StartupNorth

Year: 2010

  • How to pitch to corporate VCs

    One way to segment  the world of  VC is into two camps: (1) financial investors and  (2)  corporate investors. My guess is that a lot of the VCs lurking around here are what you would call financial investors; meaning, they take other people’s money, invest it in start-ups and try to make more money.

    But there is the other type of investor, the corporate ones. These investors tend to work for a large corporation and invest the company’s money. Their goals are also to make a lot more money off of their investments but they are also tasked with producing a strange and esoteric thing called a “strategic return”.

    In a nutshell, these investors have to invest to make money, and to make their company smarter by learning from you, the clever start-up.

    For start-ups, having a corporate VC as an investor can have many benefits if the relationship is correctly managed including credibility, access to the corporations sales and engineering teams,  access to go-to-market channels, and opportunities to conduct joint R&D.

    So it is important that start-ups realize that pitching to strategic investors is not like pitching to financial investors. So here are a few ideas to get you started on your corporate VC pitch:

    1. Prepare a pitch: Sounds obvious, right? You’d be amazed at how many start-ups show up without a pitch. I guess  they think they can come in and talk shop for 30 or 45 min and that will be enough to land a deal. It isn’t. Show up prepared and ready to go.
    2. Know the company’s investment thesis: Companies aren’t shy talking about their investments, so there should be a lot written about past deals. Don’t come in with a canned investor pitch, read up on past deals and come in with a pitch tailored to the company’s investment thesis.
    3. Tell them why you’re relevant: Corporate VCs often have to get support from a BU for a deal, so help them position your company with the BU. Figure out which part of the company will be most interested in you and explain that in your pitch.
    4. Better yet, have traction: Come in with a history of working successfully with a BU. Show how investing in you will help you scale/innovate and make the BU relationship even more successful
    5. Don’t come in as a competitor: If you’ve built a competitive product that is better than theirs (or so you think), don’t think you’ll get money from them to keep you off the market. They won’t invest in you. They’ll probably just try to crush you. It is easier.
    6. Come in as a partner: If you and the larger company are in the same space, it doesn’t mean they will necessarily be interested in you. “You do software, we do software” is not a compelling reason for a corporation to invest.  Rather, tell them how your software (product, service) will help better position their software (product, service) in the market.
    7. Finances: Oh yeah, nothing drives corporate investors battier than being treated as  dumb money. You’ll need to come in and talk strategic alignment, but very soon the conversation will turn financial. Remember, these people live and breathe your markets every day,  so they can tell if your market sizes/growth assumptions are for real

    Meeting with corporate investors can be a maddening, time consuming process. They will ask a million question not only about your business, but on how your business relates to their business. So you need to know your business cold and their business cold. But if you come prepared with insight and some existing wins under your belt, this crazy process may have a profitable outcome.

  • Toronto community mourns passing of angel investor

    Paul Maasland from CBC
    Paul Maasland source: CBC & OPP

    Local angel investor Paul Maasland was murdered, his body was found north of Toronto at a public boat launch. We extend our deepest condolences to Mr. Maasland’s family. And our sincerest concerns go out to his friends and colleagues at Maple Leaf Angels and his investments (according to Mr. Maasland’s LinkedIn profile) including:

    The conversations with his investees shed some light on Mr. Maasland as an investor. From one of the portfolio companies CEOs:

    “I’d just say he was very generous with his time and resources and provided great input into how we ran [company removed]. He always was positive and excited about the initiatives were were doing.”

    These comments were repeated throughout Mr. Maasland’s portfolio. He was a knowledgeable, generous investor that provided useful guidance and support for his companies.

    This is an unexpected situation for anyone including many startups. It opens questions for startups about succession planning for Board Directors, questions around the Shareholders Agreement and the shares of a deceased investor. Hopefully most Boards are experienced in succession planning. As the shareholders change over time with new investment, replacing board members is a fairly straightforward and common practice (albeit usually under very different circumstances). Regarding what happens to a deceased investors shares this is decided between the deceased’s estate and the shareholders agreement. If an estate needs or chooses to liquidate the investment, many shareholders agreements have a clause that allows the company or other shareholders to purchase the investment at Fair Market Value. There are tax and legal considerations, so this should not be considered tax or legal advice, please consult a professional.

    It’s unfortunate for our small close knit community to suffer such a sudden, tragic loss. We are deeply saddened to hear about the loss of a member of our community.

  • Year One Labs launches

    Year One LabsIn case you missed it on TechCrunch, Year One Labs launched today.  Year One Labs is a startup incubator/accelerator in Montreal with a great team: 

    This a team that is deeply steeped in the Montreal software/internet/infrastructure startup scene. They have a combination of deep technical chops plus the necessary hands-on operations with early stage companies looking for a scalable business model with customers.

    If this isn’t enough they’ve surrounded themselves with great advisors including Dan “I’m Everywhere Man” Martell, Rails core team member and Shopify founder Tobias Lütke and others.

    The Year One Labs Program

    It’s an interesting program that provides:

    • $50k, issued in tranches based on milestones
    • Four partners who will work alongside you and your team
    • An international network of mentors
    • Direct access to Angel investors and VCs, both 1-on-1 and during our Demo Day events
    • Free rent, Internet, coffee etc. in the Year One Labs space

    In exchange for “a minority stake in your startup, typically between 10-20% under standard Series Seed terms”.

  • DemoCamp with Fred Wilson

    Mark your calendars.

    Fred Wilson of Union Square Ventures will be keynoting DemoCamp Toronto # 27 on October 6, 2010.

    EquentiaHow did we pull this off? Well the big shout out goes to William Mougayar at Eqentia, this would not have happened without the support and efforts of William. In case you haven’t seen Eqentia, they power custom portals for media monitoring, competitive intelligence, knowledge tracking and more. They power two sites that I use daily to track the Canadian emerging technology scene: CVCA and NextMontreal news widget.  We’ll be launching a full Eqentia powered news portal in the next couple of weeks.

    The full details about DCT27 are still being locked down. The venue is still to be determined. The venue is the bulk of the ticket price. The goal with ticketing has always been cost recovery and we’ll aim to keep tickets inexpensive (current model show about $25/person less for students). Fred Wilson, Union Square Ventures

    DemoCamp Toronto 27 Details

    • Date: October 6, 2010 [Hold the Date – iCal]
    • Time: 11:30am – 3:30pm
    • Location: To be determined
    • Notify me when tickets are available

    I want to demo! Pick me, pick me!

    We’re also looking for up to 5 local demos that match the investment thesis at Union Square Ventures. If you think your company has the right stuff then you should apply to demo.


  • Startup Weekend Toronto September 24-26

    This is a guest post by Startup Weekend Toronto organizer Chris Eben.

    Let’s build some more startups in Toronto! According to StartupIndex, the GTA has 325 startups – by September 26, we might be able create 10 new startups in Toronto.

    Startup Weekend, a 54 hour event in which teams go from idea to launch to pitch in a weekend, comes to Toronto September 24-26 at Ryerson University through StartMeUp Ryerson. Check it out here and get registered while tickets are still available.

    The only way to determine whether entrepreneurship is for you is by actually going for it, and Startup Weekend gives you that opportunity. Going from idea to pitch requires working on every facet of entrepreneurship – researching a market, articulating the unique value proposition, competitive advantages, user acquisition strategy, business model, building the prototype, and more. You will work on and learn all the critical things you should be thinking about when starting a company and get practical experience.

    After the weekend, you can continue working on your project making it your path to entrepreneurship, or you can take what you learned during the weekend and apply it to your next venture. Over 36% of Startup Weekend companies are still alive after 3 months, and over 10% of companies go on to produce revenue or get seed funding.

    Startup Weekend is a great way to network with other passionate entrepreneurs and find potential co-founders. During Startup Weekend, you will not only meet some talented individuals, you will get to see how they work, helping you evaluate the potential for long term fit. Interaction and exchange of ideas between different teams is common which means your networking opportunities are not limited to your immediate team.

    Every Startup Weekend participant walks away learning a lot about startups and making some valuable connections. There is a great line up of speakers:

    • Mike McDerment, CEO of FreshBooks
    • Mark Ruddock, former CEO of Viigo (bought by RIM)
    • James Lanthier, COO of Mood Media
    • Sarah Prevette, CEO of Sprouter
    • Tim Smith, CEO of GridCentric
    • April Dunford founder of Rocket Launch Marketing
    • Leila Boujnane, founder and CEO of Idee Inc.

    They, along with a growing list of other experienced folks from the local community will be involved as mentors and judges to help teams during their weekend journey and provide constructive feedback. Attendees will take away valuable lessons to be applied to their current projects and anything they do in the future.

    While Startup Weekend is a non-profit organization, there is a cost to the event to cover expenses.  StartupNorth readers may use discount code “StartupNorthSWTO” for a significant discount.

    Follow @startupwkndTO and #swtoronto for news and updates leading up to the event.

  • Learn to get burned

    Picking co-founders and early employees will always be one of the scariest things you do. Even as you are doing it for your 3rd, 4th, 5th of 15th time, you never feel like you are getting better at it, you just start to get a bit more paranoid and careful. There is however a certain breed of entrepreneur out there who have a little more grit in their teeth. Their wrinkles are a little deeper, and their eyes just have that look of intensity that not everybody has.

    Who are these people? These are the battle hardened fighters who have been through the wringer and they have survived. They are the ones who have learned to get burned.

    Getting burned can come in many different forms, but a few stick out in my mind:

    • The useless co-founder
      Smart, fun, caring, prompt. They have all sorts of good qualities and it seems like all of the elements of a great co-founder are there, but when it is time to focus and execute, they start to flake. It isn’t a straightforward flakiness either, it is an awkward, confused and maddening unreliability that makes it even worse. Not only are they not delivering, but the excuses are insulting. They still talk a pretty good game at times, but under the surface you are getting angry.
    • The over-sold employee
      You are a startup but you are growing. You are hitting that stride (10-20 employees) where you need a few great managers. You need someone who is seasoned enough to navigate the ins and outs of a growing employee base without having to come to you all the time. The truth is that you are still running pretty lean though, and these folks cost a lot of money, so you end up with someone ambitious but inexperienced. Sales managers, biz dev, marketing, wherever you put them the result is the same: They oversold their skills as a manager and you’ve been burned.
    • The big team
      You came up with a killer product with a few friends and it seems like all the right people came to the table at the right time. Before you know it you have a founding team or 4, 5 or 6 people. You love them all and it kinda feels like college all over again. Everything just works at first and you get off to a pretty good start. You’ve been burned. Big founding teams become unwieldy and as time goes by different personalities start to accentuate. If you get the mix just right then big teams have some potential, but that usually means getting at least one person out of the mix. If you are starting up with a big team then you have to be ready to get burned, or to recognize when you are the one doing the burning.
    • The “operational investor”
      “I spent 10 years as a CEO before I became a VC” “we only do strategic investments where we can help move the company to the next level for a win-win and synergies with our portfoliotized group of investments” “I am an angel investor because I like to stay close to the company”. Most investors will try to sell themselves to you with some promise of value-add. You’ve seen The Dragon’s Den, Kevin O’Leary would be ready to promise his expertise to an oven mitt knitting startup in exchange for “50% of the action”. Most of these guys are full of crap and the ones who aren’t are golden. If value-add is part of their pitch to you, then make them prove it will happen.

    Both sides lose
    When you hear about someone getting burned you have to remember that the story is never what it seems. There are two sides to what is going on and there will always be a bit of truth to each story. Like in any relationship things get messy during a divorce. People say things they shouldn’t, and it is easy to try to hurt eachother. A “I have to win” mentality can take over and it is hard to shake. If you are on the other side of a vindictive co-founder or employee then it can be hard to look past it.

    You can try to win all you want, but everyone loses. What makes the difference is that some people pick up and focus on what’s next, while others sit and stew. I have done both and believe me, you don’t want to be doing the latter. Those who sit and stew once rarely do it again however, because it is just as painful for them as it is for everyone else.

    Avoid the inevitable
    I asked Rob Hyndman, a Toronto based lawyer who works with a lot of startups, what you can do when you are forming your company to help prepare for getting burned. It might feel overly pessimistic, but the more seasoned you are, the more willing you will be to plan ahead.

    It’s very hard to deal with relationship problems if you don’t have the right structure set up in advance, and you burn a lot of cycles trying to nudge people in the right direction if you don’t have the means to force them to it when you are ready to act.

    Having your energy drained by an ugly divorce is one of the surest ways to sap your enthusiasm for your mission and keep you too distracted to tend to what needs to get done. These relationship problems are one of the biggest early risks that you can minimize with proper care in advance.

    Shareholders agreement provisions like founder stock vesting, and provisions that ensure that founder disputes can be resolved, including with the departure of people who aren’t “working out”, are useful approaches to resolving relationship problems.

    Don’t waste time
    Learning to get burned isn’t about getting burned over and over again, it is about seeing it coming before it happens and heading it off in advance. You need to pick carefully and have a backup plan in place. When it does come time to break it off with a bad partner you need to make it clean. Specifically

    • Be up front: No letters. No emails. No phonecalls. Don’t hide behind a lawyer. This is face-to-face stuff. If it means flying halfway across the country on a Saturday to do it, then you do it.
    • Be sure and be clear: Assuming you have done more than enough to give them a chance to either find a role that works for them, or to do the quitting themselves, then it is time for you to do the hard work for them. When you are being “up front” you also have to be clear: It’s over. It’s over and this is why. State your reasons clearly but don’t talk down to them.
    • Be humble: Like it or not, you screwed up as much as they did, and you are going to be the one left holding the bag of crap. You are not righteous. Take responsibility for what you got wrong.
    • Work together: Especially with co-founders and early employees. You asked them to buy in to something that you wanted to create. Like it or not at some point you sold them on this and they bought in (I know that is true, because you are the one doing the firing now). Work equally as hard to find a way out that makes sense for them and does the minimum amount of harm to their future (and in turn, yours).
    • Work for eachother: In every case it will be a net-benefit to both sides if both sides have a bright future. Work hard to make sure that eachother are successful. This takes an incredible amount of maturity and foresight, but as long as you are building something of your own, you won’t feel like you are missing out on what your former partner, employee or employer have gone on to build.

    It sucks, but it is going to happen to you at some point. Learn to get burned.

  • John Philip Green joins CommunityLend

    Big news in the Toronto startup community today. John Philip Green, one of the founders of LearnHub.com, has joined CommunityLend.com as CTO. We have covered CommunityLend in the past as they have worked around regulatory hurdles to become the first provider of peer-to-peer financing in Canada. They have raised over $2.5 million to date.

    John has helped to advise CommunityLend from the very beginning, so this seems like a natural fit. I am a bit disappointed that he won’t be working on a new startup of his own, but it is great to see him end up at such a high-potential Toronto startup.

    Savvica, which John founded with his wife Malgosia, has been growing quickly and is back primarily by  Shantanu Prakash, the founder of Educomp Solutions. John and Malgosia have developed significant operations in India, with over 60 employees there at present, and a headquarters in Toronto. Savvica and its sister sites have evolved significantly in the last few years and now includes Learnhub,  JumboTests, Nuvvo, Studyplaces and EduIgnite.

    CommunityLend, who announced John’s joining today, is the only provider of peer-to-peer financing in Canada.

  • iStopOver and PlanetEye merge raising $3M

    iStopOver, the peer-to-peer accommodation rental marketplace incubated by Brightspark, has merged with PlanetEye, the interactive travel guide spun out from Microsoft Research – in the process raising a round of up to $3M from GrowthWorks and JLA Ventures, PlanetEye’s original backers.

    The merged company is adopting the iStopOver brand and will focus on expanding the rental business. iStopOver is poised to launch in new markets, having recently validated its model by facilitating thousands of bookings (valued at $1.25M) between hosts and guests during the South Africa Soccer World Cup. It is free for hosts to list a property, iStopOver captures a booking fee of 6-15% on each reservation.

    iStopOver’s Anthony Lipschitz will serve as COO and Mark Skapinker as Executive Chairman of the company. PlanetEye’s Jonah Sigel, who will continue on as CEO, shared his thoughts on the value PlanetEye brings to the venture in addition to its development team and portfolio of patents pertaining to interactive maps:

    The unique ability to show a potential customer everything they want to know about a specific area, the restaurants, the events, the attractions, social media happenings and more will help that customer make a more informed booking decision.

    With greater resources to invest in development and marketing, iStopOver is well positioned to compete with AirBnB in this emerging online travel segment.

  • Lessons from C100 Mentoring in Toronto

    We wrapped up another amazing C100 Mentoring (C1M) session the other week with mentors in San Jose talking live and in-person to a group of great companies in Toronto via Telepresense. As with all of these “TP” meetings, the wonder of the technology quickly melts away and the groups on either side of the video wall were able to really get down to business.

    We were fortunate in this last C1M session to have Rick Spence of the National Post sit in on the session and he shared his main take-aways in a recent article headlined:  Startups get face-time with Valley veterans.

    It is always interesting to read what main points a third party to a C1M session zeroes in on. From Spence’s point-of-view (with some of my commentary) the main things that the recent C1M start-ups need to think about are:

    • Keep it quick; or as he put it “sum up the pitch early.” He highlights that companies need to perfect the elevator pitch. Say what you do quickly and simply. Spence says 30 seconds but I would argue that event that is too generous for the real world (we give you some leeway in C1M, so 30 seconds is OK.) Out there, keep it to 15 to 20 seconds and keep it punchy!
    • K.I.S.S me! That’s right, when you’re out there trying to explain what it is you do, keep it short, sure, but please also “keep it simple, supplicant”* If your technology or application or web service or whatever cannot be explained in simple language then what you are doing is either (1) too esoteric for these crude Earthly market or (2) not explaining it right. If the answer is (1), you’ve got bigger problems but more often the answer is (2) and you need to step back, detach yourself from your product/service, and figure out how to articulate your value-proposition in a simple, compelling manner
    • “Focus, Focus, Focus”- I won’t add any commentary here. Just focus on those three words and the point is made
    • Note when I said “K.I.S.S. me!,” specific reference was made to articulating a“value-proposition,” that was on purpose. Sometimes we love to talk tech and how great our little service or gizmo works. If you’re after engineering brownie points, that approach works great. But if you’re after customers, forget the tech and focus on value.
    • Sales is what it is all about. There is only one group of people that can make any business successful, start-up or otherwise. No, it isn’t investors, partners, or event the founders themselves. The only group of people who can make a company a success is customers and securing their support is called selling. Make sure you find someone who knows how to do that.

    These insights are a very good summary of the conversation across all three companies. We touched on each of these points in one way or another with each company we met.

    In addition to the points listed above, the mantra that I was repeating for each company was segment and prioritize.

    I know that a lot of new companies have to throw whatever they can against the wall and see what sticks. That approach has its place, but it can also burn precious resources with little return. I’m a huge fan of looking across your (potential) customer based, segmenting them and then having a laser-focus on the ones that will be most profitable. Too often, I got the sense companies were trying to do everything all at once. Even if a product/service has multiple applications, there needs to be the discipline within a company to figure out which application has the most immediate promise and then going after the relevant customers.

    *I have to admit, I had to look up what “supplicant” means. The Dictionary.com definition was “a person who supplicates”, which wasn’t very helpful.

  • Week in Review