News : July 4, 2000

TEAMED WITH ROYAL BANK
Baldhead puts trading in the palm of your hand

By Terrence Belford
July 4, 2000
Financial Post

Here's the scenario. It's a fine sunny day next spring and you are on the back end of 18 holes at your favourite golf course. One of your buddies offers you a hot tip on a sure-fire stock. He tells you to buy in as soon as you get back to the clubhouse.

You do one better. You reach into your golf bag, pull out your hand-held computer, and, waiting for your turn to tee off on the 16th hole, you place a buy order and get a confirmation from your Royal Bank Action Direct account. Using the same palmtop, you then do a transfer from your chequing account to your Action Direct investment account and top it up — in case you get more hot tips before the day is done.

Courtesy demands you thank your golf partner. The person you should also thank is Jay Jordon's father. Mr. Jordon is president of Sona Innovations Inc., the company that created Royal Bank of Canada's wireless banking and investment management applications for hand-held devices. He's the man behind the smarts inside your palmtop that let you trade stocks and bank from the middle of the golf course. And it was his father who gave Mr. Jordan the idea in the first place.

The Sona story is a prime example of the fact that business, especially technology, is about people, not corporations. You may have seen the announcement of the formation of Sona in the newspapers recently. It stated that Royal Bank and Baldhead Systems Inc., a company Mr. Jordon formed in 1995, announced the formation of Sona Innovations Inc. of Toronto. Sona will create software solutions that will provide the banking and investment communities with real-time banking and brokerage services for a variety of Internet-enabled devices.

First off the line will be a banking solution that Royal will brand and make available to its customers, as well as a similar investment trading, tracking and management solution for Royal's Action Direct customers. The next step will be marketing those applications to other financial institutions and brokerage houses. At the same time, Sona will expand the reach and scope of its products by migrating them to other wireless devices — such as cellphones. Baldhead will initially provide the staff, Mr. Jordon will be Sona's chief executive and Royal Bank, a minority partner, will lend its prestige and marketing clout.

It seems pretty cut and dried until you look at what happened with a similar venture, in fact the only other case to date of a bank backing a small technology company in the wireless financial transactions field. Bank of Montreal put about $1-million into 724 Solutions Inc. a year ago, and when 724 went public earlier this year, that $1-million had turned into about $1-billion. At age 29, Mr. Jordon may be looking at e-billionaire status.

In 1995, Mr. Jordon left his job on the help desk at a small Toronto software company, Angoss International, to start his own custom development shop. The firm, Baldhead Systems Inc., was a two-man affair. Mr. Jordon and a partner rented a small office in an old building in downtown Toronto and created custom solutions for a number of small- to medium-sized business. As business turned to the Internet, so did Baldhead. But, even as he was making a success of custom development, Mr. Jordon could see the next big leap in technology would be wireless-based, and he put company money into wireless research.

That began in February of last year. Last May, Mr. Jordon was updating his father on what the company was doing with wireless and the enormous potential it offered anyone who could come up with a "killer application" that people would gobble up like salted peanuts. "Stock trading online," Mr. Jordon Sr. replied. "Stock trading and banking."

The light clicked on in Mr. Jordon's head. Of course. Everyone has a bank account. Who wouldn't like to be able to bank anywhere, anytime, anyplace? In the office the next day, Mr. Jordon set the team to work building a prototype. "Prototypes are the only way to go," he says. "If you are trying to sell something, nothing beats being able to go into someone's office, plunk a prototype down."

By last September, Baldhead had a working prototype for the Palm Computing platform. The trouble was, Mr. Jordon hadn't a clue about how to get the prototype into the hands of a bank's decision-makers. One September morning, he found himself talking about the problem with his building's property manager, Tom Yarmon. Mr. Yarmon told him he had just the man for him. Enter David Robertson, president of Comdot Holdings Inc. and a former senior executive at Royal Bank. Mr. Robertson had both a keen eye for value in a project and a deft hand at making the necessary introductions.

In October, he and Mr. Jordon sat across the table from a handful of Royal Bank managers, made their pitch and showed them the prototype. The reception was warm, but the bankers quickly pointed out that the prototype lacked two essential features — security and a written business plan. Back to the drawing board.

From November through March of this year, Baldhead worked with Certicom Inc. of San Mateo, Calif., to incorporate 128-bit encryption into the application. Baldhead brought on board Bill Halpenny, who had experience with both business plans and strategy.By late March, the prototype boasted the latest in SSL encryption security. Back to the bank. This time, Royal executives greeted the Jordon-Robertson team with the warmth usually reserved for prodigal sons. Negotiations began in earnest.

On the last day of May, a deal was struck that saw Royal Bank invest a significant amount of money in a new jointly owned company — Sona Innovations Inc. Baldhead would control Sona, provide the start-up staff, and Mr. Jordon, at the bank's insistence, would be CEO. For his past efforts and continuing advice, Mr. Roberston became a minority shareholder. What's next? The first project is getting the kinks out of a version of the prototype Royal Bank can Beta test on select customers. "We certainly hope it will be before the end of the year," Mr. Jordon says.

Financial Post
July 4, 2000

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