Ryder Cup Financier Backs Startups to Unclog Wireless Networks

Shortly after Terry Matthews left his native Wales for Canada in 1969, he started a venture importing electric lawnmowers from the U.K. It quickly floundered, he said. The shipping company lost the delivery and the machines didn’t arrive until October.

“You can’t give lawnmowers away in October,” said Matthews, 66. “Timing in life is almost everything.”

Now Matthews, who became a billionaire from technology companies he started, sees opportunity for companies that can help wireless carriers relieve the strain on their networks from smartphones such as Apple Inc.’s iPhone. Among the 60 companies he has started or backed are a handful that make technology for wireless operators, including Dragonwave Inc. and Bridgewater Systems Corp.

“The drivers of change are mobile devices, mainly mobile phones,” said Matthews, during an interview in his modern concrete office building outside Ottawa. “The bandwidth that’s associated with that is dramatically increasing.”

Dragonwave and Bridgewater, both based in Ottawa, have surged along with the data on wireless operators’ networks. Dragonwave rose 10-fold last year, while Bridgewater more than tripled. Dragonwave supplies microwave radio products that link transmission towers to carriers’ land-line networks; Bridgewater makes software to help Verizon Wireless and other customers ease data congestion.

Several Matthews-backed startups are still private, including BenBria. This month, Mitel Networks Corp., a maker of telecom software and equipment started by Matthews, said it plans to raise as much as $211 million in an initial public offering. Matthews wouldn’t discuss the IPO, citing restrictions of the current investor roadshow.

Ryder Cup Development

Matthews’ investments have been successful enough that in 1980 he bought the former Wales maternity hospital where he was born, and has spent 100 million pounds developing the property into the Celtic Manor Resort with three golf courses. The site is scheduled to play host to golf’s Ryder Cup in October.     The courses are “full all the time,” said Matthews, who sold his Newbridge Networks Corp. to Alcatel-Lucent SA in 2000 for $7.2 billion. “I don’t play. It takes four hours.”

Matthews sees his startup investments as part of a broader revival in the Canadian technology sector. Many local companies are being founded by former employees of Nortel Networks Corp., the telecom equipment maker that filed for bankruptcy last year. Dragonwave Chief Executive Officer Peter Allen and Bernard Herscovich, CEO of local startup BelAir Networks Inc., both worked at Nortel.

Revival In Ottawa

“You take a look at Ottawa, and you’ll say Nortel’s melted down, well true,” said Matthews. “The fact of the matter is it is coming back. The activity level for new companies starting up is wild.”

Last year, 222 startups were established in the nation’s capital, according to the Ottawa Centre for Research and Innovation, while 215 firms were bought or went bust. Matthews sits on the boards of 12 companies and chairs 10 of them.

“The fact that Bridgewater and Dragonwave have succeeded reminds investors why technology investing can be a profitable enterprise,” said Mark McQueen, president of the Toronto-based venture capital firm Wellington Financial.

The skills of the region’s workforce may be well suited to helping major carriers with network congestion, Matthews said. AT&T Inc., Verizon Wireless., and other mobile-phone operators are looking for cost-effective ways to manage the surge in data traffic on their wireless networks. AT&T has said that traffic on its network has increased 50-fold in the past three years.

The new companies haven’t boosted total technology employment in the Ottawa area. The number of tech jobs slipped 1.3 percent last year to 78,067 according to the Ottawa Centre.

Investment Approach

Matthews’ investment approach is to back companies that solve real problems for customers and have attracted customers willing to pay up for products.

“It’s a fallacy to think that you take a pot, put very smart people in it, a ton of money and something’s bound to come out,” he said. “The important thing is to connect with clients.”

In his office, he pulled down an old rotary-dial converter made by one of the first companies he started in 1972 with a mere C$4,000. He sold a controlling stake in that company to British Telecom in 1985.

“I start about five new companies a year. The typical amount I start a company with is a half a million dollars,” Matthews said. “What I do is remove the speculative nature of the R&D by connecting with clients.”

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

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