Itemus and aftermath

The former head of a bankrupt technology incubator can sum up the lessons he learned from the multi-million dollar collapse of his company in one sentence.

“”Don’t do stupid acquisitions, which we did a doozie,”” Jim Tobin, ex-CEO of Itemus Inc. told the annual conference of the Canadian

Association of Business Incubators in Toronto Friday. The association represents about 100 public and private incubators in the country.

Publicly-traded Itemus failed almost immediately after acquiring media company The Shooting Gallery Inc., of New York in a stock swap in the spring of 2001.

Two months later, amid the plunge in on-line advertising, it announced Shooting Gallery was in trouble and could be liable for millions of the subsidiary’s obligations.

Itemus said it was trying to raise $10 million. TSG closed, and Itemus stock plunged.

Observers thought that was the last straw in an organization spawned on growth. It bought internet applications company Name Inc. for stock, and consultancy Digital4Sight for $22 million.

“”We went out too aggressively with our capital assuming it would always get replenished,”” Tobin said, recalling the stock market boom of 2000, “”and we didn’t have the governance and (financial control) systems.””

Itemus was among the Canadian for-profit technology incubators that either went under or changed business models in the last two years, including the NRG Group, Wsi Interactive, Exclamation International and

Tobin refused to be interviewed about Itemus because the company is still in the hands of a bankruptcy trustee.

While the collapse of the Internet bubble has made it difficult for incubators and aspiring entrepreneurs to start companies there may be new opportunities, he said.

Squeezed by capital markets, corporations are beginning to think about spreading the risk of technology projects by collaborating with vendors or entrepreneurs.

Incubators can help their startups by keeping close to business to spot such trends, said Tobin.

“”Understanding that change and trying to dock into it will help overcome some of the usual problems with trying to commercialize early stage ideas,”” he said.

Tobin said he was preparing to start a new job, but would not name the corporation or get into any details.</P


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