Ex-Chrysler CEO Tom LaSorda ditched the auto industry for the startup world and now is eyeing the Waterloo region for potential investments.
Anthony Reinhart interviewed LaSorda about startups and his plans for Waterloo.
Q: Startups are everywhere these days. Why are you interested in Waterloo Region?
A: I did a little bit of investigation and study of where the hubs might be in different areas, and being a Canadian, I wanted to focus in Ontario.
I grew up in Windsor, so I knew Toronto, Waterloo and Kitchener should be a big hub.
Then I ran into David Sutherland, who was on the board of U.S. Steel with me, and we were on a board together in Canada, Husky Injection Molding out of Toronto, and I told him what I was up to.
And he says, ‘Hey, you should really look at Kitchener-Waterloo; I’ve got a real good friend, Gerry Sullivan, who used to be running an incubator up there and is really tied into the community and into a lot of startups,’ and he says, ‘You guys might want to look at that.’
So we reached out to Gerry, then we visited Communitech and some other startups that were at the University (of Waterloo), and we, quite frankly, were very warmly welcomed.
It’s like the Canadian tradition; even though I’ve been in the U.S. for over 20 years, you know, they just don’t lose their magic, the way people treat people there.
So it was that, and of course, there are so many bright people in the Waterloo-Kitchener-Toronto area; great hubs with universities, so we said, ‘Hey, this should be a focus for us. We’re Canadian, we’re fast, we know what they’re going through, it’s hard to raise money in Canada, and we’ve got a great investor team, so why don’t we reach out and support the Canadian teams?’
I’ve got a soft spot, obviously, so I’d like to help the Canadians if I can.
We’ve been in contact with some of the companies and we’ve got some term sheets going with some of the companies in the area, and in Toronto, too. We just like the calibre of the personnel and the leadership of these startups.
It’s very refreshing. You don’t have to go anywhere but around the corner to find smart people. You don’t have to run to Silicon Valley; I actually have never gone there.
Q: You were the CEO of one of the world’s largest automakers, surrounded by qualified people to help run the company. What does a big corporate guy know about startups, anyway?
A: Everybody asks me [that], but if you look at a big company, we’re engaged in startups every day. They’re just not seen on the outside.
So, starting up a new product, starting up a new technology, starting up a new plant, starting up a new division, starting up a joint venture – these are all startups in a different way, and in a big company, you’re picking different people every day or every week or every month to lead you in various parts of your business.
Selecting great people and great ideas is inherent in big companies, but people just don’t realize it.
Q: During a pitch, how can you tell when a startup entrepreneur is worthy of investment? What qualities – and warning signs – do you look for?
A: That’s a great question, because there are only three things that we fundamentally look for.
Is the idea or the technology or service clearly a breakthrough in technology, or is it disruptive to existing competition? That’s the first thing.
The second thing is really an assessment, and it’s likely a half-hour, and then maybe a subsequent meeting; it’s an ongoing interview with the leadership team. You’re assessing their knowledge base, their keenness to lead, and you get a vibe from that.
You get these smart-alecks who think they know everything and don’t want to listen to anybody – and that’s a very rare case, but you see that – and we generally would shy from that. That’s generally a warning sign, that ‘we’re too smart or too good for everybody else.’ And in some cases, they probably might be, and that’s OK.
And then, there’s the third major area we look at, which is really, really important – do you know your own numbers? Do you know the market? Do you know the competitors, and more importantly than all of that, do you know your customer?
If you know all that stuff and you’re a great leader – you know, everybody’s got a different personality, and I have no issue with different personalities; that’s not what I’m focused on. Some people are shyer than others; some present better than others. That’s been my whole career, watching that in companies.
But, putting all that aside, is it a great idea? Are they great in leading?
And of course, a lot of startups may come out of what I’ll call the technology side, and generally don’t know how to go to market. That’s where we see the biggest weakness in some of these companies.
Then we assess whether we can help them. If we know they have big weaknesses because they don’t know how to go to market and they don’t want help, why would I invest?
Q: You mentioned your soft spot for Canada. As a Canadian who has scaled the heights of corporate America, how has your experience influenced your perspective of Canadian entrepreneurship?
A: I think Canadian entrepreneurship is really no different than anywhere else in the world.
I think many of the companies in Canada are really focused on Canada, and that’s 10 per cent or less of the size of the United States. I think we broaden them and say, ‘I know Canada’s great, but you go to four cities and you’re mostly covered for most of the country.’
So we kind of open them up to say, ‘There’s something beyond your borders, and if your idea’s great for Canada, it’s probably great for everywhere else, so why don’t you look beyond that?’
I agree to some extent that going outside your own world of knowing all the rules and the laws and the culture of Canada, going beyond that, is very difficult. And it’s no different from a U.S.-based company going into Canada.
I think getting some people who might know a bit, and maybe can help a tiny bit, is probably why we offer something different than they can get in Canada.
Q: IncWell has set a range of $50,000 to $250,000 for its investments. Why did you settle on those numbers?
A: There are two fundamental reasons, I guess. Number 1, you always have to have a cap on where you’re headed, because you want to have funds for many companies and not just put all your eggs in a couple of baskets.
When you have 13 investors, all good friends of mine – and in fact, we’re going to start another fund, so who knows who else may want to join the fund – I really want to know the people, because it’s a family event, you know?
We said $250,000 because that allows us to invest in other companies.
And the one thing we do is, we can offer a tag-along to the rest of our investors. So, let’s say you love this company, and we put in $250,000, and the company is still looking for more money. If you’re an investor with me and we turn to you and say, ‘We’d like you to invest in this company as well,’ that’s available.
The bottom line is, we’d like to invest in dozens and dozens of companies, and we’re very, very fast in deciding if we want to do it.
I think our record stands for itself in regards to getting back to people; within 24 to 48 hours after they pitch us, we tell them whether we’re in or out, and if we’re out, why, and if we’re in, these are the terms.
Sometimes people agree with our terms and sometimes they don’t, but hey, life’s too short; I don’t worry about it.
This interview originally appeared on Communitech.