BUSINESS

Canada— who needs it?

Ross Laver January 11 1999
BUSINESS

Canada— who needs it?

Ross Laver January 11 1999

Canada— who needs it?

BUSINESS

Ross Laver

She’s been hailed as one of Canada’s top young entrepreneurs and the brains behind one of the country’s fastest-growing software and entertainment companies. So what is Isabel Hoffmann, the energetic 39-year-old founder of Toronto-based I. Hoffmann & Associates Inc. (H+a), planning to do for an encore?

Oddly enough, she’s thinking of moving to the States.

To New York City, in fact, where, as Hoffmann sees it, the banks are less fearful of lending to young companies, the people are less culturally insecure and the politicians don’t act like they have a God-given right to meddle in the private sector.

Oh, and one more thing. “The shopping is better there, too.”

Hoffmann is half joking about the shopping, but she’s serious about wanting to pull up stakes.

Canada, she says, throws too many obstacles into the paths of entrepreneurs. Despite all the talk about the so-called brain drain and the need to nurture homegrown innovation, she believes Canadians as a group are too complacent and risk-averse to succeed globally.

“I have a theory that Canadians have been raised to conform,” says Hoffmann, who grew up in Switzerland and Portugal. “When you have conformism, you don’t have creativity. Canadians always see themselves as second class.”

If that’s true, Hoffmann undoubtedly belongs elsewhere. In six years, she’s taken her firm from a standing start to more than $5 million in revenues, largely on the strength of a popular series of children’s CDROMs. The walls of her office—in a converted downtown Victorian mansion—are lined with awards and accolades, including a spot on Maclean’s annual Honour Roll in 1995, a 1996 Entrepreneur of the Year trophy, recognition by The Financial Post in 1997 as one of Canada’s top 40 young CEOs, and a 1998 world medal for interactive me-

dia at the New York Festivals Competition.

Having come this far, Hoffmann is itching to break into the big leagues with a proposed initial public offering next fall. A key part of her strategy is to ally her 50employee firm with multimedia and entertainment giants—companies that can give her access to a worldwide audience. Last summer, H+a struck a deal with CBS to develop and manage CBS KidShow Online, a Web site tied to the network’s lineup of Saturday morning cartoons. Soon after,

Netscape Communications Corp. chose H+a to be a content provider for its new children’s Web service, KidZone.

At the annual Digital Hollywood conference in Las Vegas, Nev., this week, Hoffmann plans to unveil yet another partnership: an agreement with Montreal-based Cinar Corp. to develop an animated TV series based on her company’s best-known digital characters, a boy named Nikolai (named after Hoffmann’s nine-year-old son) and his mischievous cat Neow-Neow. There are also plans to spin off Nikolai and Neow-Neow into a collection of children’s books. The deal would be something of a watershed—the first time in Canada that characters conceived on CD-ROM have made the leap to the printed page, rather than vice versa.

With so much going her way, you’d think Hoffmann would be in high spirits. Yet she can barely contain her frustration with the bankers and government officials who, she

insists, have stunted H+a’s growth and forced her to consider relocating. “The Royal Bank has been my bank since I came to this country in 1976, but they’ve been doing everything possible to get rid of me,” Hoffmann says. Eighteen months ago, she crossed swords with the bank over her refusal to pay an $8,000 legal bill arising from an application for a line of credit. Since then, she says, the Royal has declined her requests for additional financing. At one point, the Bank of Montreal seemed poised to approve a line of credit tied to the firm’s receivables, but Hoffmann claims the bank changed its mind after announcing plans to merge with the Royal. Hoffmann, for one, thinks Finance Minister Paul Martin was right to kill the bank mega-mergers.

“The Canadian banks don’t like us,” she admits. “I’m very glad they’ve been forbidden to merge, because as it is we have absolutely no choice. The banks look at us and say, ‘Oh, Internet company—risky, very speculative.’ ” Three Canadian venture-capital lenders also gave her the cold shoulder, so a year ago Hoffmann struck a financing deal with Mitsubishi International Corp., the New York arm of one of Japan’s mightiest conglomerates. She’s now negotiating a further cash infusion from a U.S.-based venture-capital firm. “Our experience in the United States is nothing compared to the nonsense we were listening to in Canada.”

As for the government —well, don’t get Hoffmann started. She complains that Ottawa has been slow to pony up $368,000 worth of investment tax credits earned in 1996 and 1997, that H+a has been unfairly denied government contracts, and that the rules surrounding federal and provincial grants for new media are stacked against her because they favour tiny start-ups and companies that produce Canadian content. “This is ridiculous to me because the content we’re creating is exportable around the world. It’s precisely what they should be supporting. But no— they’ll only support it if it’s relevant to some little group up north in Yellowknife.”

So what? So Hoffmann is now weighing an offer of office space in Mitsubishi’s U.S. headquarters on Madison Avenue. “It’s a little dangerous for me to talk about this because some of my employees may not like it, but I’m serious,” she says. “It’s got to the point where I don’t see any advantage to staying in Canada.” Perhaps not, but Canada’s nascent multimedia industry can scarcely afford to lose one of its brightest stars. The question is, does anybody care?