StartupNorth

1997-2012: Fear, Uncertainty, Doubt.

2012-2020: Optimism, Opportunity, Execution.

I’ve been bullish for a while now, it’s no secret. It was 5 years ago that I was writing off VC in Canada and explaining how startups needed to step up to create an environment to bring them back.

And like a bowl of Sea Monkeys, the VCs have emerged from stasis.

Do you realize that I can’t even conjure up a single VC financing in Canada in 2008.

This week OMERs stepped up in a big way with a $20million financing for HootSuite. This, along with the recent $30 million (debt) financing of Halifax based Unique Solutions, represent some of the first real, and stable, “acceleration capital” that we have seen in Canada.

Five years of uncertainty about startups in Canada. Uncertainty about whether we could really start them. Uncertainty about whether we could really build them. Uncertainty about whether we could really scale them.

5+ years that I am happy to say good riddance to.

The last 5 years we have focused on:

• Seed stage financing
• Removing section 116 from the tax code
• Waiting for shitty VCs to go away
• Welcoming good VCs on to the scene
• Getting rid of any idea of building a startup “for the Canadian market”
• Making “Startup” an understood thing
• Telling good news stories when they came along

When I wrote a the post about 2011 being a big year I was focused on 2012 as the next step. What I realize now is that we aren’t just living year-to-year like we used to, the startup community in Canada now needs to start thinking in larger timeframes, with bigger goals and a far more ambitious strategy.

This is the time to double down.

I believe strongly that the values, infrastructure and growth of Silicon Valley are becoming better understood and slowly commoditized. Our challenge is not to try to recreate Silicon Valley, but to take the elements of what make it good and to apply it in our own communities. We are getting much closer to that.

A half-decade is a long time to think about, especially for entrepreneurs. Here’s what I think we need to think about that we haven’t done much about in the last 5 years. What do you think we need to focus on for the next 5 years?

Education

Children need quality education in the fundamentals of the Web. Right now we have an education system which tried to teach students about computers but almost completely neglects the Web. A shift to Web-oriented education would mean:

• Understanding the role of many devices (computers, tablets, phones, etc) in education
• Web-infused curriculum in all topics. Such as: Web-focused research skills in science courses. Social Media in Language Arts. Etc.
• Programming skills which are introduced early on and are a required component of curriculum.

A focus on education should imply the participation of students in the startup community. We need to find ways to include younger and younger would-be entrepreneurs the web startup community.

Community as the framework

There are a lot of efforts underway to “professionalize” the management of the startup community in Canada. Watch out for people who claim to know what is best for the Canadian startup community but who haven’t felt the need to immerse themselves in it by being a part of it. The reason that Canada has managed to standup a respected and vibrant startup community is largely because the effort has been decentralized and grassroots. It has not been because of centralized programs or PR focused exercises.

We need to maintain this focus because developing a strong social network of individuals who are able to contribute to and support the development of Canadian startups is critical. It’s why I like the C100, Startup Festival, Grow Conference, CIX and others. They are efforts that have come from people who are entrepreneurs themselves and who understand that the health of the community is critical.

Tighter Silicon Valley links

The vast majority of startup hub cities in Canada are within a short flight of San Francisco. We need to take advantage of that link and make exposure in Silicon Valley an expected thing for Canadian Startups. This is easier than ever and it is getting easier. We need more Debbie.

Policy

Web Startups are not yet on the radar of policy makers. This has resulted in disjointed policy development which has sometimes harmed startups who develop and compete globally. I believe that the current government has actually made some changes such as the changes to Section 116 of the tax code. Startups benefit from very specific parts of the legislative and tax codes and we must continue to seek as many advantages from these as possible. I mentioned Education above but policy influence also needs to extend to Immigration, R&D programs, procurement and anything else that can be used to give startups in Canada an advantage.

 Grow like hell and don’t stop

The final thing we need to do is to make even bolder moves. We have our feet under us and now it is time to double down again and again and again. Rather than being the companies who are getting picked off for $20million here and $50million there we need to find opportunities that let Canadian startups become the acquirer and growth engine, rather than the other way around. Hootsuite is a start, but we need to chalk up a few more before the process will become well understood in Canada.

Welcome to the next 5 years.

Jevon MacDonald

co-founder of Startupnorth.ca

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I’ve spent a lot of time thinking about incubators. Creating one, mentoring at others, visiting lots and being skeptical of several (I’m not saying which). You can decide for yourself if you think there is an incubator bandwagon being jumped on, but one incubator that marches to its own distinct drumbeat is The Founder Institute.

Here are two examples: 1) they don’t give you money and charge a nominal tuition fee, and 2) all founders who go through The Founder Institute get a share in a common equity pool. That’s pretty innovative.

Entrepreneurs already know Adeo Ressi, who is the founder of The Founder Insitute, as the man behind TheFunded.com. He’s also behind a bunch of other successful startups and is a bit of a renaissance man.

I spoke to Adeo recently about what makes The Founder Institute so different, why it works, and why Canada needs the Founder Institute. I think it’s a great model for talented Canadian entrepreneurs who don’t necessarily fit the ‘mould’ of the TechStars/YC genome. At the end of the post I’m going to ask for people to step forward if they would be interested in talking about getting The Founder Institute in their Canadian city. I know Adeo is interested, and so am I.

Here’s the interview:

You’ve built 8 startups, 4 of which were acquired. What’s the secret to your success?
Perseverance. No matter how bad things appeared, we struggled through the adversity to find the magic. Building a company from nothing to a few hundred or a thousand employees in a few years time is an immense challenge. The moment that you master one phase of growth, you are already onto the next. It takes a high degree of self awareness and perseverance to succeed. There is this meme that failure is acceptable. I prefer to triumph over adversity.

Your last two startups, TheFunded.com and Founder Institute, are about helping entrepreneurs. Is this philanthropy or business (or both)?
Entreprenurship is becoming harder, and I want to give back to the craft of entrepreneurship. A strong philanthropic mission can only endure with a solid business underpinning, so the Founder Institute is a for profit entity. I am turning over the for profit company stock to a long-term trust to guarantee the philanthropic mission for at least 100 years.

As I became more successful as an entrepreneur over the last 18 years, it became easier to build amazing products and harder to build great companies. When I started in 1994, about 1 in 100 companies were successful. Now, less than 1 in 1,000 companies are meaningful. The Founder Institute was designed to invert the startup failure rate, and our goal is to create 1,000 meaningful and enduring technology companies per year. We expect to hit this goal in 2012, less than 3 years after being incorporated ourselves.
There are a lot of incubators out there. What is different about the Founder Institute?
I am a huge fan of the programs being launched to help entrepreneurs. There is a renaissance going on. Most other programs help entrepreneurs that have a company, a team and traction. The Founder Institute looks for passionate people with a dream, and we help them create a meaningful and enduring technology company. I like to say that we mine diamonds, while others make jewelry.

We have chosen the most challenging segment, inception. Everyone involved in the Institute is a founder, and we create an equity pool that shares the upside created from the companies among everyone. So, if you graduate from the program and fail while a peer goes on to succeed, you will also see a return from your peer’s success.

Who should (and who should not) attend Founder Institute?
Everyone who has a dream to start a company should apply. We have absolutely no gender, race or idea biases, which also separates us from various other programs. The average age of applicants is 34 years old, and we have a 21% female graduation rate. Just due to our scale, the Institute is the largest female incubator in the world. I would eventually like to see our graduation demographics resemble the demographics of the working population.

What’s the greatest success of the Founder Institute to date, and why?
The greatest success of the Founder Institute is are helping thousands of people pursue their dream. We survey all enrolled Founders around the world, and nearly everyone would proactively recommend the Founder Institute. Some semesters are better than others and some locations have a stronger ecosystem, but the survey results are universally consistent.

What do you think Founder institute can do for Canadian startups?
The Founder Institute is a great asset for a burgeoning entrepreneurial ecosystem, like in Canada. We encourage successful entrepreneurs to help the next generation of companies and give them economic upside from the results. We help local Founders to launch meaningful and enduring companies. We provide a high quality stream of companies for other incubators, for investors and for various vendors. Ultimately, we are a value added player in the ecosystem, and we get along with everyone else.

You’re on the Board of the X Prize. Why are you so passionate about private space travel?
I am passionate about models to inspire innovation, and I believe that prizes are effective. As Chairman of the Strategic Committee when the Ansari X Prize was won in 2004, I pushed the foundation to expand the prize model into other categories, such as genomics, automative, medicine, etc.

There’s a great picture of you with President Clinton (http://www.adeoressi.com/about/). Seriously, how cool is he? What about Hillary?
In the photo, I am standing next Jeff Dachis as well, the Co-founder of Razorfish. I find that Founders are a much better bunch of people to spend time with than politicians, and I look forward to traveling around the world to meet aspiring Founders.

THE ASK

I think The Founder Institute would work really well in Canada. I think there are a lot more entrepreneurs than available spots at incubators and Adeo has really focused on what’s important for idea-stage startups. They’ve launched 415 companies in 20+ cities around the world.

I’m looking for interested parties to step forward if you’re interested in starting, running, mentoring or hosting The Founder Institute in Canada. Leave a comment or contact me directly.

rluk

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Note: This is cross posted from WhoYouCallingAJesse.com by Jesse Rodgers, who is a cofounder of TribeHR. He has been a key member of the Waterloo startup community hosting StartupCampWaterloo and other events to bring together and engage local entrepreneurs. Follow him on Twitter @jrodgers or WhoYouCallingAJesse.com.

 Some rights reserved by wallyg

The popular belief in Canada is that the tech startup world has been fairly light on investment dollars relative to other industries in Canada. Because there is such a disparity in seed or angel round investment size in Canada vs the US people tend to point to that as a reason people go south. The perceived result of the funding problem (and likely the weather) is that there are 350 000 Canadians in the Valley. No one can argue the talent to build global calibre tech companies exists in Canada (or at least has Canadian passports) but you can certainly argue Canada lacks that certain something to keep them here.

Five years ago Paul Graham observed that the total cost to get a tech startup started had dropped dramatically and will continue to do so.

So my first prediction about the future of web startups is pretty straightforward: there will be a lot of them. When starting a startup was expensive, you had to get the permission of investors to do it. Now the only threshold is courage. – Paul Graham, 2007

There is a lot of attention around getting young people money but does that help them? Does that keep them in Canada? I would argue that the ones that do need and can use capital don’t pull up stakes and leave town for the investment. They leave town (or the country) because they are missing something more valuable than money — customers, mentorship that helps them get customers, and a network of peers.

Know thy stage

The problem with comparing funding deal levels in Canada and the US is that it ignores the stage the company is in relative to the stage of US startups raising money for the first time. The Startup Genome report 01 and the Startup Genome Compass offers startups an excellent way to measure themselves against a benchmark of over 3 000 startups. In the report there is a table (shown below) that gives you some overall averages for all startups.

From the Startup Genome Report 01.

In last seven years of being involved in the Canadian startup community (mostly in Waterloo) and in the last three years leading what is arguably the best student focused incubator in Canada while founding my own startup. I saw dozens of companies peek into the Discovery phase, a few move on through to the Validation phase.

What I have seen happen before the discovery phase:

• Talk of raising money is used to pull in a large group of talent.
• Focus is not on customers, it is on technology or raising money.
• There is little help by way of mentorship that takes the time to understand the dynamic of the group.
• Mentors focus on finding a way to get them money so they can work full time.

Jesse Rodgers

Jesse is the Director of VentureLab at Rotman (rotmanventurelab.com), a cofounder of TribeHR, and ran VeloCity at the University for a few years. He has been a key member of the Waterloo startup community hosting StartupCampWaterloo and other events to bring together and engage local entrepreneurs. Follow him on Twitter @jrodgers or WhoYouCallingAJesse.com.

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