Where’s Waldo?

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I’ve written about CIX Top 20 Follow @CIXCommunity in 2008200920102011 and 2012. To follow my pattern here is my post for 2013. Full disclosure: I sit on the Advisory Board for CIX. 

There are 3 core events in the Canadian startup calendar:

There are other happenings and gatherings ranging from NxNE to HPX Digital to Mesh to the C100 events. If you need a reminder about the state of the Toronto startup ecosystem, make sure you check out my now 14 month old but still relevant post, Don’t Panic.

Each of the above events is optimized for different audience needs. CIX brings the  viewpoint of Canadian investors (if you care). The advisory board is primarily venture capitalists (a few lawyers, a couple of CEOs and  one evangelist):

  • Roger Chabra, Rho Ventures
  • Boris Wertz, Version One Ventures
  • Mark MacLeod, Freshbooks (recovering VC)
  • Barry Gekiere, IAF
  • Joe Catalfamo, Summerhill VP
  • Justin LaFayette, Georgian Partners

The advisory board is 44 people big. And approximately 30 are doing some form of investment. It’s almost 70% are actively making investments in technology companies. There is very strong Canadian VC and investor representation in the group that advise and plan the conference content.

And it shows in the content, of the 67 scheduled speakers (as of Nov 14), 19 of the speakers are from the advisory board – that’s 28% of the content. (It’s even higher if you include partners and others from firms of advisory board members). If you want to know what Canadian VCs and investors are thinking, this is the best way to see what is important. They define this conference. They provide the content and the voices at the conference.

So why go?

CIX gives you insight in to the types of companies, IP and traction that Canadian investors are currently looking for. It is the barometer of the “high potential growth technology companies” in Canada. It will be interesting to see what everyone thinks are the hot companies and trends. The panels and policy discussions are the things that Canadian investors are grasping and struggling with. It will be interesting to hear the conversations.

You might argue that as an entrepreneur you don’t care about these conversations. They don’t help you grow your business, build your product, or acquire customers. But they do provide you insight into the mind set of the people you are trying to raise money from. That might be the thing that gives you an unfair advantage in understanding their decision making process this year.

I love that 2 of my personal investments Upverter and OpenCare made the Top 20. Full disclosure: My employer, OMERS Ventures, is an investor in 360 incentives. I’m also excited to check in on Breather, Bionym, AxonifyHubba and others. The CIX Top 20 has turned out some of the best companies in the past 5 years.

It is possible to make your luck at CIX (just remember the preferred method of connecting).

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What is the problem accelerators are solving?

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There is currently a preoccupation with accelerators in the entrepreneur world resulting in a large increase in programs.  Arguably, the result of this frenzied growth is that ‘entrepreneurship’ is as commoditized as college. Unlike college, it is extremely hard to know which programs are adding value and which ones are wasting everyone’s time. This doesn’t mean investors aren’t in the know and they are favouring the programs they like – example, YC or TechStars.

It could become (or has already become) virtually meaningless to be an accelerator born internet entrepreneur so why would you give up 6-12% of your company to do it? For investors it is really hard to cut through the noise. I think this is because few people actually know why accelerators exist at all. In some cases I fear that the people that are creating new ones aren’t likely clear on why they are creating these programs either.

How does anyone know which ones work? What problem are they solving? What metrics should they be tracking in order to get better at what they are doing?

Defining the problem(s) accelerators solve.

There are three problems I think accelerators are trying to solve:

  1. Investors need to identify talent.
  2. Talent needs to find the right investors and coaches.
  3. Education system failure.

The first is a relatively easy problem to solve. It is hard for investors to identify talent at an early stage, accelerator programs offer a filtering tool for investors as they can take the top talent that applies and narrow it down to those that have the highest potential based the criteria of the particular program. If an investor trusts the filtering job done by the accelerator than that accelerator is providing value.

A suggested metric for this: measure how many alumni of a program receive funding, from what type of investor, and in what time span?

The second problem that talented people and teams have is finding the *right* investors and coaches. By the right investor I mean someone that will give you enough money and coaching that you can slowly de-risk your startup a little more and build momentum as you grow towards being a sustainable business. Founders need coaches to apprentice under while they build their company. The right investor is someone who will put in enough of their own money and time and they can help you get your business through the major milestones it faces. This likely means that party rounds are bad. What I think should be the goal are 4-6 investors and/or an individual (not a VC) has a 1/2 to 1/3 of the total round.

This should result in the person(s) who put in significant capital also have a board seat and have their sleeves rolled up ready/able to help.

A suggested metric: track who put in the most personal money in the round and are they on the board of directors or some other significant role in the company? How much time a week/month do they spend with the founders?

The failure in education is a much harder problem to solve. Is it the traditional silos that are limiting education or is it the expectation that you go to school to be trained for a job or a bit of both or something else? Is the failure the education system (K-12) or is it the students or both? In higher education you have environments that are designed to encourage independent thought that is backed by facts and thinking. You should be exploring and developing your networks.

At no other point in your life will you be surrounding with that much leading edge research and thinking. Just because a school doesn’t hand you your first startup with funding and office space does not mean the education system is failing entrepreneurs!

There is also already a process for very smart people to apprentice under others that have already developed their ability to take massive amounts of information and focus it on an outcome. It also happens to come with a filtering mechanism built right in that improves the likelihood that the person that finishes is relatively in the top few percent. It’s graduate school. The process is not perfect but it is a process that works.

Educating people is hard. Coaching people is harder still. If an accelerator is going to solve the failure of the education system in educating entrepreneurs it should take that part very seriously and not dismiss the education system as having nothing to offer.

A suggested metric: Does the accelerator have qualified educators and coaches that put in a significant amount of time (more than 1 hr a week) with each entrepreneur? Are there measurable outcomes expected on the entrepreneur? Are there consequences for not meeting expectations?

Accelerators should be more than marketing to the entrepreneur and placing them in a zoo for the public to see them in action. Education is serious business and it is about people’s future. Entrepreneurs need to have realistic expectations and enter with a clear idea of what they want out of the opportunity.

Everyone around accelerators is still learning about how to make them work and figure out for whom do they exist. It is an exciting time in education — just be sure to track stuff that matters while you run the experiments!

The Odds are You’re Going to Fail

Now now chief, I'm in the zone

Stay focused! We have this on the wall at GoInstant. Source Mike Mitchell

I mean that in the most constructive way possible!

You’re unlikely to recruit founders, raise money, gain traction, earn revenue, get acquired or go public. You’re very likely to fail.

Here’s How Bad Your Odds Of Success Are

To beat these odds, you need to be doing everything you can to find an edge, especially pre-funding or pre-revenue.

Here are 3 of the most common questions I disappointingly ask early stage startups:

1. You’re not full-time?

It’s insulting to ask an investor for money if you’re not full-time on your startup.

You need to be way beyond the one-foot-in stage before raising a round. If you don’t believe in the idea enough to go all-in, why should investors, customers or your team believe it?

Full-time is the bare minimum. Large companies are working 40 hours a week, with way more resources. How can you accomplish more each day than them? You need to work longer. You can’t expect balance in your life, especially when the team is small. You need complete obsession over work.

Assume there is competition working on the exact same idea. Even if you don’t know about them, imagine them. They are small startups, medium sized companies, and large enterprises. They are working relentlessly. They could launch faster. They could launch bigger. Let the threat drive you forward.

Work weekends, work evenings, pull all nighters. Obsess over it.

2. Where’s your demo?

You need a demo, and it needs to be amazing.

If you get feedback on that demo, consider it then implement it right away. Stay up all night and work on it. There should be at least two of you; the CEO demoing during the day and the CTO working all night to implement. Iterate, iterate, iterate, as fast as possible.

The important thing here is momentum. You need serious momentum. You need an unstoppable train. Your momentum will attract your team, investors, and customers.

3. You have side projects?

Side projects will distract and kill your startup.

You should be working with obsessive focus on one idea and one idea only. Facebook was almost killed by Zuckerberg’s side project.

Side-projects are great for creativity. Many developers have side projects that they use to keep their skills sharp. Many companies have R&D labs or a percentage of hack time. Early stage startups are not the place for side projects.

Write all your ideas down, then get back to focus. Constantly consider priority. What is the most important thing you could be doing right now to move customer or investor relationships forward? Your entire company should be thinking this way.

You need every edge you can get

Your only edge is to find an edge everywhere. Long hours, momentum, focus.

It’s not sustainable, and that’s a good thing. If you can’t make it work then you fail fast. Pivot or fold and try again! If you CAN make it work you can hire enough people to bring back a healthy work-life balance.

Set goals for your team in short intervals. We will achieve X by Y date or we will [pivot, fold, etc].

Remember, beating the odds isn’t easy, but there are many ways to find an edge.