in Canada

Does RIM Matter to Startups?

If you haven’t heard by now, RIM is having a horrible year. Their earnings meeting yesterday was chock full of bad news:

Q1 revenue: $4.9 billion vs. $5.15 billion consensus
Q1 EPS: $1.33 vs. $1.32 consensus
Q1 shipments: 13.2 million vs. 13.5 million units expected
Q2 revenue: $4.2-$4.8 billion vs. $5.46 billion consensus
Q2 EPS: $0.75-$1.05 vs. $1.40 consensus
Q2 shipments: None given vs. 13.5-14 million units expectation

One caption I read put it best – RIIMMMMMBEEEERRRRRRR.

Out of the downfall the Globe and Mail was hypothesizing that the fall of RIM was catastrophic for Canada’s tech eco-system. The article was a bit light on fact as to why it would rip apart the Canadian eco-system, and my initial gut reaction was “RIM has almost no impact on any of the startups I know.” But then I decided to go and look at the facts.

Since roughly 2008 RIM has bought the following Canadian startups:

So they’ve probably flushed about $60mm-$80mm into the Toronto ecosystem over 3 years in exits. On top of that they have the BlackBerry Partners Fund (with about $150mm in cash) which has invested in several Canadian startups. Lets also not forget that the eco-system around their partners. BlackBerry’s platform has created opportunity for mobile dev shop’s like Fivemobile and Xtremelabs to exist. But it feels like those guys do most of their business in iPhone and Android.

So between exits and investment via BB partner funds they have probably kicked in about $100mm to the Canadian startup eco-system over the past 2-3 years. Which is not something to sneeze at. Having said that, Google (not HQ’d in Canada) has kicked in probably close to $100mm in the past 12 months… just in exits. So maybe its also not something to brag about either.

Putting these numbers together, makes me feel more ambivalent about RIM’s impact on the tech eco-system in Canada. Lets be clear, we’re talking about a decline in the short to medium term, not a total shutdown. In that decline I expect RIM to take an even lesser role in the eco-system than before. And I’m not sure it matters.

(Small end note as a UW alumnus. I’m not sure RIM’s downfall will have that big an impact on the school either. Big companies like Microsoft, Google, Facebook are still going to fight over UW’s top talent – their won’t a shortage of jobs for UW’s engineering community anytime soon. Maybe Laurier’s business & marketing grads… oh low blow).

  • http://thinkinginteractive.com Andrew Lockhart

    I might argue that RIM’s decline will be good for the Canadian startup scene as it will release a lot of technical talent into the market. Also, I’d be surprised if the forthcoming severance packages don’t end up providing some runway for a number of new startups to emerge.

  • Dan Morel

    I almost wrote that point!  It could unleash a wall of entrepreneurs.  Creative destruction.

  • http://twitter.com/karam_n Karamdeep Nijjar

    I think the bigger impact will be on the younger engineers who have spent some time at RIM and then moved on to start their own companies. If those same engineers are working at Microsoft, Google or Facebook, then the odds of them moving back to Canada to start a company are a lot lower than if they were already here.

    On a more sentimental level – seeing the RIM buildings across from campus was always pretty inspirational to us while I was at Waterloo. It put the city and the school on the map (so to speak), and gave us an impetus to dream a little bigger than perhaps we would have otherwise. Mike Lazaridis actually handed me my degree, and took the time to chat with each and everyone of us. It’s a little discouraging to see the press beat up on him like they are, hopefully they can bounce back. Let’s not forget what Apple looked like 10 years ago…

  • Bsugar

    Yes, the earnings call yesterday was full of bad news.  However, let’s not forget that RIM still has an audience of more than 50 million BlackBerry subscribers.  This is a captive audience hungry for increased functionality on their smartphones.  Along with the newly released BBM Social Platform this represents a significant opportunity for startups.
    While we’ve seen impressive growth from other platforms, BlackBerry certainly hold a lot of promise for entrepreneurs looking to gain insights into the mobile marketplace.  My hope is that those leaving RIM will view their talent, experience and connections within the company as the assets that they are and take advantage of this opportunity.

  • http://tophatmonocle.com Mike Silagadze

    My prediction is that they are going to go the way of IBM and become a consulting company. They will focus on enterprise communications solutions, and eventually drop custom hardware development altogether. 

  • Dan Morel

    @twitter-88619820:disqus I really fought with sentimentality in this article.  I used to work for a carrier (Digicel) where I led the deal with BlackBerry and then launched BlackBerry in 18 countries in the Caribbean.  I like a lot of people at RIM at the most senior levels down to the operational levels.  They are (were?) motivated, smart people who were keen on delivering.  I wish Canadians would rally behind them more broadly.  Having said that, I still don’t think RIM helps or hurts the tech startup ecosystem much, they just kind of don’t matter, which is possibly a bad indicator for their future.

  • John Arnott.

    I find it interesting that the press is so pessimistic about RIM; just remember how long it took Nortel to unravel (still is.)
    And as Karamdeep says, remember what Apple looked like ten years ago!
    I was at a medical devices conference recently and one very intelligent speaker hinted that we should see a major play from RIM in the medical space in 4-6 months. That seems to me to be a fairly reasonable timeframe for a major strategic play that greedy shareholders and journalists would do well to remember. 
    But the big question really is ‘what else have they got coming’?

    John Arnott.

  • http://threadyblock.blogspot.com/ Jason Dea

    I think the best and brightest talent at RIM today will go on to start another pool of great Canadian start-ups, much like what happened post-Nortel.  That being said, there is something to be said about having a global success in our backyard for other Canadian entrepreneurs to look up to and aspire to be.  I for one hope the management at RIM sees this as an opportunity for re-birth.

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  • Chris

    the startup ecosystem in canada doesn’t hold a candle to the US – we succeed despite ourselves.  Look at the disaster that is the SRED program…and the VC in-breeding.  

    At least we have some incubators popping up.

  • Chris

    Why would you rally behind RIM?  
    They froze every dev out there the second they said “We’ll be all QNX…starting in over a year.”  
    Compare the torch to an iPhone, Galaxy, or even Desire.  It’s not even in the same league.
    Only BBM in consumer world is keeping them around.
    Business execs are pushing hard to get off BB.
    Playbook is peppered with bugs, and asks users about things like “bridges.”  Does the job….but it’s not nearly as fun or enjoyable to use as an iPad.

    Overall, RIM is moving too slow.  Seems like they get stuck in the land of in-decision.

  • Chris

    “Along with the newly released BBM Social Platform this represents a significant opportunity for startups.”

    I Lol’d.

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  • http://thinkinginteractive.com Andrew Lockhart

    Nice article here on NextWeb documenting how Nokia’s demise has spurred on the startup scene in Helsinki:

    http://feedproxy.google.com/~r/TheNextWeb/~3/sBYxcHYQqoI/

  • modding_canuck

    Laurier’s Business program has a very high post-grad employment rate… with grads going to many other organizations such as P&G, McKinsey, big 4 accounting firms, BCG, other CPGs, etc.  RIM isn’t a large employer of business students in general.  Obviously, I am one. :)

    You’re missing a few other startups, including Torch mobile.

    We’re talking about a company that is NO WHERE CLOSE to losing money, has only lost its foothold in the US, is growing globally, and is in a transition period because of its complete rejigging (better late than never) of their HW and SW platforms.  It’s tough, but man, a couple bad quarters ( 100s of millions of dollars in the black), and we’re calling for the heads of the CEOs to be delivered on a platter, planning the exit plans, and minimizing their impact to Canadian technology.  Lets not forget the 100s of millions the CEOs/employees themselves have donated to the different institutions in the region.

    The company needs to let the dead weight go, and this is a great time to do it… while it’s still pumping out boats of money.

    Overall, your articles are meh, under-researched, full of hype, and grammar issues (really, you can’t distinguish their vs there yet?).