the financing firms were asking "what does Mandeep's team need, and what does Inkra need, and seeing a complementary factor," says Greenstone principal Richard Osborn.

The financiers set up a meeting. Inkra's Mr. Roberts says he and Mr. Dhawan were keen on a second location, as they knew it would be expensive and difficult -- if not impossible -- to recruit all the engineering talent they needed in Silicon Valley's hypercompetitive environment.

They had ruled out locations in India, Israel or Europe as being too difficult to manage. A couple of North American teams they had encountered didn't have the mix of talent and chemistry they were looking for.

When the Inkra founders met Mr. Dhami, who had spent seven years at the Vancouver division of Motorola Inc. before branching out on his own last year, something clicked.

"If you are going to throw your lot in with somebody, you really want to make sure it's somebody you can do this with," says Mr. Roberts. Mr. Dhami's credentials checked out on paper. He also appeared to have the contacts and ability to recruit the talent Inkra would need.

"The thing you're always looking for in a remote location is critical mass," Mr. Roberts says. "The worst thing would be to have two guys who can't pull a team together."

For his part, Mr. Dhami had been negotiating with backers who were willing to invest in his company on its own.

And teaming up with Inkra would mean abandoning some of the work his team had already done.

In the end, he decided that Inkra's contacts and experience would give him clout he couldn't get alone.

Inkra, he says, "had a much better-developed sense of the customer they were going after." Some of the largest potential customers were already giving feedback to Inkra's team about what kinds of services they needed.

"That level of feedback would have taken us a year-and-a-half to get, and they already had it," Mr. Dhami says.

The two teams met in August and began negotiating shortly after. By October, Inkra had closed a second round of financing, and has now raised a total of $26.5-million from backers that include Battery and Greenstone as well as U.S. firms Norwest Venture Partners and Storm Ventures.

Battery would not appear to need financial help from a much smaller firm such as Greenstone. Also over the past year, it's become much more common to see major U.S. venture capital firms investing in new Canadian enterprises.

Mr. Osborn sees the Inkra deal as the next step in that evolution. U.S. firms will still invest in Canadian startups, but he expects to see more Canadian investors hooking up with U.S. partners to back companies based in the United States, Canada or -- like Inkra -- with operations in both countries.

Like almost every other aspect of the Internet economy, this trend is speeding up.

The result, says Mr. Osborn, is that it's "now possible to work for a hot Silicon Valley startup without leaving Canada."