Monday, 28 January 2013

Final thoughts on this small businesses matter

Some final thoughts on this whole small business / Dragonfly Affair thing ...

Some people may not have sympathy for poor Dragonfly Games. You can never rely on money or help from others, even the government, they say. You need to be independent and succeed or fail on your own merits.

I would counter by saying that you shouldn't offer assistance if you don't intend to follow through in a honest way. You shouldn't claim your program is reliable and then rescind it a year later. You shouldn't require a company to submit dishonest financial statements. You shouldn't force somebody to hire your wife.

Maybe the government shouldn't be in the business of actively helping business at all. Maybe they should just keep regulations and red tape to a minimum and get out of the way. That's a fair position to take ... I won't argue against that. However, I am personally not opposed to the government providing assistance.

I have friends who are better able to speak about these matters than I am, but that's okay ... I am going to offer up a couple of suggestions anyhow:

1) Programs should be simple and permanent. I know it's tempting to announce new programs before every election but it must be confusing and frustrating for businesses when they keep changing.

Tax credit or assistance programs should not be specific to certain niche industries, but general programs with clear guidelines that any small business can apply for. They should be managed by an independent board to keep politics out of it as much as possible. The board or a jury should select applicants based on some combination of factors such as need, probability of success, strategic industry, employment potential, etc. The program should be permanent, so that as businesses rotate through it, it will develop a track record. This will make manipulation or interference more apparent and harder to hide.

2) We need to get to the bottom of the Crocus debacle. It's still poisoning the venture capital environment. The current government's position has been to pretend it never happened and hope that people forget. They will, eventually. The noxious cloud of Crocus will slowly dissipate until one day the people investing in their RRSPs will once again be inclined to trust a Manitoba small business venture capital fund because they were too young to remember what it was all about when it happened.

But that will take too long. We need to cleanse this ASAP with a proper investigation or inquiry or something. Nobody has ever been held accountable for what happened, which means that the people who made it happen are still out there, which means that it could happen again, which means that people will not invest in venture capital to any significant degree, which is bad for small business n Manitoba.

AND maybe or maybe not ...

3) Scrap the NRC & BCC. I really don't know enough about this .. only anecdotal information suggesting that the research and incubation programs run by the National Research Council and Biomedical Commercialization Canada aren't very efficient. I'm all for research and development, but maybe there's a better way.


These are just my thoughts. I do not guarantee the quality of my thoughts. I absolve myself of any responsibility for the actions of those who read my thoughts. Reading my thoughts may cause dry mouth or liver disease.

Tuesday, 22 January 2013

The Dragonfly Affair

Meet Dragonfly Games: a small Winnipeg-based developer of educational video games for children, including children with special needs. A small but growing high-tech company with endless potential but a need for capital. Exactly the kind of company we would like to see grow and employ people here in the province.
In 2005, Dragonfly was approached by the Province of Manitoba and encouraged to apply for the MFS (Manitoba Film & Sound) Tax Credit program. The work they were doing was considered "highly desirable" by the Province and this MFS Tax Credit was promised to be a "highly reliable program" that Dragonfly could use for securing financing from other sources, and could be used to apply for matching funds under other programs.
Late that year, budgets were submitted, hands were shook, and the two parties signed a contract. Relying on this Tax Credit, as they were told they could do, Dragonfly applied to Telefilm Canada for a matching equity contribution. Final applications were made with revised budgets, as directed by government employees, and in January 2006 a Certificate of Acceptance was provided to Dragonfly by the Government.
Everything was in place. Dragonfly was going to get a $168,000 capital infusion from the Tax Credit, and they would leverage this capital and a loan guarantee from the Province to get $100,000 in bridge financing from a credit union. The production total was just over $500,000.
In June 2006, despite the Certificate of Acceptance from the Manitoba government and all their assurances, the tax credit for Dragonfly was cancelled. The government suddenly decided that the video game business did not qualify. Lee Doerksen, the owner of Dragonfly, was forced to put up his house and business assets as collateral to continue doing business and sustain the bridge financing.
With Dragonfly now in a financial bind, the government came forward again with a new program -- the 'Manitoba New Media Production Grant' -- and Dragonfly had little option but to participate. The government promoted this new program using Dragonfly as an example, even holding a press event for television from Dragonfly's offices. The government publicly announced that it would help Dragonfly and companies like it succeed.
The New Media grant was to increase with the amount of qualifying labour for the grant. With these new assurances, the funding commitment from Telefilm Canada also increased, allowing Dragonfly to manage a total production budget of $1.1 million. Of that, approximately $350,000 was to come from the government's New Media program. An increase in bridge financing of another $100,000 was also required. They were back on track now, and with a larger budget than before.
As Dragonfly was engaging in the provincial funding programs, it was approached by Biomedical Commercialization Canada (BCC), a program funded by the National Research Council (NRC), Western Economic Diversification (WED), and the provincial government, for participation in their business incubator program.
With this program, Dragonfly would pay BCC $5,500 per month for business services, and BCC would provide additional services valued at twice that amount: $11,000 per month. This was made possible because BCC receives government funding in addition to the fees paid by the client. The promised services included a full-time employee and various professional services on a part-time basis, as well as office equipment, amenities, and other resources. The total value of these services was to be $16,500 per month or $396,000 over 2 years.
As you might have guessed, BCC did not come through with the promised services.  Dragonfly complained and asked BCC to document the services provided to no avail. The BCC and NRC "threatened, harassed and intimidated Dragonfly" in an effort to deter them from further complaints. Meanwhile it was suspected that BCC was submitting invoices to its funders to recoup funding for these services that it did not provide.
Dragonfly is not alone: they became aware of other clients who had similar complaints. A company called Health Media Network Inc is already embroiled in a lawsuit with BCC. In fact, all of the companies Dragonfly spoke with were very concerned that BCC was submitting invoices to its funders including NRC, Western Economic Diversification, and the provincial government, for services that it did not provide. To date, none of these departments have contacted Dragonfly for information on the matter.
It gets worse though: in 2007 "BCC and the NRC sought to persuade and coerce Dragonfly to hire a spouse of an NRC staff member." Dragonfly refused because the person was not qualified. This resulted in additional threats by BCC to withhold services, and later that year BCC and NRC terminated the contract and expelled Dragonfly from the program.
Dragonfly paid into the program, but did not get value for that money, nor did they get the additional assistance that was promised and that Dragonfly was counting on. They were, however, subjected to treats and coercion.
As mentioned, BCC did not provide Dragonfly with the level of services as promised and expected, but some services were provided and Dragonfly required an accounting of those services for it's financial statements. Dragonfly made repeated requests to BCC for an accounting of the services provided but all such requests were denied. Instead, BCC instructed Dragonfly to account for its services as if actually rendered. They were expected to make false reports to the Manitoba Department of Science, Technology , Energy and Mines (STEM), the government branch overseeing the New Media grant, and Telefilm Canada. 
...  Coincidentally (or not) STEM's Deputy Minister John Clarkson was on the BCC board.
Dragonfly was put in a difficult position of trying to report the value of services received from BCC, such as they were, without any documentation from BCC, while refusing to illegally misstate amounts and run afoul of CRA or Telefilm Canada.
In 2007 a staff member in the provincial government "openly and falsely accused Dragonfly of misrepresenting and falsifying its budgets". Because of this alleged fraud, the government announced that it would not honour its remaining commitments under the New Media grant program. 
They didn't stop there. Government representatives went to Telefilm Canada and told them about this, and Telefilm subsequently withdrew its funding as well. Government representatives also contacted Dragonfly's credit union, preventing Dragonfly from obtaining the financing it required.
All of this transpired as the government and BCC were in the process of proposing yet another program: Centres of Excellence for Commercialization and Research -- a program with some big-name backers designed to "marshall Manitoba's research and commercialization assets to create growth". This program, like the BCC program that failed Dragonfly Games, would also require investment by the client firms, but to an even greater degree, and it would require the client firms to fork over intellectual property rights.
Dragonfly eventually coaxed Telefilm Canada back to the table, and with a lot of unpaid labour, they were able to complete a scaled-back version of their project. However, for Dragonfly, the consequences of this government "assistance" were harsh. According to their statement of claim, "Dragonfly has been rendered and remains insolvent and unable to conduct business", the company's credibility has been tarnished, key employees have abandoned the company, creditors have gone after Doerksen's house and business assets to settle claims, and as a result Doerksen himself has experienced "extreme financial hardship".
All of this flowed from an attempt from a small, high-tech company to seek assistance to grow its business. It accepted assistance from a supposedly reliable government program and high-profile business incubator, and ended up in ruins.
Unfortunately many small businesses may be in the same position today, with little choice but to seek help from these same organizations, because there are few other sources of capital in Manitoba.
Disclaimer: most of the information above was taken from Dragonfly's statement of claim against the government and BCC, and from correspondence with the owner. As with every lawsuit, there are two sides to the story. This post portrays one of those. That said, I have no reason to doubt the accuracy of any of the information stated above.

Monday, 21 January 2013

It's tough to be a small business in Manitoba

Let's suppose I had a small business in Manitoba. Let's call it Anybody Want A Gizmo? Let's suppose that I wanted to expand my gizmo business to include doohickeys but required additional funding to take that next step, and suppose as well that I was turned down for a spot on Dragon's Den. Who can I turn to?

Manitoba can be a tough place for an entrepreneur to do business. We hear a lot of talk about how innovation is important, and how growing small business is critical to Manitoba's economic future, but there aren't many stable sources of support and funding for budding businesses. "There are few places to turn for growth capital in Manitoba" Martin Cash, the Winnipeg Free Press business journalist, tells us.

Venture capital funds are a great source of financing for promising young businesses, and they are a great source of tax breaks for investors, but they are almost non-existent in Manitoba. There are a couple of small funds (GrowthWorks, Golden Opportunities -- which sounds more like a retirement retreat than a venture capital fund) but the Crocus calamity has forever tarnished venture capital in the minds of many Manitobans.

Crocus was by far the largest and highest profile fund if its type in Manitoba, such that it became synonymous with venture capital investing in this province. But even as the Crocus fund was incurring massive losses, it was being pumped by the Provincial Government as a great place for people to put their hard-earned cash. The end result of course was that the fund crashed and people lost money. If individual investors can't trust a government created and promoted venture capital fund, it's little wonder that there isn't much venture capital for small businesses around here.

With the lack of available venture capital, a business may need to turn to a hodge-podge of ever-changing government programs if they don't have the private connections to raise money. It seems that every two years the programs change ... probably so that every two years the government can send out another press release to announce another new program to help small business. Though the names of the programs may change, the entities that offer them generally do not.

One of the current programs, announced in 2011, is the Commercialization Support for Business Program, created by the Manitoba provincial government from a recommendation of the Manitoba Innovation Council which was appointed in 2009 by the Premier. There is also BCC (Biomedical Commercialization Canada) which is funded largely by the National Research Council and the Province of Manitoba. BCC affiliated programs with names like "Manitoba Knights" ostensibly help foster small businesses -- for a fee and a chunk of their equity.

Now another program is being pitched to supply start-up capital to entrepreneurs, as long as they "manage their progress through government-licensed incubators, such as ... Biomedical Commercialization Canada."

All of this is fine if it works and actually helps small businesses innovate and succeed commercially. I am sure sometimes it does, but as it turns out sometimes it doesn't. Sometimes things go terribly wrong. Let me tell you a story about one small local hi-tech business that not only didn't get the help it was expecting, but was driven into insolvency as a result of breaches of contract and extortion by the BCC and provincial government programs.

So grab yourself a cocoa and come back shortly for The Dragonfly Affair.


I recently painted a dragonfly ... I will share with you ...

Monday, 7 January 2013

Report on speed limits -- will they listen?

Well this was a nice surprise:

A new city report, released this morning, recommends Winnipeg not lower the residential speed limit to 40 km/h. The report said many studies conducted throughout North America have shown that driver speed is affected by the context of the road and not by speed limit signs.
When I wrote about the half-baked proposal at City Council to reduce speed limits (Speed limit proposal based on bad statistics) I had assumed it was a lost cause. Useless words floating off into space. We've seen time after time, like with the hand-held cell phone ban, how legislative bodies completely ignore facts and write their laws based optics or misguided impressions.

Oh I know my blog still won't make a difference, but there is a wee small chance that this new report will, given that, among other things, the report is not authored by a anonymous blogger.

More importantly, the report compiles data from a number of studies in other cities to draw it's conclusions, including the Edmonton study that was grievously misused to promote Harvey Smith's misguided proposal to lower speed limits.

I ended my other blog post by saying:

"What we need in this city is a common-sense approach to setting speed limits. Set speed limits at levels that reasonable according to industry standards and adjust as necessary for special cases like school zones. Let's not create misguided legislation based on inconclusive data and misinterpreted studies."

Perhaps with this new evidence that artificially slow speed limits don't work, our councilors will take heed and rethink their proposal, though that it still doubtful. Some people are simply immune to facts. I had a 15 or 20 minute conversation with Harvey Smith about this in September, and there is no budging him.

Good intentions should not trump good sense.

Thursday, 3 January 2013

Unibroue and the MLCC

Everybody knows that the Manitoba Liquor Control Commission (the "LC") is a communist instrument to control our drinking behavior and limit our quality of life so that, like a bunch of deprived North Koreans, we plunge into a depressed malaise that prevents us from caring about life enough to bother rebelling against the government that is suppressing us in the first place. It's kind of like Stockholm Syndrome, except with beer instead of chains.

That said, Liquor Marts are generally well located across the city, and I have no complaints about the selection of wine and hard liquor. There are also independent wine stores that you can shop at, although they too operate within the firm embrace of the ever-caring and wise LC.

Beer, however is a problem. The LCs have a limited selection, and precious little refrigerated beer. Hotel beer vendors, of which there are none in my neighbourhood, have more cold beer but an even worse selection, and under archaic laws are required to operate in association with a hotel .. which is why there are none in my neighbourhood. For the life of me, I cannot imagine why independent beer boutiques should not be allowed to operate in Manitoba.

I went to a Festivus party recently, and brought with me a 750 ml bottle of Unibroue Éphémère. During the traditional Festivus Airing of Grievances, I expressed the following peeve of mine: that Unibroue beers are only available in Manitoba in these large 750 ml bottles. Unibroue makes some of the best and tastiest beer in Canada, but I'm deterred from buying it because each bottle of beer is a commitment.

You see, sometimes 750 ml is more beer than I feel like drinking in a given evening. Now according to the host of that Festivus party, you can cover or recork the bottles and keep them in the fridge for up to 3 days. That may be, but to me keeping an open beer in the fridge overnight is just wrong and immoral. A beer can never be at it's best if it's been open for a day or three.

Sometimes 750 ml is also more than I should drink in an evening. Many of the Unibroue creations have higher than average alcohol content. For example, Trois Pistoles, La Fin Du Monde, and Don de Dieu all have 9% alcohol. That makes 1 (one) bottle of any of those beers the equivalent of drinking 4 (four) 341 ml bottles of any average beer.

To make matters worse, the big bottles are plugged with a cork that's a bitch to get out unless you have a pair of Vise Grips handy.

All of these beer do come in regular 341 ml bottles. I know because I saw it with my very own eyes last time I was in Montreal. I bought a six pack for my hotel room. Can we get these here in Winnipeg? No.

Today MLCC tweeted (yes, they're on Twitter, aren't you?) that they were bringing in Collection Packs from Unibroue.

The Collection Pack is a variety pack containing a couple bottles of different brews (Trois Pistoles, La Fin du Monde, Maudite and La Fringante, according to Cody). This is fine and everything, but the point of a taster pack is to allow somebody to try different beers and find one or two that they like more than others. Once they find that flavour that they enjoy, they're forced to buy the becorked 750 ml bottles if they want to continue drinking it.

Apparently we used to have Unibroue 6-packs here but the distributor stopped bringing them in. This just raises the question about why our beer selections are being limited by a single distributor. How can our beer selection be at the whim of a faceless corporation? Why can't MLCC allow individual beer stores to import their own selection? Why do we even need the MLCC?

One of the quirky search terms that I found when doing my 2012 wrap-up post was "we want beer protest". I think this person may have been on to something. People, it's time for us to rise up and demand more! More choice. More freedom. More beer!

Wednesday, 2 January 2013

2012 at the Peanut

Continuing the tradition, here's a wrap-up of the year for ...

To summarize: productivity has fallen. I had 20 fewer blog posts in 2012 versus 2011. However, with the new management philosophy here at the Peanut we do more with less, and in spite of the drop in posts we had a 25% increase in traffic. As a result of meeting our targets for the year I have awarded myself a massive bonus, and the rest of the staff was given 256kb USB 1.0 flash drives for their efforts.

In media-related things, I went on CBC Radio in March to talk about golf courses.

I had some more blog posts printed in the Winnipeg Free Press: Donor fatigue, Water Park, Building trends, Dogs and suburbanites, System-bred criminals, and Mayoral pay. This past Sunday they also printed my post on #IdleNoMore in the dead-tree paper, but they did not put it on the internet. I suspect this is either because I posted a rant about fluff Free Press coverage the prior day, or because I called Terry Nelson a "grand standing buffoon" in the post. In hind sight that was probably unnecessary as I haven't heard a peep from him regarding Idle No More. (update: I've been told that it was only an oversight that it wasn't posted on the Freep web site.)

I was invited to a media night at IKEA prior to the official opening and got a glimpse of what it's like to be a journalist, with free-flowing champagne, smoked salmon on biscuits, special discounts and awesome gift-bags of swag!

And of course I was on Winnipeg Internet Pundits, this year more as a regular guest, taking to the airwaves approximately every four weeks.

New Winnipeg-ish blogs

The Power Of Words is written by former Winnipeg Police Sergeant James Jewell. James has written some outstanding posts with insight into the crime and the police service. Highly recommend you check this blog regularly.

Fellow pundit Greg Gallinger has an eclectic little blog greg.g. Some posts are little more than photographs, while others are more extensive, like his post on leaving downtown. Due to the minimalist nature of the blog I can't even tell if it's new this year, but it's new to me, so .... 

Everybody knows Bryan Scott's photo-blog Winnipeg Love Hate, but Bryan also started a tumblr page this year cleverly called "Bryan Scott" that features fantastic photos of many other places in addition to Winnipeg.

With something like 68 posts in less than 3 months, and often lengthy ones at that, it's hard to keep up with WpgNewsReview. Arthur Mira does a lot of digging through 311 stats and other publicly available documents and provides some interesting insight in many of the posts. In others he may say things that you disagree with, like that thing about Theo Fluery which I won't mention again, but the blog is what it is. He doesn't try to be politically correct.

Twitter personality Stefanie Cutrona writes at stefspeaks. This blog is not affiliated by the Mafia.

Former Winnipeg Free Press journalist and newly minted Macleans magazine contributor Lindsey Wiebe started a tumblr page, which is primarily a photo-blog. We here at the Peanut wish Lindsey well in her new job in The Centre Of The Universe.

I'm sure there are more, but it didn't seem to be as active a year in the bloggosphere. If you know of any good new blogs by all means let me know.

Also, I should mention the Spectator Tribune -- a new Winnipeg-centric web publication, featuring former Free Press and Uptown writers, among others. Perhaps a glimpse at the future of journalism as mainstream papers slash their original content.

Top posts from the Peanut

Our most popular posts this year were*:

CMHR Part 1: Project Management

Waterpark: 7 reasons to say "no"

Put a steak in the Kane rumours

Firehall land swap absurdity

Moving the CP rail yards

*My Blogger stats conflict with my Google Analytics stats. As both are Google products this confuses me slightly. I don't trust either, but I went with the latter for this list.

Those were most popular in terms of hits. In our opinion, our best posts of the year were:

The Winnipeg golf course series:
Action Items Part I
Action Items Part II
Wrap Up

Confusion Corner redesigned and unconfused

... and of course ...

The Adventures of Johnny Oduya!

Top search terms

directions to vimy ridge
ray rybachuk - Boy, this guy has really pissed some people off ... like whoever created this blog. 
evander kane rumours
sam owns an acre of land on red river. the government dams the river. a lake forms behind the dam, covering sam's land. does the government owe sam anything? - I'm serious. This is a question on some stupid LSAT or FSAT or something, and every time I put this on my year-in-review post I move up the Google hit list. I now populate 3 of the top 15 Google hits for this question! How do I make it stop???? Next year, no matter what, I am NOT putting this in my year-end post.
cool helicopters - who doesn't love cool helicopters??

Quirky search terms

are you a peanut blog - Well yes and no. See, it's not about peanuts per se, but ... ah forget it...
boobs touch - Tell me more ...
do people who wear keeping it riel shirts know who he is - Good question. I ask the same thing about those Che Guevara shirts ..
draw a peanut fast - OK -------------------- >
fuck you montreal police - Ya, fuck you!
how about our crooked mayor in winnipeg???????? - Winnipeg small talk: "So ... how 'bout our crooked mayor?"
hugh mcfayden who is he and why pee in mouth - Only Hugh can answer that question.
leah hextall feet - ummm ...okay.
manitoba hydro good place for a terrorist attack - Hello, CSIS?
maths blog still model maths park model - .... what?
me to you bears - I don't even know where to go with this one.
rod black ruins figure skating - Rod Black ruins everything.
sin like a mother fucker in edc - Where is this edc place, and how do I get there?
the used condoms - New indy group?
what a fuckup - I'm a little bit insulted that this search found my blog.
we want beer protest - #EmptyNoMore
what does a yellow yield sign mean - I'm beginning to understand why drivers are so bad.
who are the hookers in edmonton what do they look like and what are their street names - It's good to do your research before you travel somewhere.

Have a great year everybody!

See also:
Slurpees and Murder - an A-Z poem.

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