Elliptic Semiconductor's Al Hawtin. (Darren Brown, OBJ)

Sometimes, things just go right for a company, as was the case with Elliptic Semiconductor. Despite being a startup in the wake of the tech bubble burst with relatively little venture capital funding, the security subsystems designer managed to find its first U.S. customer with relative ease, and it's been fairly smooth sailing from there.

So how did Elliptic do it? The OBJ talked with Al Hawtin, Elliptic's vice-president of marketing and business development, to get the inside story.

OBJ: Tell us a bit about what your company does.

HAWTIN: We're in a business called the semiconductor intellectual property (IP) business, where we design the security subsystems for other people's integrated circuits (ICs). So the big chip manufacturers like PMC Sierra, Raza, Mindspeed, these guys all make chips and they need security locks inside them to run high-speed security implementations and we do that design for them. The vast majority of our target customers are fabless semiconductor companies that do ICs that don't have their own manufacturing and, in general, they are looking to integrate other people's security subsystems.

OBJ: Why did your company decide you wanted to market to the United States?

HAWTIN: The majority of the companies we targeted as customers are residents of Silicon Valley, so really it's be successful there or fail in general. I was looking at the figures the other day, and about 68 per cent of our sales come from the United States.

It doesn't happen immediately – our first customer took us two years to develop, and that's a pretty long time, but once that began that certainly unfolded a significant business opportunity in our target market. So we're blessed to have the U.S. as our prime target market, because it is one of the easier ones to go out and get.

There was a period of time when I thought things were going to be a little more challenging; we went through a period of concern post 9-11 and the worries about terrorism. However, in face-to-face meetings with customers, the openness seemed remarkably unchanged and very pro-Canadian. They view us essentially as the 51st state; that certainly has some pluses and minuses but in terms of doing business in the U.S. it's a great place, very open, as long as you're able to make the investment and continue to do so.

OBJ: And what about other international markets?

HAWTIN: There's a big cluster of companies in Japan because there are big, well-known names that are highly vertically integrated companies that make semiconductors, folks like NEC and Fujitsu, but we knew that the challenge we have in Japan is language, of course. And although a lot of Japanese read English, there's also a bit of skepticism that they should be dealing with a smaller company, particularly a smaller startup that was relatively lightly funded. We had just come through the bubble as well, so there were some concerns about how long a small company would survive with the drought of VC that was forming, and the Japanese are more risk-averse than our American cousins.

And then you look at other pockets, and Israel has developed over the last two years, but when we began the country was pretty small in terms of VC and had a relatively small number of semiconductor players. Then you slide into Europe and you have some big incumbents, folks like STMicro, Philips, all big companies in rather isolated geographic communities that would be hard for us to get to with a limited travel budget. So when we did the analysis, looked at the map, looked at the density, looked at our budget, the equations worked out pretty well.

OBJ: What are some of the advantages of working with the American market?

HAWTIN: It represents the best export market for Canadians and probably will continue to be so. Part of it is attitude and part of it is legislative since we are two such carefully interwoven economies. It just works very effectively. Now, we may be showing a bit of bias here because our prime target market is California, and by its very nature, California has some very unique attributes. For example, there's a lot of venture capital in California and a lot of startups, so it's a bit more risk-centred, and they like working with companies that have an innovative approach to things. Increasingly, California in particular is very multicultural, so it feels very much like home in terms of their attitude, their openness, their willingness to do business with foreign companies.

Venture capital, while it has slowly been drying up here, remains quite strong in the U.S., particularly in California, so I think for any tech company, the U.S. is still the go-to market out of the gate. There really isn't a lot of choice, and in fact, if you look at the VC numbers recently, poor old Ottawa is really suffering from a drought of venture capital, and that's probably not going to change. So for Canadian tech companies the focus is definitely going to be the U.S.

OBJ: Any pointers that you can give to companies looking to do the same?

HAWTIN: Our combination that we used to be successful in developing our market was really hard work, which is cold-calling – the world's worst undertaking in terms of a sales activity – research of companies that we felt would be interested in our products, and a lot of attention to how our potential customers use the Internet.

It's kind of interesting to think about how our customers now find us. In the early days our customers found us through a series of keyword searches, primarily through Google, which led them to our website, which then had to be organized effectively in sync with their keyword searches ... it was kind of conveniently structured to how customers were thinking when they came to Google, and initially entered their keywords. So that very tight Internet coupling.

And last but not least we also did a very careful, practised e-mail campaign that every quarter or so we were touching customers with in-depth technical articles that we would e-mail them summaries of to get them started, so they'd come to our site and read the full article and get to know us.

Interestingly enough, what's happened is that as we look at the stats from Google, no longer do customers find us generally through keyword searches, although that's still part of it; more often they're finding us through searches for our name. So we've now achieved brand prominence in this area, which is really quite a remarkable achievement. n

THE EXPERTS SAY

Tech companies generally find that American customers may actually be quicker in taking up new technology and trying to gain competitive advantage with it. There are many studies that show that Canadian small and medium businesses spend only about half of what a comparable U.S. company would, on a per-employee basis, on technology. It's in part because they don't have access to the knowledge or info, the human relations or staff, and it's also because the U.S. market is so much larger – the growth possibilities for companies there are much greater, so when you invest in tech the growth you're going to get is much higher. You're going to make a bigger effort to use tech. So that's something that in a way if you're selling into the U.S. market should be viewed as an advantage, because those companies should be more aggressive in wanting to use tech to gain competitive advantage.

Bernard Courtois, president, Information Technology Association of Canada

If the company is looking to put their salespeople out in the marketplace (close to customers), the biggest issue that we tend to see is because the salespeople are remote, it creates issues regarding accountability for their performance. There can sometimes be an aversion to a consistent approach to selling or process, and it's like, "Well, we hire really experienced people, they come with a Rolodex of contacts, they know what to do, we just let them run." And then what happens is management has issues regarding the predictability of the revenue stream in their forecast, because opportunities are coming into the pipeline that aren't well enough qualified and they can't gauge which stage these deals are really at. So what companies can do instead of shooting from the hip is put the standard corporate sales process in place, where they ... create a template for their sales process which clearly defines what they need to do in order to find business, qualify it, get it closed, and purify their pipeline and drive a higher level of predictability in their business. There's this mindset that you can't get good salespeople here in Canada or Ottawa, so we need to hire U.S. people ... and quite frankly, you're going to have issues in the U.S. as well. Just because you're hiring a U.S. salesperson doesn't mean you've got a competitive advantage. You still need to do the basics to make sure you've got a common process and a common system in place in order to manage them and hold them accountable.

Terry Ledden, managing partner, Sales AboutFace and Sandler Sales Institute