Year: 2008

April Fools: We are funded! StartupNorth takes a $3.2 million series A financing

Well, the time has arrived. We can finally take the covers off of what we have been working on and give you an idea of where we plan to go with StartupNorth.

Today we are announcing that we have taken an initial round of financing to expand StartupNorth, launch new startup focused projects and to further expand our blog-related publishing business. Most of you are aware of our first addition to the SUN network: wirelessnorth.ca

Our new CEO and former Microsoft employee David Crow sums it up best:

“Running a startup community has been very lucrative for StartupNorth (now known as SUN, INC) in the last year and we feel that we have been leaving a lot of money and opportunity on the table. In order to maximize the potential and reach of our media properties and to enable further growth in to other markets, we have decided to take this round of funding. To further accelerate this expansion, we have acquired several blog networks, including a Canadian one, and we will be announcing that formally quite soon”

In a sense, this is eating our own dogfood. We encourage startups to take as much money as they can early on in order to grow as rapidly as possible, which will bring with it a solid business plan. By expanding rapidly and letting the business plan emerge, we believe we can show fellow Canadian entrepreneurs how to do it, and our new VCs, Apprentice Partners from London, UK and placements from two Canadian pension funds, have helped us make this decision.

Jonas and I would like to thank all of you for your support in the last year. Without you guys, we couldn’t have done this.

Everyone welcome David aboard. And remember: with all this money, we’ll be hiring soon!

March 31, 2008
iNovia launches a new fund – Seed and early stage venture capital

iNovia is announcing their new fund today. The new fund, which comes in at $107million is focused on Seed and Early Stage deals in the information technology, life sciences and cleantech sectors.

iNovia, who most recently participated in the funding of StandOutJobs, has been engaging the startup community pretty directly lately and are usually visible at events like StartupCamp, blitzweekend and others. iNovia promotes itself as “Entrepreneurial Capital”. By they mean that they come from diverse and relevant backgrounds. Instead of being full of ex-banker, iNovia tends more towards entrepreneurs and people with experience working with startups.

With its recent additions, the iNovia Capital management team now comprises a diverse group of professionals, all of whom have operational or financial backgrounds, coupled with strong technical and business expertise. iNovia has also established a network of Venture Partners and Entrepreneurs in Residence, who provide industry insight and expertise, along with access to a large network of collaborators.

“Entrepreneurial Capital” can mean something else as well, and I think iNovia just might deliver. My definition of “Entrepreneurial Capital” is an Angel or VC who is just as hungry and hustles just as much as any startup. From coast to coast we hear complaints about poor dealflow for VCs and that this hurts their business. This may be true to an extent, but it is about to get a lot worse for those VCs who don’t show that same Entrepreneurial Spirit. Firms like iNovia, Montreal Startup, EVP and others are all going to be scooping up more and more of the best deals at very early stages simply because they will be engaged closely with the very communities that are giving birth to these startups.

Technology Venture Capital is a startup business in Canada. It is young, the players are largely inexperienced and the market is small but emerging. This is a good thing. If you are a VC with money to spend, you can still win. There is a massive community forming that is almost exclusively to your benefit and that community is working harder than ever before now.

We will be watching iNovia closely to see if they live up to all my hype.

March 27, 2008
Angel financing – Term sheets (part 1)
A term sheet is used to outline the main terms under which investors make an investment in your company. It is usually introduced part way through the due diligence process. A typical sequence of events (assuming this is your company’s first outside financing round) would be:
- You make your investment pitch to a group of angels
- Interested angels form a due diligence team and start due diligence activities
- At some point in the due diligence process, if angels reach a comfort level in the investment opportunity, they will introduce a term sheet to start the dialog on the conditions under which they will invest
- Due diligence investigation into the company will continue in parallel with discussions on the term sheet
- Once both activities reach a satisfactory conclusion, the legal paperwork will be drawn up for the investment, the papers will be signed, and the funds will be transfered

An important thing to understand about a term sheet is that it is not necessarily a binding document. Meaning just because the investors and the company have reached agreement on the term sheet (which outlines how much money will be invested and under what terms), investors are not bound to following through with the investment. The main point of a term sheet is to ensure both sides are comfortable with the terms under which the investment will occur. As discussed above, this is usually introduced part way through the due diligence process – when investors have a comfort level in the investment but before they have completed the full due diligence process. Investors will want to get a term sheet on the table so they can ensure both sides are comfortable with the terms of the investment. i.e. there is no point to spending the time to finish a full and detailed due diligence investigation, only to find out at the end that the investors/company cannot agree on the investment terms. So just because you have a term sheet from potential investors, don?t consider the investment a done deal.

Although the term sheet is not necessarily binding, if the investment proceeds to closing it will be used by lawyers to incorporate the terms of the deal into the closing documents, shareholders agreement, etc. So it is important to ensure you understand and are comfortable with the contents of the term sheet before you indicate acceptance of it to the investors. You should get legal advice on the term sheet as it will most likely contain conditions on board makeup, management oversight, voting rights, etc. These conditions will be incorporated into your company’s shareholder agreement so will impact all current shareholders of the company. Depending on how your current shareholder’s agreement is written and how many shareholder’s you have, you may need a majority of your current shareholder’s to approve any new changes to the shareholder’s agreement to accommodate the new investors. Part of good investor relations is to ensure your current shareholder’s are aware of your financing activities and are on-side with the implications of new investors and how it will impact them.

In my next article I will talk about some of the common terms usually found in a term sheet. To view an organized index of all angel financing articles as well as sees a roadmap of future articles, click here. If you have any comments or suggestions for future articles feel free to contact me: craig at mapleleafangels.com

March 25, 2008

StartupCamp Montreal 2 – May 15th, 2008

StartupCamp Montreal 2 has been announced. It is taking place May 15th and will be at the SAT again. I am a little sad that I will have to miss it because of another conference, but that doesn’t mean you can’t have fun!

Make sure you sign up, and if you are a startup, you should consider presenting. StartupCamps are one of the few places you can get no-holds-barred feedback on your business plan. If you are interested in presenting, add yourself to the wiki.

Date : May 15th, 2008
Time : 6pm to 10pm EST
Location : SAT – Société des arts technologiques

They are really stepping it up for this event as well and will provide a bunch of help and support for the startups that are chosen to present.

1) The top five startups selected to present at the event will have the opportunity to participate in a one-day pre-event workshop session. The goal being to have ?pitch? experts help the companies prepare ahead of the event. The workshop will be hosted by Austin Hill, John Stokes, Vincent Guyaux, and 2 other VC / marketing experts.

2) Presenting companies will have 8 minutes to present, with 10 minutes of follow-up questions from the event Gurus and the audience.

3) We will have ambassadors on hand prior to the event and during the event to help with match making and networking.

Weekend Reading – March 23rd 2008

We use the weekly reading post to link to things we didn’t cover, but are probably worth hearing about. If we are missing something, please post it in the comments below!

Capazoo lays off 60 employees and closes shop (Make sure you read the comments!). Also, Valleywag linked to us in their post about the collapse.

DemoCamp Edmonton is set for March 26th and it’s looking great.

OCRI is sour, grapes by David Crow, and a response: No ‘sour grapes’ for OCRI

ICE08 is taking place this week in Toronto

Rick Segal announces tour dates [lessons for VCs]

Rick Segal is going on tour. The idea? Get the message out there about what he, and other VCs, are looking for when they evaluate new opportunities, and help entrepreneurs get a better understanding of what VCs try to do. He will also be providing some useful tools, like sample term sheets.

This comes as there has been more publicity about the performance of private Venture Capital funds in Canada, and a significant amount of discussion about whether or not it is a good idea to start a company in Canada.

There is definitely a perception out there of VCs in ivory towers who expect everything to come to them. This is in stark contrast to the attitude that most entrepreneurs encounter when in the valley or elsewhere with a strong VC ecosystem. You get used to seeing VCs out at practically every community event, listening closely and watching as entrepreneurs grow. Those traits are rare here. As someone said to me recently “In any other business, if you complained you had no customers, everyone would tell you you are an idiot. We need to get out there an hustle, we need to find those customers.”

What Rick is doing is an example of how you can get out of your tower and start mingling with the plebs. The fact is, Canadian VCs aren’t poaching all sorts of great deals from other places, instead they rely on Canada to produce investible startups, and the best way to recognize that is to get involved and to take a long-term view. Venture Capital is only one piece of a big picture, but it is critical that VCs begin to mature along with our Angels and Entrepreneurs.

There has been a significant amount of anti-VC sentiment in the Canadian startup community and it is probably more related to a feeling of VCs being an unknown than anything else.

Here are the dates that are set up so far, starting on the east coast

April 14th Morning – Halifax NS
April 14th Evening – Moncton NB
April 15th Evening – St John’s NF

If you want to register, email rick at jlaventures dot com with “VC Roundtable” in the subject.

I love my city, and so should you

There are dozens great cities in this country that I love to spend time in, these are cities that are making an impact on the world and which get noticed by the world. Montreal, Ottawa, Toronto, Vancouver are the headliners with Calgary, Victoria, Edmonton, Saskatoon, Waterloo and Halifax all staking their own claims to greatness in unique ways.

There have been a lot of blog posts lately talking about how someday a Canadian city can be our Silicon Valley. Toronto or Montreal have been the most vocal in trying to be recognized as a great valley equivalent, and even Vancouver seems to have jumped in the fray. The bidding is in comparing the communities of each city, and the prize is the title of being the Startup Hub of Canada.

The point is being missed completely, and I have a surprise for everyone.

The way I see it is that our job here in Canada is different, and we should stop wasting time trying to become Silicon Valley (who really uses that term?): Canada will never have a San Francisco. We will never have a Silicon Valley, we won?t even have a Boston or a Seattle. We won?t really even have a Boulder.

The opportunity for Canada is first to build strong communities individually, and then the job is to build strong connections between those communities. Canadians (who are still here!) are different from those who flock to San Francisco in search of the holy grail. Canadians love their own city, and they aren?t very excited about the idea of all making their way to another city in search of success. Most of us will choose to make a go of it in our own backyard, where we are connected to our great communities and where we feel like we can all have an impact.

We need to compete fiercely with eachother for the prize of being the top city to build a startup in Canada, but we also need to start creating a larger ecosystem where we can can the egos and start to make connections.

I regularly impress myself with my own ignorance of what is going on in Vancouver especially. We constantly miss great stories just because the connections are so weak. Hopefully this blog can start to change that, but what is more likely is a tightening connection between BarCamp communities across the country.

Open, Creative and Connected Communities are the next Silicon Valley. No city will be able to compete.

TSOT gets started with Greeks

TSOT, based in Toronto, has been working since 2006 on building out a membership management system. Their strategy differs from more generalist solution providers like Ning and Toronto based Wild Apricot in that TSOT started out focusing on Greek organizations.

Fraternities and Sororities pride themselves on their membership rosters, so it makes sense they might want to migrate from a spreadsheet that could easily be lost when someone spills a beer on their laptop, to a web based solution to manage their chapters and alumni. In pursuing this market TSOT sought the approval of a Greek Licensing body to kick start sales.

TSOT’s product, Fraternity Live, looks and feels a lot like Facebook. Each member gets a profile page, photo album, and status updates. Each chapter resembles a group with admins, group messaging, and unlike Facebook finance and calendar pages. Fraternity Live even built a Facebook App, which like just about everyone else’s is a disaster (3 daily active users). For all the similarity, Fraternity Live is unlikely to approach stratospheric social networking site valuations. Why? At least for now, TSOT is in the business of selling websites, which significantly slows adoption. While this is certainly something one can make money at, the market is rewarding eyeballs, creative monetization strategies, and horizontal web services.

Like many startups, TSOT struggled a bit nailing down their business model. The original plan was to charge Fraternities and Sororities a subscription fee. Then TSOT explored offering the service free and monetizing views with banner ads. Unfortunately for TSOT, Facebook rules the roost; it seems despite all the private Greek functions, frat boys and sorority girls want to hang out with everyone else on campus. So TSOT is back to charging a setup fee and annual subscription.

TSOT plans to take its platform into other verticals later this year. In doing so they will be swimming into deeper more competitive waters. Affinity Labs, a provider of niche social networks organized around jobs like police work and nursing, hit a $61M payday when Monster acquired them. Affinity Circle, with whom TSOT competes directly, is forging down the job listing monetization route. It will be interesting to watch TSOT experiment with their business model and the openness of their system’s social graph.

CIX – Canadian Venture Capital Meetup

Back in June, StartupNorth was one of the first places to break the story of the death of the Toronto Venture Group. Every year the TVG had an event called the “Venture Forum”, which died when the TVG was shut down.

It didn’t take long for the gap to get filled in however, and soon enough the CIX was announced. The premise is largely the same: Companies are pre-selected to pitch a room full of VCs who will presumably think about funding some of them. You need to apply to present, and then your company will be vetted by a selection committee. The cost to attend and present (if you are chosen) is about $1,000 in total, or $495 if you are just attending.

Is CIX worth attending?

This conversation got kicked off today on David Crow’s blog after David posted about CIX, Ali Asaria, the guy behind Well.ca, suggested that $500-$1,000 was actually a lot of money for a startup, no matter what stage they are at.

It is true, $1,000 is a lot of cash, but the truth is: it isn’t too much. The question here isn’t about money, it is about value. Will you get anything out of 2 days in a conference full of other people who are trying to make this ship sail in Canada? I think you will. The thing is: It is completely up to you. You can find the agenda for the two days here.

To make the best of this event you need to come at it with the right frame of mind: Make as many connections as possible, tell as many people as possible about your startup as you can, and finally, get as much advice as possible.

In the run up to CIX we will have a few posts about kicking butt at CIX, for both the VCs and the Entrepreneurs.

StartupCamp

There is also StartupCamp, which we are putting on for free during CIX. We decided to do this because it will give a chance for the startups presenting at StartupCamp to get exposure to a crowd that doesn’t always come out to these events.

Where companies that present at CIX will be somewhat established and will have already figured out their pitch, StartupCamp is for companies who are still trying to work out the details of their business plan.

You can fill out this form to apply to pitch at StartupCamp. We’d love to have some unknown but awesome startups to show off!

You can register for CIX here.