How They Started Read online

  Now 51, Mike is still heavily involved in one of the most successful and pioneering technology businesses in the world. It wasn’t until the first weeks of 2012 that Mike handed over day-to-day operations to RIM Chief Operating Officer Thorsten Heins, and he has stayed on as vice chair of the board, and chair of the board’s new Innovation Committee. He is as determined as ever to maintain RIM’s position as a technology pioneer.

  The early days

  There were signs of Mike’s inventive talents long before the world started to hear about them. The man who helped develop the world’s first reliable portable email device made a record player out of Lego blocks at the tender age of four. When he was 12, his fascination with engineering and with the way things work became clear when he was awarded a prize at his local public library in Windsor, Ontario, for reading every science book on its shelves.

  Perhaps unsurprisingly, Mike’s peers remember that even as a teenager he had a seemingly endless bank of new ideas and inventions. In 1984, while studying electrical engineering at the University of Waterloo in Ontario, he set up a company with childhood friend Doug Fregin to develop some of his ideas. This company was backed by Mike’s parents and a New Ventures Loan from the government of Ontario. RIM was born.

  Founded as an electronics and computer science business, RIM caught a lot of people’s attention, and Mike, certain of its potential and desperate to devote all his time and energy to it, dropped out of college just a month before graduating to work on the business full-time. It was around this time that RIM won a major $600,000 contract with General Motors, one of the largest car companies in the world, to create an electronic display system. The creation of user-friendly electronic displays has since proved to be a particular strength for Mike, as evidenced in the BlackBerry.

  After his first big project with General Motors, a series of successive contracts generated revenue for RIM, and by the late 1980s sales hit $1 million, with the company having grown to employ 12 people. In 1987, a contract with Rogers Cantel Mobile Communications Inc., a mobile phone and pager operator, marked the beginning of the company’s journey into wireless communications. RIM was the first wireless data technology developer in North America. Tasked with researching digital wireless devices, RIM developed a wireless radio modem. It was later used in products such as computers and vending machines, and for business communications such as credit card transactions.

  Funding growth

  Throughout the 1990s, RIM focused its energy on the challenge of making mobile wireless emailing a reality. The company began working with Ericsson to enable its wireless data network to support two-way paging and wireless email, as part of a three-way partnership with Anterior Technology. In 1992, Mike hired James Balsillie to develop and run the business, freeing him up to focus on what he does best: engineering. Harvard MBA graduate Balsillie soon became RIM’s chairman and co-chief executive.

  Balsillie invested CA$250,000 into the business himself and later helped secure CA$2 million from COM DEV, a technology firm in Waterloo, Ontario. The company also received CA$100,000 from the University of Waterloo’s Industrial Research Assistance Program in 1994. Further research and development was funded by venture capitalists who invested in the company in 1995. In the first round of venture capital funding, Working Ventures Canadian Fund made a CA$5 million investment, which was used to complete the development of RIM’s wireless hardware and software. During this time, RIM also received substantial investment in the form of loans and grants from the Canadian Government.

  RIM was the first wireless data technology developer in North America.

  In 1996, RIM developed a plug-in card for computer-enabled wireless email. By the following year, the company had created a relatively small handheld device that for the first time enabled two-way messaging via a pager (using BellSouth’s wireless data network). Named the Inter@ctive pager, it was soon snapped up by companies including IBM and Panasonic, which distributed the devices to their field staff.

  Realizing the potential of their wireless email technology, and knowing just how much money it would take to pursue these opportunities, Balsillie and Mike knew they needed a substantial amount of extra capital. So RIM decided to go public. The company raised CA$115 million when it listed on the Toronto Stock Exchange in 1997, a further $250 million when it floated on NASDAQ in 1999, and yet another $900 million from a share issue in November 2000.

  The birth of a phenomenon

  The first BlackBerry was launched in 1999. This device made it possible for users to access their corporate email accounts (from a Microsoft exchange server) while on the move. Its “always-on” technology was an instant hit with customers, who were alerted when they received a new email and didn’t have to go in and retrieve it. It cost $399, with a monthly subscription charge of $39.99. By 2000, the BlackBerry was named Product of the Year by the online magazine InfoWorld.

  An early model: the Blackberry 6210.

  The brand was soon a commercial triumph. In 1999, sales of the BlackBerry more than doubled RIM’s revenue to $47.5 million, while profits rose to $6.8 million. Central to BlackBerry’s success were RIM’s partnerships with the big ISPs, telecommunications companies and, later, the mobile phone networks, to allow those companies to offer BlackBerry devices and fee plans. By the end of 1999, several major ISPs, including RCN Corporation and GoAmerica Communications corp in the US, had signed up to offer BlackBerry’s services to their customers. Overseas, Telcel Cellular was offering two-way messaging through RIM’s interactive pager across Latin America.

  Its “always-on” technology was an instant hit with customers, who were alerted when they received a new email and didn’t have to go in and retrieve it.

  RIM also negotiated distribution agreements with huge computer companies such as Dell and Compaq, whereby the computer companies’ sales staff would sell the BlackBerry to their large corporate clients. In addition to increasing sales and profits quickly, this helped raise BlackBerry’s profile. As early as the first year after its release, the devices started to crop up in business meetings, especially among investment bankers and venture capitalists, who thrive on being as up-to-date as possible.

  As a result, sales of BlackBerry devices took off in the US corporate market. In 2000, the Canadian telecommunications company Nortel invested $25 million in RIM as part of a joint marketing and product development agreement with a view to extending BlackBerry’s global reach. By the end of the year, revenue had grown to $85 million, with net income of $10.2 million.

  RIM was far from alone in its development of devices to access email remotely. By the late 1990s, email had become so central to most people’s work in the developed world that remote access to email was clearly going to be an enormous market. The first company to crack it would surely make billions in profit. Unsurprisingly, there was lots of competition, including Microsoft and Palm Inc. The latter had done well with its personal digital assistant (PDA) that featured a pen rather than a keyboard. BlackBerry took off because it came up with a way for people to access their email easily and quickly on a small device. Operating systems such as Windows work very well but are very large, which makes them relatively slow on small computers. RIM’s genius was to work well with Windows but use its own operating system, one that could be optimized for small devices and work much faster than Microsoft’s equivalent.

  In addition to this, BlackBerry did two other things that were unconventional yet worked brilliantly. The first was to offer a QWERTY keyboard that was large enough to be easy to use. The second was to use a “flywheel” to move between emails and around the screen. This worked extremely fast, and people learned how to use it in literally a few seconds. Within minutes of having their BlackBerrys set up, people were comfortable using them, unlike most other competitive devices trying to do the same thing.

  Expanding overseas

  By 2001 the BlackBerry, which now had its signature thumb-controlled keyboard, was beginning to make an impression on the
European market. Agreements with telecommunications companies such as BT Cellnet, Digifone and Telfort Mobiel meant BlackBerry devices became available in the UK, Ireland and the Netherlands, respectively. Meanwhile, expansion in the home market continued at a fast pace, helped along by more distribution agreements with the likes of IBM. By the end of 2001, more than 12,000 organizations in North America were using BlackBerrys.

  Within minutes of having their BlackBerrys set up, people were comfortable using them, unlike most other competitive devices trying to do the same thing.

  RIM’s head office in Waterloo, Ontario, Canada.

  By this point, RIM had sold over 200,000 devices and had forged a partnership with AOL to provide its email service through RIM’s handheld devices. While Palm’s range of PDAs were the biggest sellers in the overall market, the BlackBerry was fast becoming the device of choice for business people who needed fast and reliable access to their corporate emails.

  The early years of the new century brought stiff competition, not least the introduction of Nokia’s SMS service. To remain competitive, RIM in 2002 began enabling third-party developers and manufacturers to enhance their products and services with wireless communications. It also began licensing its keyboard technology (which was uniquely controlled by a user’s thumb) to its rivals Palm and Handspring.

  A decision to partner with Hutchison—one of Australia’s biggest media technology companies, which operates the mobile phone brand 3G—signaled the arrival of the BlackBerry “down under.” Hutchison Telecoms offers an industry-leading international roaming service that operates in over 149 countries. In 2001, Hutchison was beginning to expand outside its native Australia and promoted the BlackBerry device heavily throughout Asia and the Antipodes.

  BlackBerry’s launch in the European markets was helped by its development in 2002 of the 5810 model that incorporated mobile phone functions. In the UK, this led to a huge deal with the cellphone network provider Vodafone, and a similar agreement followed with Deutsche Telekom in Germany. Over the following months, BlackBerry was launched in France, Italy, Spain and Switzerland. However, by 2002, RIM had net losses amounting to $28.3 million as a result of the mounting costs of product development and international expansion. The company therefore made the decision to cut 10 percent of its staff.

  By 2004, the company was back on course, and there were now 1.7 million BlackBerry subscribers worldwide. With 82 percent of these still based in North America, the company took steps to ramp up its international expansion plans. Europe was a particular focus, and in 2004 RIM had secured deals with most of the major European networks, including Orange and BT, which doubled sales in this region. Key to this success was the fact that BlackBerry sales staff were giving free trials to companies that wanted to give the devices to their workers. Around 90 percent of these companies ended up as paying customers.

  Also in 2004, RIM released a new version of its email server to support Chinese and Arabic alphabets. In 2005, Hutchison’s Hong Kong branch partnered with language support company Onset to introduce Japanese and Korean language support functions for BlackBerry users in Hong Kong and Macao. This partnership ensured BlackBerry could make significant headway in Japan and Korea.

  Cracking the mass market

  Throughout its history, RIM has continually raised its game when it comes to product development and has remained a true pioneer in the design, manufacture and marketing of mobile communications tools, winning numerous awards for product innovation.

  While the BlackBerry was an instant hit with executives and fast-paced business people, the company has now adapted the model, with video cameras and music players, to draw in more retail customers. The BlackBerry Pearl 8100 was introduced in 2006, and helped BlackBerry shed its heavily corporate image. It’s now quite common to see people on trains and planes playing games on BlackBerrys.

  RIM has worked hard to make its email portals as secure as possible. Since becoming the first product to offer dependable mobile email in 1997, the brand has become synonymous with data security and is used by many customers who are sending sensitive, “for your eyes only” material, be they celebrity A-listers or government officials. The company has also faced several legal battles to protect its multiple-award-winning patented technology from being used by competitors (serial inventor Mike holds more than 30 patents).

  BlackBerrys are now used all over the world, and the company has offices in North America, Europe and Asia Pacific. The devices, which run on nearly every network, have become so successful that many users (typically senior executives of large companies and business owners) now wonder how they ever lived without them. Unofficially dubbed the “Crackberry,” the BlackBerry is known for being addictive. With the option to receive an alert whenever a new email arrives, many business people are unable to resist the temptation to check out the latest addition to their inbox, no matter where they are or what the time is.

  The brand has become synonymous with data security and is used by many customers who are sending sensitive, for your eyes only material.

  In 2007, RIM was named one of Canada’s Top 100 Employers, as published in Maclean’s, Canada’s leading business magazine. What’s more, it was the only wireless technology company on the list. Meanwhile, the BlackBerry continued to be synonymous with the concept of email on the go, and the device’s ability to synchronize with its owner’s desktop proved a valuable feature.

  RIM also created a dedicated corporate philanthropy program to donate money to help students in the fields of science, engineering and business to commercialize their ideas or inventions.

  Where are they now?

  BlackBerry is now available in more than 140 countries worldwide, and its subscriber base has nearly 75 million customers globally, made up primarily of senior executives and business owners who use BlackBerry for email on the move. By partnering with some of the world’s leading mobile phone producers, including Sony Ericsson, to help it develop its ranges of smartphones, BlackBerry has maintained a strong position—although a key partnership with Nokia fell through when Nokia decided it wanted to move forward alone.

  BlackBerry does have a fight on its hands, primarily as a result of the incredible rise of Apple’s iPhone, as well as Google’s Android operating system. Recent data from Nielsen show that Android’s market share in North America has now reached 29 percent, while BlackBerry’s has slipped to 27 percent.

  The Blackberry Bold 9900 is one of RIM’s latest models in their range of smartphones.

  At the beginning of 2012, RIM dramatically announced that Thorsten Heins will take over as president and chief executive officer. Mike has become vice chair of RIM’s board and chair of the board’s new Innovation Committee. James Balsillie remains on the board but does not have any operational role.

  On Thorsten’s transition to CEO, Mike said: “There comes a time in the growth of every successful company when the founders recognize the need to pass the baton to new leadership. Jim and I went to the board and told them that we thought that time was now.”

  As BlackBerry experienced a number of setbacks in 2011, and with its share price continually falling, a shake-up was deemed necessary.

  Despite a tumultuous 2011, which culminated with launches of versions of RIM’s BlackBerry Bold touchscreen smartphones. RIM is releasing the BlackBerry PlayBook 2.0 tablet and the BlackBerry 10 mobile operating system in 2012. With a change at the top it is continually striving to compete with its rising competitors. In fact, Mike is so confident of RIM’s future that he announced plans to purchase an additional $50 million of the company’s shares.

  Dropbox

  Out-of-the-box success

  Founders: Drew Houston and Arash Ferdowsi (shown, left to right)

  Age of founders: 24 and 21

  Background: Self-admitted “computer geeks”

  Founded in: 2007

  Headquarters: San Francisco, California

  Business type: Online file-hosting service
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  Sometimes the best business ideas come from simple solutions to life’s small problems. Conceived in 2007 and officially launched by co-founders Drew Houston and Arash Ferdowsi a year later, Dropbox is a Web-based file-hosting service that uses cloud storage to let its users share and back up files using file synchronization capability.

  Drawing comparisons with pioneers Apple, Google and Facebook, Dropbox’s growth has been nothing short of stunning. And it grosses far more per employee from its 70-strong team than those luminaries do. Despite the fact that 96 percent of the company’s approximately 50 million users pay nothing for their service, Dropbox is said by analysts to be on course to take in revenue of $240 million in 2011. What’s more, it’s been said that the company can double its sales in 2012 without recruiting a single new customer, as users exceed their “freemium” allowance.

  But as the company prepares to move into a new 87,000-square-foot headquarters early in 2012, and while rumors abound that the company is in the process of raising between $200 million and $300 million in funding at a whopping $5 billion valuation, it’s clear that Drew and Arash have no need to be modest.

  The precociousness of youth

  The story of Dropbox begins with a precocious child who grows into an overachieving teenager. As a mere 5 year old in suburban Boston, Drew began messing about on an IBM PCjr, and not long after, he started writing his first code.

  Drew recounts that his mother, a high-school librarian, sensed his burgeoning computer “geekiness” and did her best to help him fit in with other kids by refusing to let him skip grades. Things changed, however, when Drew was a teenager. At just 14, he signed up to beta test an online video game. In the process, he made a detailed list of all of its security flaws. Impressed, the company hired Drew as their networking programmer in exchange for equity in the company. Drew continued to work with small startups throughout high school, and when he wasn’t working he was still coding.