StartupNorth

Year: 2010

  • A vendetta to get you up in the morning

    I always like to say that a little vendetta is healthy for a startup. A vendetta, or keeping frenemies as Mark Suster wrote, can be a positive way to differentiate yourself if you understand the bigger picture. It is risky as part of of a company culture, but when you believe in something enough you can use it to your advantage.

    Now, the term vendetta might be a little harsh at least by the letter of its definition. Perhaps frenemies is a little more more palatable.

    The best playbook on this is Marc Benioff’s Behind the Cloud and Mark covers the rest in his post (especially the advice: Do not actually think your competition is stupid), so I will only add:

    The bigger message has to be positive

    Mark Suster mentioned Marc Benioff in his post. If you dig in on how Marc has positioned Salesforce against the rest of the industry it can, on the surface, seem very confrontational. The truth is that every jab Marc takes seems significant because he draws momentum from his very positive and forward thinking vision for Cloud Computing/SaaS.

    Without that leadership then Marc might have been less endearing, but instead he gave more positive thinking and leadership than he did negative. That meant that when Salesforce did use negative tact (their logo is an example of negative messaging), then it was easy for the customer to understand where that negative message fits in to a larger picture. Without the bigger picture? It’s just negative.

    Know what you are not

    In my most recent startup we were stacked up against a handful of competitors during a “pitch day” to the executive of the customer. It was a “must win” deal for us but it was still a longshot because we were up against some well entrenched competitors who “owned” the industry. The truth is that we had harboured a quiet vendetta against these guys for ages and it drove us to understand their business as much as possible. “Competitive intelligence” was not something we did formally, but I realized at that moment that it had become a small hobby. We would research what the competition was doing, who they had doing it, and how their customers felt about it.

    The end result was that we knew exactly how to position ourselves to differentiate away from the rest of the competition. When the customer thought about the pitches they thought about us on one side and the competition as a cluster on the other. Our value vs. theirs was implied and we didn’t have to spell it out or waste valuable time in our pitch. We knew what they were and what we didn’t want to be. We just had to believe that it was how the customer felt as well.

    Don’t be a hater

    That is all to say: Don’t be a hater. Don’t make it personal. Don’t be vindictive. Love the game of it all.

    In the end: it is a game and if you don’t realize that you will be the first to run out of steam.

    This is all especially true in enterprise software where the customers (nee users) are actually being treated like crap by your competition. A little empathy goes a long way with them.

    A lot of people like to pretend they love their competition and talk a friendly game. That is fine, it is probably your best default position, but when the time comes to walk out of that corner and start landing punches then we all expect you to make them count. Your customers will respect it, your employees will respect it and more than any other: your competition will respect it.

    Just make it count.

  • Making 2011 a BIG year

    2011 is the year for us to find some winners and to make them explode on to the international scene. 2011 is the year for Canada to pull out of the pit and to hit the track hard. It is going to get a bit crazy and you have to decide for yourself whether that is a good thing or not.

    2011 is the year we capitalize on some of the hustle of the last 3 years and when we all focus on building some huge successes.

    For a lot of people 2011 is the year of winning big.

    Economic indicators continue to suck, but it doesn’t seem like anyone cares. Competition is heating up and everyone is ready for a good brawl. Year of gluttony. Present company excepted of course.

    Howard is going to Russia. As an EIR I have been practicing sitting back in my chair, putting my hands behind my head and saying “What’s your China strategy??” (that’s a joke BTW)

    The IPO market will not be back in 2011 though. Frankly, I don’t care.

    You are going to hear less editorial from us at StartupNorth in 2011 because we are going to be focused on the big wins. I am putting my money and time to work in startups that I think are going to KILL IT. Where are you focusing on 2011?

    2011 isn’t about kumbaya for me. It’s about making the best of a good time. We live in good times. I’m not throwing the baby out with the bathwater, but I want to see the baby put to work.

    This is the year to take your shot. Either exit or go big

    Opportunities in 2011 will be outsized compared to what we have seen and may be better than we will see again for another five years.

    The bears are all tired and the bulls will be back to buying. The “early exits” and “talent acquisitions” we have seen in the last 18 months will continue, but we will also be back to some really big opportunities.

    This is the year to take that leap.

    Whether you’ve been working on an OK business that needs scale, or you have a killer founding team ready to come together to attack a huge market, then this is the time to gather resources and to really focus on making it happen.

    Can you do it in Canada? Good teams are going to get funded. Good teams and big ideas. Before you start worrying about your idea, think about your team and how you are going to execute.

    This is the year to try that big idea.

    Whatever you are passionate about, 2011 is the year when people with big ideas will finally be listened to again. No more “that will never work” — it’s going to be optimism and opportunity. People are ready to listen to visionaries again and we need them. Whether it is social change, a new startup or a research project — this is your time to roll.

    If you have been sitting on the sidelines then it is time to get off your butt and make your move. Now or never.

    Losers will be lost

    For some reason people always think that it is the losers that win in “good times”. That’s a load of crap. Bad companies will always be bad companies. They aren’t going to get any further ahead in 2011.

    Focus is still the name of the game

    Smart entrepreneurs will not be focused on valuations they are going to be focused on working with winners, because the wannabes are going to be coming out of the woodwork. Smart VCs will double down on the markets that they know well. This is not the year to spread yourself thin looking for the next sexy deal, it’s the year to double down on deals you understand and that you can ride right to the end.

    Canadian funds need to avoid being used as “runway” in later stage US deals. DIG IN and focus on taking good opportunities from Seed to Exit. Making things is still worth more than buying things.

    I normally hate predictions, resolutions and anything “year end”, but this time I am too optimistic to hold it back. I am already waving goodbye to 2010 and as far as I am concerned it is 2011 already.

  • Why Canada? Habib Kairouz of Rho Ventures explains

  • 5 Thoughts on 5 Things I learned in 48 Hours

    5 Things I learned in 48 Hours – Techvibes.com.

    Some of my thoughts on some of his thoughts:

    #1 The Valley Feel- yes, it is true it does exist and it is unique to Silicon Valley.  That is not to say other areas don’t have a great innovation vibe, far from it! Some other areas have great innovation. But regardless where you are, it is good to stay on top of what is happening in the Valley.

    #2 The Valley Model- This I could take or leave. Yes, the Valley does have a unique VC-backed approach to innovation. But it isn’t the only way to fund and promote start-ups.

    #3- Think Small in Scope, and Large in Market- I love this idea. So true. Focus on what you want to do, do it super-amazing well, and then do what you do to conquer a huge (and growing) market.

    #4- You Can’t Phone It In- You really can’t. It takes work and preparation.

    #5- Be Yourself- Leave the impersonations to the comedians.

    #6- Start Local- I think this is the most interesting and ties in with points #1 and #2. Yes, be aware of what is happening in the Valley. Hell, be inspired by it, but don’t try to copy it (so I guess this ties in to point #5 also.) Find what is unique about your area and then build on that existing strength found, fund and grow your start-up.

  • Cognovision acquired by Intel

    UPDATE: We are hearing that the acquisition price tag is closer to $30m and possibly even higher. 


    Another great exit for the Toronto startup community and some great news in advance of CIX in a few weeks. Toronto based Cognovision has reportedly been acquired by intel. According to DailyDOOH, which covers the digital out of home market, the pricetag was $17m.

    Cognovision was the winner of the CIX pitch competition last year.

    I have to admit that when I first heard the Cognovision pitch, it felt holodeck cool. It also seemed “too good to be true” — Turns out I was wrong and the company shot to ~$1m in revenue pretty quickly. Using a camera on top of a digital display, Cognovision could give you some rough estimates that covered:

    • Actual Impressions – The number of people who look at your displays
    • Length of Impressions – How long people look for
    • Potential Audience Size – The number of people who walk by
    • Dwell Time – How long people stay near your displays
    • Anonymous Demographics – Demographics of your audience (gender and age bracket)

    Congrats to Shahzad, Haroon an the entire team.

  • It's about to get a little crazy out there . . .

    Ok, here’s the thing. The “is this another bubble?” conversation has been going on for a while, and everyone was able to agree that there hasn’t been a bust imminent so far. It might have been dragged out by the sluggish economy, it might have been a function of a lot of effort going in to building actual technology and less going in to building companies, I don’t know.

    But it is clear now that a change has taken place. I no longer talk to breathless and frustrated entrepreneurs who can’t find anyone to do their deal, instead I am hearing from frustrated and excited VCs who are trying to get in to the next hot deal. Personally, I LOVE it. Some really great deals are going to get done that SHOULD get done, but might not have just a few years ago.

    Fred wilson put the stake in the ground today and his post will go down in history as the first one to truly call the bubble.

    Things are going to get wild very soon. This is a great time to be raising capital as a startup. A lot of fundamentals are now either stable or rapidly moving up. From economic indicators (and their relation to the Web) to the creation of new funds. From consumer to enterprise. Things are good, all good. Get out there and build build build!

    NOBODY MOVE

    This is where we can easily start to make mistakes as a community. I have written about our need to think differently about the Canadian startup ecosystem and that feels more important than ever now.

    The first DemoCamps, which were started at the lowest point of the trough between the last bubble and today, were focused on finding the most innovative, interesting and valuable ideas/companies and there was very little focus on anything other than a few fundamentals. Who would pay for this? Why is it valuable? Will you be able to scale it?

    Let’s keep asking those questions and lets make sure we build STRONG startups in the next 5 years. Valuations will rise and the volume of startups will continue to increase, but I believe we can do it in a healthy and sustainable way.

    LPs need to focus on backing funds that can create value in their portfolio, not just the ones that can get them the sexiest deals (at the highest valuations no doubt).

    VCs need to avoid acting like every deal is the deal of a lifetime. We are JUST getting to a place where we can create startups in some quantity here in Canada. Overfeeding the newborns will just mean there is less for the kids who come later.

    Startups need to remember that valuation isn’t everything. A VC who understands your business, your customers and who can stick with you for longer than a few years is going to be critical. Don’t just jump at the first goofball who gives you the valuation you want. They’ll be coming out of the woodwork.

    Chances that anyone will listen to this? Zero.

  • John Ruffolo joins OMERS to manage new Venture Capital arm

    Some great news for Ontario, and the national startup community, today. We are hearing from multiple sources that John Ruffolo will be joining OMERS as Senior Vice President of Knowledge Investing. He will start in the position on January 3rd 2011.

    This position, which is focused on managing direct Venture Capital investments, has been the subject of speculation since OMERS announced that they planned to take a similar direct investment model with Venture Capital as they have with Private Equity deals, which has been a successful model for them so far. Pension and other labour sponsored funds like OMERS have historically taken Limited Partner positions in third-party funds (the VC funds you know and love already) and this hands-on approach is unique in Canada.

    John Ruffolo was previously a Managing Partner at Deloitte’s Toronto office and he conducted the survey of Canadian VC GPs that we wrote about earlier.

    John’s reputation is positive and his knowledge of both the past and current startup and Venture Capital environment in Canada is unique. It is great to see things moving ahead in the development of a new capital source for startups in Canada.

  • Has KIK finally arrived?

    I have been using kik pretty much since it launched last April. It was particularly useful for me because I was spending most of my week in the US at that time and kik allowed me to TXT back home while avoiding Rogers/Fido/Telus/Bell’s atrocious $1/message TXT roaming fees.

    The kik app was always very solid and rarely crashed, but there were often delivery problems, even on kik-to-kik messaging. It also seemed to eat up a lot of battery on the IPhone and Blackberry. Those problems seem to be in the past however and it doesn’t seem to affect my battery life anymore.

    kik seems to have finally taken off. So much so that they are signing up an average of 3 users per second and the team is struggling just to keep their servers online. They have published a few graphs showing their signup volume and it is impressive. The sudden drop resulted from kik having to take their servers offline and their app out of the app store.

    As it stands, kik is Blackberry Messenger, but it works on Blackberry, IPhone and Android. I have tried it on all platforms, and they all seem to be equally good.

    There are a handful of other multi-device messengers, such as whatsapp, and it is hard to figure out exactly what the kik business model might be in the end. They originally talked about some sort of music streaming/sales business, but it is hard to tell if that is still the plan, and frankly I am not sure that my private messaging and music worlds should be mixed up like that.

    Whatever model kik does eventually settle on, it is probably worthwhile for them to focus on continuing the growth they are now achieving.

    Kik came out of Velocity at The University of Waterloo, which we have covered in the past.

  • Coffee, Co-working and Crash Pads in Toronto

    Editors Note: This is the first post by Andrew Peek at Jet Cooper. I love the concept of shared spaces for the collisions of ideas. Albert and I talked about this back at Bubbleshare. I know that it is part of the ethos at the Kontagent offices in SF. And I know it’s part of the culture at Extreme Ventures, where I’m camping while starting up. It reminds me of the “Responsible use of Shared Resources” philosophy from SCS at CMU, basically you’re responsible for not ruining it for everyone else don’t abuse the privilege. The open door policy is a great way to allow for new collisions whether that’s new ideas, new employees, or just new connections. @davidcrow

    Chalks

    If you are an entrepreneur in Toronto, you are probably familiar with the various coffee shops, co-working spaces and wi-fi zones available to you as pseudo-offices. You might even have a pattern of Foursquare check-ins that run like clockwork throughout the week.Steven Johnson refers to spaces like these (noting England’s transition from pubs to coffee houses) as environments where ideas can have sex. At Jet Cooper, we like that.

    While it takes a serious commitment to invent and scale something the size of a CSI (Centre for Social Innovation), it isn’t all that hard to contribute something – even if it’s just a few desks – to the people who might be one good conversation away from a big idea. It’s for that reason that we’ve kept a handful of desks available in our office since day one. Even now, as we plan for our next office furniture re-arrangement, we try to keep in mind the people we haven’t met yet.

    Thinking back on it, it has been a wonderful way of attracting a lot of bright people, which on it’s own is a great way to expose any team to a city’s creative pulse. And realistically, all it cost was a few extra desks and chairs.

    There are no restrictions on who can drop in. You don’t need to be a client, or a partner, or even have a twitter handle. Just stop by and maybe let us know your coming so we can put a beer on your desk.

    Consider this a ringing endorsement for this kind of simple contribution. If you have an office, open the door. The correlation between environments and innovation isn’t a secret and as per usual, more good is gooder.

  • What do Canada's VCs really think?

    If you were to ask Canadian VCs, which Deloitte did this past April, what they think about Canadian entrepreneurs and startups, and the VC business in Canada in general, you might not get the warm and positive response that you expected.

    Based on these responses, Canadian Venture Capitalists think less of their entrepreneurial countrymen than their counterparts in Brazil, China, France, Germany, India, Israel, the UK and the United States. There is, based on this survey, a larger divide between entrepreneurs and VCs in Canada than there is anywhere else in the world.

    • Only 36% of Canadian VCs believe that an “improving entrepreneurial environment” is one of the factors that make Canada  a good place for Venture Capital. That is in contrast to 60-88% of VCs in countries such as Brazil (59%) , China (82%), France (67%), Germany (72%), India (88%) and the UK (59%).
    • When asked which factors contributed to creating a “non-favourable climate for venture capital”, Canadian VCs were again quick to blame entrepreneurs. 47% of VCs said that they believe a “lack of entrepreneurial talent to build a new company” is one of the problems with their industry. Only German VCs were more contrite – 72% of them said lack of talent was a problem. Other countries had far more benevolent VCs: Brazil (5%), China (42%), France (22%), India (15%), Israel (0%), UK (33%), US (6%).
    • Another answer to the question “factors contributed to creating a “non-favourable climate for venture capital”” that generated a big response from Canadian VCs was the idea that “reduced entrepreneurial activity” was a big factor. 28% of Canadian VCs said that they believe there is a lack of activity in Canada, that is in contrast to Brazil (3%), China (10%), France (11%) , Germany (39%), India (0%), Israel (10%), UK 14% and USA (5%).

    Is it possible that Canada is an exception to the rule in the rest of the world? How can it be that Venture Capital class investors in every other type of economy (emerging through to advanced) have a more positive opinion of entrepreneurs in their home countries?

    I decided to put the question to some of the VCs I respect the most in Canada. The folks who I believe are doing good things and who really get it. In these conversations there were a few major themes. Overall, the outlook seems pretty positive, while remaining realistic about our past performance. Nobody would agree with the consensus from the Deloitte report. Some of the responses:

    1. “It’s bullshit”. Nobody was ready to argue that the current attitude toward Canadian Entrepreneurs is justified.  The consensus was that it is the result of a lot of fund managers who got a rough ride and they don’t want to take responsibility for it.
    2. “It’s still early in Canada”. With a few exceptions, Venture Capital in Canada didn’t start until as late as 1995, and when it started it went off with a boom. A lot of money was raised by GPs who were not necessarily experienced operators (an old complaint). There are two common conclusions from this: We need new GPs who are experienced operators and We need to back the old GPs because they have finally learned their lesson
    3. “We are finally seeing a crop of 2nd-timers”. “Reward failure” is a popular refrain. The idea that entrepreneurs need to learn from doing is well established, but we haven’t seen the cycle of entrepreneurs here in Canada that we could really use. This was something that practically everyone expressed no matter how positive they were. This is a fundamental change in the entrepreneurial landscape in Canada.
    4. “The talent is here”. Canada has good product related talent. We need to focus on keeping that talent here and to build our capabilities in international marketing and channel development. “It really needs some work” is hard to argue with, but is it an industry breaker? No.
      The recent growth of seed funds in Canada is also helping to address many of these concerns. These funds are accelerating the pace of learning for new entrepreneurs so quickly that many are becoming high-quality second-timers within a few years and a very small amount of capital. This brings them back to the table with their hunger and some talent.

    Let’s move on

    This “blame the entrepreneur” attitude is now worn out. Whatever truth there is to it is in the past. Canadians are as, or more, connected to the internet than any other country and Canadian entrepreneurs no longer sit around learning from other Canadians, they are learning from a global A-list.

    In the end this is all to say: It isn’t as simple as pointing a finger and laying blame. Nobody is squarely blaming the VCs of the last 10 years for our problems, and it is similarly wrong to throw dirt back at Canada’s entrepreneurs.

    The lifetime of Venture Capital in Canada has been short and it could be argued that practically every economy must go through a “churn” phase where the asset class underperforms before a handful of factors come together in order to create a healthy industry. With some new funds starting to close and a mix of new and old blood actively trying to do the right thing, we might just have a shot at this.

    I leave you with some thoughts from Howard Gwin that I think show a fair balance of both blame and optimism for everyone involved and it contains some antidote for what’s going on. Read it in its entirety here.

    Where do we start?

    I am a “double down” kind of person.  Anybody who has worked with me has heard me yap about 80/20/80.  I think we need an 80/20/80 attitude in the Canadian tech marketplace.  We need to focus 80% of our energy on the 20% of companies that have an 80% chance of succeeding.  Set much higher bars across all of our ecosystem from mentors, to angels, to incubators, to VCs, to board members, to anyone providing advice to our community.  A few more thoughts:

    * Mentors must bring value or stay out of the game.  If founders are not coachable, move on to the next opportunity.  If VCs do not bring value beyond money, do not engage with them.  If incubators are coaching, set much higher bars for the outputs your companies produce or shut down.

    * Funding “good companies” does not work.  We need more $ in potentially great companies. Whether we are funding pre-revenue companies with seed $ or growth equity, the bar must be higher.  At a minimum, here are some high-level standards to measure potential of success independent of stage:

    • Big frigging market – no debate.
    • Massively differentiated value proposition that’s not  we are smarter, nicer, cheaper, faster etc.
    • Significant competitive barriers to entry.
    • Tailwind versus headwind – the market is out looking for a solution.  “Market makers” make good road kill.
    • Excellent team that’s open to coaching.

    If there is ambiguity over the above, the ecosystem needs to either address it or move on.

    * Post-seed VCs must spend more on less.  Work the models so companies can get through the troughs — or don’t fund them.  Available capital in Canada for venture is not enough, so we must spend our capital on the best and brightest or nothing will change.

    Founders, do not fall in love with your product or your people.  Before you talk to anyone about funding get experienced people to rip your strategy and pitch apart.   You only get a few chances to get it done so make sure they count. Network like there’s no tomorrow.  Gather people around you who have proven “big league” execution skills.  Talk to everybody who can spread the message and bring value.  Get yourself down to the Valley. Cold-call and get connected to anyone who can make your business move faster and smarter.  If you don’t your competitor will.