CREDIT: Wayne Cuddington, For TechWeekly

Mark Scott

CREDIT: Simon Hayter, For TechWeekly

Alex Leupp

CREDIT: Wayne Cuddington, For TechWeekly

Scott Marshall

CREDIT: Wayne Cuddington, For TechWeekly

Jim Hjartarson

CREDIT: Simon Hayter, For TechWeekly

Andrew Coutts

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High-tech firms that cross the $100-million-a-year revenue threshold are a rare breed. In Ottawa, you can count them on your fingers -- Newbridge, Mitel, Corel, Cognos, JDS Uniphase, Entrust and Lumonics. Getting there involves supreme ambition, discipline, good timing and no small measure of luck.

Over the past three years, venture capitalists have invested more than $3 billion in 100 or so Ottawa startups in the expectation that some will grow very large indeed. The city's tech economy would benefit enormously if a handful of these could transform themselves into winners -- which is why half-a-dozen of the city's research and economic agencies, led by the Ottawa Centre for Research and Innovation, recently created a task force to help create the right conditions for takeoff.

To provide some insight into what it would take for this to happen, The Citizen has examined the game plans of five startups that are showing exceptional promise. This is not to say that they will all surpass $100 million in sales one day; in fact, the odds are that one or two will fall short. The virtue of these firms is that each has already landed significant customers. They also offer examples of business plans that are ''non-linear'' -- they have the potential to grow very quickly.

For one thing, all are aiming at substantial business sectors. If there is a knock against Ottawa's entrepreneurs, it is that too many limit themselves to smaller niches. Atsana has no such modesty; it wants to be the world's leading supplier of multimedia processing chips for cellphones. Catena Networks hopes to give Alcatel -- the No. 1 player in digital subscriber line technology -- a run for its money by changing its industry's rules.

In keeping with such hefty ambitions, each of the five firms featured here has constructed an international sales network capable of handling dramatic increases in the number of customers.

N-able, a virtually unknown software developer, is rushing to fill the void in a multi-billion-dollar-a-year opportunity for supplying special software tools to outsourcers -- companies that operate networks on behalf of others. Databeacon, another software developer with high ambitions, has increased the number of its worldwide sales partners during the past two years from five to 82.

Without exception, the leaders of the five firms have loads of relevant experience. Ceyba CEO Scott Marshall was a key executive at Newbridge from its founding in 1986 to 1999. Alex Leupp, the top gun at Atsana, has run startups before, as well as large units within high-tech multinationals.

All these characteristics -- ambition, sales leverage, experience -- are probably essential for success, but not necessarily sufficient. Achieving the kinds of breakthroughs that can produce large firms requires a confluence of events whose impact often can't be predicted. These can include anything from wrong-headed moves by competitors to changes in national regulations or laws.

Indeed, it's likely some of the fastest-growing firms in Ottawa by the end of this decade will emerge from a group of well-run startups not included in our sample -- chip designers, metro-optical firms, optical component startups, wireless outfits, networking companies, among others which have yet to post revenues. Plenty of technology bets have been made, increasing the odds that hits will emerge from Ottawa.

It's also worth noting that Ottawa's earliest champions got large using different routes. Newbridge experienced explosive growth almost immediately, while Mitel, Corel and Entrust took a few years to warm up. JDS and Cognos, for their part, grew slowly and quietly for many years before reaching the take-off point.

Of course, the champions of Ottawa's tech industry -- including Eli Fathi, chairman of the newly built task force -- don't particularly care how the next wave of startups gets big; just that it does. The five leaders pictured on these two pages are trying to make it happen by just getting on with the job.

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Enterprise software

Databeacon

Founded: 1995

CEO: Andrew Coutts

Product: Analysis software

Venture capital: $10 million plus

Employees: 40

Andrew Coutts was a little astonished at the reception he got when he took over the top job at Ottawa-based software specialist Databeacon in the spring of 1999. One of his first tasks was to line up a second round of venture financing for the eight-year-old startup. "People just told me, 'Sorry, I'm investing in photonics now, not software,''' he recalls.

He was saved, temporarily, by the onset of what he calls "bizarro world'' -- those heady days when dot-com customers would drop cheques into his hand for hundreds of thousands of dollars for the right to license Databeacon's business intelligence software. Many of these customers went bankrupt in the wake of the dot-com crash.

All of this served as a wakeup call for Coutts' conservative instincts. For the past three years, he has concentrated on replacing his lost dot-com revenues by systematically building a more solid base of customers.

The result since 2001 -- Databeacon has boosted its sales network from five partners to 82 while the number of countries covered has jumped from four to 26. A partner is any firm that sells Databeacon software to a third party, whether directly or as part of another software application.

Databeacon pays each of its partners a fee representing up to 25 per cent of gross sales. The bonus is a network of agents who can push through enormous quantities of software if the demand is there.

"We've now got the leverage of these organizations,'' says Coutts. "When things turn up, we've got a model that can sustain 100-per-cent growth year after year.''

Will things turn up, though? The early signs are encouraging. During its most recent quarter, Databeacon reported a tripling in the number of deals compared to the previous quarter. Revenues for fiscal 2003 (ending Sept. 30) are expected to top $5 million, up more than 30 per cent from last year.

While this sounds a long way from serious money, much of the hard work has already been done. Coutts points out that it takes more than a year before a new partner begins to pay off in terms of good sales. Partners must not only be trained how to use Databeacon's software. They need an incentive to push it as well.

Databeacon has been giving it to them. First, there is the 25-per-cent fee. Second, whenever Databeacon lands a deal through one its own employees, it will often encourage that customer to use the reseller for ongoing help and maintenance.

The approach is similar to that of Cognos, which also relies on a mix of employees, outside agents and technology partners to land its sales. It's no accident. Michael Potter, the former CEO of Cognos, was an early financial backer of Databeacon, which used to be called InterNetivity. Neal Hill, a former Cognos executive, is a Databeacon board member.

Although Databeacon and Cognos both develop business intelligence software aimed at helping firms access and analyze data, they tend to target different parts of the market. Databeacon is aiming at small-to-medium-size firms while Cognos goes after larger accounts. When Cognos entered the niche in the late 1980s, it took years to establish itself before sales accelerated. Coutts hopes a similar pattern prevails in his end of the BI market.

"We've got a product that's ready and easy to use and we've got the channels to move it,'' says Coutts. "We've built a company that can scale rapidly.''

In case it doesn't, Coutts has the luxury of presiding over a firm that is generating cash flow -- Databeacon for now doesn't have to worry about raising more money.