Matthews 2.0

The son of a tech titan sets his sights on his own place in Canada's business pantheon.

Owen Matthews once yearned to become an actor. But that's not an easy career path when your father is legendary entrepreneur and tech titan Terry Matthews–and he has other plans for you. By 14, the younger Matthews was soldering switches for Mitel, the Ottawa-based telephony company his father co-founded in 1972, yet he was determined to avoid engineering and computer-related studies. “Because my rather influential father was going out of his way to encourage me to do that,” he recalls, “I, being the stubborn child that I was, would go out of my way to say, 'I'm absolutely not going to do that.' Acting and writing were the bane of my father's life.”

But the family business proved hard to escape. After finishing high school in Ottawa, Matthews went abroad to work at the family resort–the Celtic Manor, in Wales. He also spent about a year at another family company, Newbridge Networks, driving a truck full of trade show equipment around Europe. That's when it hit him: “Having been away from the family influence to do real things, it didn't take long for me to recognize [computer sciences] is what I enjoy. It just seemed like a natural thing to do. I was interested in the next generation of technology.”

Matthews, now 33, is the co-founder and CEO of NewHeights Software Corp., an emerging telecommunications company based in Ottawa. In the past year, its revenues grew by 380% (as a private company, NewHeights will not release revenue numbers), its staff doubled in size, and it expanded into new office space to accommodate the growth. And if NewHeights lives up to Matthews' vision, it could vault him into the Canadian tech stratosphere–right beside his dad.

NewHeights' software integrates business users' complex communication tools into one simple interface. Anyone working on a PC or a laptop in an office environment could use the software in managing video, voice and data communication. For example, you can drag and drop names to start a conference call. Another feature helps users know whom they're talking to: when someone calls, the software searches the computer for any documents related to the incoming number and name, and then pulls the documents up. Recording conversations is just a click away. You can also prioritize calls. “So when your mother-in-law calls, it goes straight to voice mail,” Matthews jokes.

Rob McLean, who handles NewHeights' public and analyst relations, explains the company's direct market is telecom providers serving business users, like a Mitel or Bell Canada. NewHeights tailors its software for each of its clients. In turn, those providers sell the software, marketed as their own service, to business users, which, in a sense, means NewHeights' market encompasses all enterprise users with computers. “For each sale they make, we make money,” McLean says.

There is competition, largely from telecom vendors who develop their own offerings in-house. But their products are not as rich in features, claims McLean, and there are currently no other software developers specializing in high-end business services. “They are competitors in the sense that a Cavalier and a Porsche are both cars, and hence compete in the car market,” he adds, “but the reality is they are at such extreme ends of the market they don't really compete for sales.”

In his office at the company's product development centre in Victoria, Matthews, drinking a latte and chatting about his work, is relaxed. And he speaks openly about some aspects of his family life–like how his older brother, Dylan, runs the resort in Wales, and his younger brother, Trevor, makes films for a company he co-founded, Ottawa-based Brookstreet Pictures. The only terse response comes after more personal queries: he wears a wedding ring but will not answer questions about kids or his wife. Privacy is, he explains, a way to keep family members from becoming targets–“for whatever reason.”

Keeping sensitive information private is a lesson Matthews says he has learned along the way, having grown up with one of Canada's wealthiest entrepreneurs. On the 2005 Canadian Business Rich 100, Terry Matthews came in at No. 24, with an estimated personal wealth of $1.36 billion. Still, growing up in Kanata, an Ottawa suburb, Matthews felt his family led a regular life. “I knew my father worked hard, and I knew that he ran a company, but that had always been the case,” he says. When Mitel, his father's first company, started doing well, the family moved into a large home on a Kanata acreage. Matthews was 13. “That's when I began to realize something really was different about my family,” he says.

He also began to realize that they had access to more money than most families. That proved to be an advantage when it came time to starting NewHeights. In 1998, during Matthews' last year of computer science studies at the University of Victoria, he and fellow student Andrew Fisher founded NewHeights with backing from Celtic House Venture Partners, one of Terry Matthews' primary venture capital wings at that time. Owen had met Fisher, now NewHeights' president, at a café in Victoria. “We were playing chess late at night, and we started talking about starting a business,” says Fisher. “I moved all my computer equipment into a space he had rented and we just started writing code.”

They started with web design, but it didn't take the pair long to figure out that it was a lot of work for little money. Turning their attention to building software was a more lucrative move. When Fisher and Matthews presented their first product–an online accounting tool–to Celtic House, the venture firm suggested they go after the booming digital camera market instead. The pair came up with an online application to help companies process digital picture orders and communicate with individual users. In their first year, 1998-99, they generated almost $1.5 million in revenue–this while they were still undergrads. Suddenly, completing school seemed less attractive. “We had every intention of going back and finishing our last few courses, but we just never got around to it,” Matthews says. “The revenue was more interesting to us.”

But when that market started to dry up, they were left without a customer base. “We were caught with some early sales and some cash in the bank,” says Matthews. Once again, they refocused. Both agreed that the telecom business was the way to go, considering their contacts and experience, and that their product should integrate the many communications tools business people deal with on a daily basis. They built the software piece by piece, taking a few years to realize the original vision. In early 2002, they acquired their first partner–Mitel.

As Matthews points out, most people would assume that would be an easy partnership to forge. But while he admits the family link gave plenty of opportunity to speak with people at Mitel, it was a long, hard fight to get them onboard. “At the end of the day, you've got people who run the company and who are responsible for [its] success, and whether or not my family has a significant stake in the company is beside the point,” he says. “In fact, it made it harder for me because I had to face the criticisms. If this doesn't succeed, it really does look like nepotism.”

Eventually, NewHeights won Mitel over, solidifying a partnership that gave it a jumping point to approach other companies. The first partner to follow Mitel was U.K.-based Marconi. Bell Canada came onboard in September 2004. And this January, Ericsson, a global telecommunications giant, bought Marconi's key telecommunications assets, making Ericsson NewHeights' most recent client.

Fisher spends most of his time in Ottawa, where about 10 employees manage sales and customer relations, while Matthews splits his time between Victoria and Ottawa when he's not travelling internationally. Because he wears a couple of hats, he is never in one place long. Besides his duties at NewHeights, Matthews is also executive vice-president of the family's holding company, Wesley Clover. With more than 20 companies in the fold–including March Networks, a security and surveillance system manufacturer, and Ubiquity and Solace Systems, both of which provide tech solutions to telecom services–he sees his role as a facilitator. He spends time understanding what's going on in the industry, sharing that with managers at the companies Wesley Clover holds, and optimizing partnerships between them.

On a late-January day in the Victoria office, where about 50 employees work, Matthews is in CEO mode as he meets with Scott Ashdown, director of product development, and Calin Somosan, a senior software developer. The conference room is bright–a wide, white border separates the walls into two parts, one royal blue, the other deep green. The doors are red. (Disney Interactive used to have these offices before moving into a bigger space in 1998. Later, Matthews points to a small, faded outline of Mickey Mouse on the men's washroom door.) The men are discussing how and when to introduce minor product changes. “By the end of the year, we will already have a pretty good installed base with Mitel, but with the Bell channel we'll have a much larger installed base of users who will be familiar with the work flow and user interface than we have in place today,” says Ashdown, as he stands at a whiteboard in front of Matthews. “If and when we change, we have to be cognizant that there's a training problem. We'll be reintroducing a learning curve…”

“We spent a lot of time honing that down,” interjects Matthews, “so if you're replacing the tools, I don't think you want to replace the actual experience.”

“Right,” says Ashdown. “That's why–“

“And that's why I think we're early,” finishes Matthews.

Matthews and Ashdown finish each other's sentences, jumping in to get their points across. Sometimes all three talk at once. But the interruptions are amicable. “Like my dad,” says Matthews before the meeting, “I expect to be challenged. I want to hear ideas from all my employees.” He's also no stranger to lively conversation. “We have a family dynamic of very spirited debate,” he says. “We don't back down easily, but we do listen very well.”

Matthews is grateful for his upbringing, one he equates to an apprenticeship. By his own account, the advantages to being Terry Matthews' son are many: exposure to strong businesses when he was young, unique access to funding, and Dad as a NewHeights board member, which helps open doors. There are also some challenges. He laughs as he says answering to family is a lot harder than answering to a venture capital firm. “Complicated dynamics” is how he describes it. “[My dad] has very high standards,” he says. “That makes it harder because his standards for me are actually higher. He needs that to be objective about success associated with [NewHeights] and to promote my company.”

In the short term, the plan is to help NewHeights' current customers train their sales forces, work with them to market the product, and highlight the product's values. When asked about an IPO, there is no hesitation: it is something Matthews would consider. Nor is he against an acquisition, as long as the time is right and the company's inherent value is strong. But he is not driving toward either. His goal is to build a company for the long haul. “That's the thing I respect most about my father, that Mitel has survived for a long, long time,” Matthews says. “I'd like to think that NewHeights could be the catalyst that a Mitel or a Newbridge is in creating other great companies.”

Maybe he didn't like it at first, but the old saw applies: Like father, like son.