agers of the firm. He had a solid track record
but the technology and venture capital mar-
kets had been so painful over the past few
years that Park, like most venture capitalists
(VCs), was a little shell-shocked. Venture
investing had been very depressed since the
technology bust of 2000, but it appeared that
investors were beginning to have more confi-
dence in the investment market.
Covington Capital Corporation was the
investment manager for five Ontario-based
Labour Sponsored Investment Funds
(LSIFs) with combined assets of approxi-
mately $600 million. LSIFs were similar to
venture capital funds with the exception that
government legislation imposed several con-
straints and restrictions on the nature and
timing of the investments in order to protect
investors and ensure that the government’s
goals of job development and local invest-
ment were met.
Park felt that Software Innovation was a
good candidate for several of the Covington
Funds. (It was possible for Covington to
spread an investment among several of its
funds.) Covington had a number of general
funds into which SI could fit, and Park
thought that SI could be particularly interest-
ing for the new Strategic Capital Fund. This
fund was started in December 2004 in con-
junction with Microsoft Corp., Hewlett-
Packard Corp and systems integration part-
ners, such as Deloitte Consulting. The fund’s
intent was to invest in technology companies
where these partners could validate the tech-
nology and market opportunity and, after
investment, could potentially work with the
companies to develop their businesses.
However, this fund was small—with only $5
million in capital—and new—with only two
prior investments.
In large funds, it was possible to “play theIt was early 2005, and Jeff Park, the senior
vice-president of Covington Capital
Corporation (Covington), had a decision to
make. For almost a year, he had been follow-
ing the progress of Software Innovation Inc.
(SI), talking with its management and learn-
ing about its business. The time had come to
decide whether Covington should make an
investment in the company or move on to
other opportunities. Park was intrigued by the
product category—project collaboration soft-
ware—and the company’s success in working
with a marquee customer. But he kept think-
ing: “This company is at an awfully early
stage. How much upside is there really? And
how long is it going to take us to realize it?”JEFF PARK AND COVINGTON
CAPITALJeff Park had been with Covington since- He had started as the lowest of the
low—an analyst—but had worked his way up
to vice president and was now one of the
three senior partners who were the key man-
528 ENTREPRENEURSHIP CASE
CASE 10
Software Innovation Inc.
by James E. Hatch and Teddy RosenbergSource:Teddy Rosenberg prepared this case under
the supervision of Professor James E. Hatch solely to
provide material for class discussion. The authors do
not intend to illustrate either effective or ineffective han-
dling of a managerial situation. The authors may have
disguised certain names and other identifying informa-
tion to protect confidentiality.
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Copyright © 2006, Ivey Management Services
Version: (A) 2007-01-19