Crowdfunding for Notman House

We’re big fans of Montreal.

There is a lot of really exciting things going on in Montreal. Founder Fuel. Real Ventures. c2mtlRho Ventures. iNovia Capital. MtlNewTech. Next Montreal. Grand Prix du Canada.  And Notman.

Notman is conceived as a community space for the web community in Montreal. I remember John Stokes talking about his vision for this space in 2006. And how the efforts of Montreal Startup have demonstrated the value and benefits to the city when founders, entrepreneurs, designers, developers and others have something to rally around. Montreal doesn’t have a Communitech or a MaRS. This is the efforts by local entrepreneurs to bootstrap a central place. John, Alan, Mark, JS and Austin have led this vision for over 6 years. And it’s very close.

Over the last year the Notman House  has hosted over 125 events, including user group meet-ups, hackathons, and learning events, been home to over 50 Startups, and been visited by over 10,000 entrepreneurs, investors, students, and others involved in the growing Montreal tech scene. It’s an incredible place.

Our top priority is to connect the already existing community. Hundreds of groups, meetups and events are being created and take place every year in Montreal. They are loosely connected and aware of each other, but still essentially fragmented. The Notman House wants to bring them all together.

We want to bring startups, students, investors, developers and artists all together in the same spirit that characterized the Montreal of the past.

Notman and OSMO Foundation is looking to raise $100k in private funding. They need to raise this $100k to unlock the a combined $1.7M in grants from the municipal, provincial, and federal government. In addition a $4.3M loan has been committed by Investissement Quebec and the BDC. However, to access these grants we need to raise $1.1M in private contributions. $1M of this is being pledged by corporate entities such as Teralys Capital, Claridge, Telesystem, McCarthy Tetrault, and Fasken Martineau.  We are looking to the community to help close the $100K gap currently faced in the funding process.

A Conversation with Brad Feld – Oct 30, 2012 in Toronto

A Conversation with Brad Feld on Startup Communities - Oct 30, 2012 in Toronto

On October 30, 2012 we are hosting an event with Brad. The event starts at 6:00pm. It is at the Toronto Reference Library. Tickets start at $25/ticket and include a copy of the book (either hardcopy or a DRM protected PDF). We will have a few cocktails, some networking, and a discussion about how we make Toronto a better place for startups. We’re just working out the details for the event.

Great list of sponsors and supporters:

We’re excited to hear more about the Boulder method and the efforts of Brad Feld , . We’re huge fans of this book, check out William Mougayar’s review. The Don’t Panic: A Guide to the Toronto Startup Ecosystem post was inspired inspired by the desire to (see Brad’s comments on StartupRev).

The first step is joining in the conversation.

Buy a ticket

Brokers, Smokers and Midnight Tokers

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In the past couple of days, I have seen a few emails from what could be best called funding brokers. They “facilitate” deals between early stage companies and potential investors. All for a consulting fee, usually for a percentage of the amount of funding raised. They have connections to high net worth angel investors and relationships with venture capitalists. Typically the fees and the engagement are model on investment banking particularly as related to later stage M&A deals.

It’s not a surprise. It’s a well established model. The Lehman model (we all know how well Lehman Brothers worked out for the rest of us) is 5% on the first $1MM raised, 4% on the second $1MM, 3% on the third $1MM, and 1% for capital above $4MM. It changes with equity versus debt financing, reducing to a 0.5-2% fee on debt rounds.

And particularly in later stage deals and M&A it is probably more accepted (acceptable?). In the transaction there are 3 potential parties:

  • Startup
  • Funder
  • Broker/Finder

Typically the person contracting the broker pays the fees. This means that it’s either the VC paying the fee, but if you are the startup it means that you’re paying the fee. And that fee is either increasing your dilution or decreasing the amount of the round. You can look at it as just paying fees like you pay your accountant or lawyer.But why, oh, why are you willing to give up chunks of your company this early to do things you are capable of doing yourself.

What does a VC think about brokers/finders?

Jason Mendelson published his take on “finders” back in 2007:

“Most venture firms don’t like the idea of brokers being involved and most venture financing documents have a clause that the company warrants that there are no brokers involved. Remember, the company’s money that is paying the broker is, in fact, the VC’s money that they invest in you.”

Jason continues “good VCs have plenty of proprietary deal flow, so they aren’t relying on brokers to show them deals”. If you can’t get in front the right investors, you are probably doing it wrong. There are a very limited set of high tech, emerging business model, high potential growth investors in Canada. Need a ‘show me the money’ list? There are other ways to raise your profile as a startup and get in front of investors. Andy Yang wrote a great piece about getting the most out of AngelList as a startup. If these channels aren’t working for you, you might want to go back and ask yourself is it the funders or is it me? What do I need to do to make my company more attractive to potential investors? Customer development? Product development? Etc.

How do you spell MBA?

We love to heckle MBAs, mostly because we’re all jealous that we don’t have one. But is it a requirement to raise funding.

“On the other hand, skills i bet won’t be important as much in the future:

  • having (only) a big rolodex or (offline) network
  • having a traditional MBA or investment banking background

Both of these are still important, but will become commoditized and marginalized by the availability of such information from online systems for social networks & reputation, and by the relentless advance of access to capital from a variety of channels.” – Dave McClure

No one is arguing that brokers shouldn’t get paid. The model is relevant. People work hard to build trust, reputation, networks and knowledge. With later stage deals the relationship, private placements, increased valuations, connections with CEOs and funders, it makes sense. But as Dave McClure rightly points out the value of the specific skills are changing. Particularly at the very earliest stage.

There is a great discussion on OnStartups about the finder’s fees. You can see the tension between entrepreneurs and investment bankers.

Social Anti-Proof

I don’t like finder’s fees for early investment rounds. Whether you call that seed and series A, I don’t know. I just don’t like seeing that capital taken out of the hands of the entrepreneur from operations. So just don’t do it.

As the company matures, the existing investment banking model doesn’t feel wrong. Many of the relationships, matchmaking, guidance feels like something you pay for, only after the deal closes. I feel like really early stage companies that have hired a broker must be broken, i.e., there must be something fundamentally wrong with the  team, the market, the advisors, etc. if they are unable that might explain why they are having difficulty raising an early round.

So it’s very wrong early. Ok later.