StartupNorth

Month: December 2011

  • Shit, that was a big year. Now we make our move…

    2011 was an important year for Canadian Startups.

    We had some exits. Over $1bn worth. We needed that. The more important thing is that a lot of those exits were by entrepreneurs who “get it” and who are going to be re-investing in startups here in Canada.

    Now we have a handful of funds who have money to deploy. Many of you probably don’t remember the good old days when there was no money to go around. I once saw a startup panhandling on Queen St West to raise money for some Dell servers. No joke.

    This was also a big year because it was one of the first in which we saw deals getting done in Canada by US based investors. That’s good because it keeps us all on our toes and it forces local investors to compete on market-driven terms.

    The biggest problem now, as far as I can tell, is that we are out of excuses. There is money, talent, and the need to build more quality startups.

    So get to work.

    In the early days of Democamp there was an obsession with quality. I think it probably stemmed from our (Toronto’s) own insecurity with itself. There was no identity or real history to draw from, so we had to be careful to make sure that everything that came from the community was world class. It wasn’t always but we tried. We need to get really obsessed with the quality of stuff we turn out in Canada in the next year. No more being cheerleaders for mediocre shit. We need to be OBSESSED with setting the bar high.

    We need to go a step further now. We need to set the bar for world class. Now is not the time to slow down.

    Part of the problem is that we don’t have a single voice to tell our story. Techvibes is doing an amazing job covering EVERYTHING, but it doesn’t have personality. Startupnorth is editorial and a lot of preaching (like this post). That doesn’t help much either. I hope a voice emerges in the next year that has the time and economic model to really tell the story in Canada. It would be good if Mark MacQueen quit his job as a banker and just blogged fulltime. That guy has it right.

    If you are still reading, you should put your name in for the founders and funders dinner in toronto in February. I promise it will be good.

  • How a Canadian startup took investment from a european incubator

    This is a guest post by Patrick Hankinson, the CEO/Founder of Compilr.com a Halifax based startup building an online IDE which has almost 100,000 users. Patrick is also a co-founder of Tether.com.

    In early 2011, I met an entrepreneur and angel investor from London, at a Starbucks in my small province. He literally just took the red-eye from London, I could tell by his blood shot eyes. He wanted to know what I was working on and I explained what I was working on an “online IDE for programmers”. I could tell immediately he didn’t know what an IDE was…

    Talk about a pivotal experience. I was a programmer turned marketer, yet I still used very technical terms to describe what I was working on. The angel investor looked at me with a blank stare; he didn’t understand exactly what I was working on.

    After another couple of minutes of questions, I explained and tweaked my value proposition. He finally understood what I was working, but exclaimed that I definitely need to work on my non-technical elevator pitch. Naively, I responded I’ll never need to pitch to non-technical people.

    Now, I know that a non-technical pitch is critical. You may end up with non-technical investors like doctors, who will want to brag to their friends what they are investing in. You don’t want to put your doctor in a situation where they can’t explain exactly what you’re product does, killing viral potential. This is sometimes the case, because the investor is more in love with the team than the product.

    After this, he explained an incubator from London was putting a session together in New York. The incubator was called Seedcamp. I’ve never heard of them before, I looked at them online, saw they had invested in a several companies and were considered a European Incubator. They definitely didn’t have any credentials like Y-Combinator or Techstars. In fact, the only acquisition that I saw, to date had beenMobclix.

    I decided to apply to Seedcamp anyway since it New York was literally a 2 hour flight away (I had never visited New York, gave me an excuse). Plus it was at Google’s office in New York. Our product, Compilr, was definitely potentially a product to someday be acquired by a company like Google, Microsoft, Salesforce, Facebook, and the list goes on. Any visibility I could get at this stage was definitely worth it.

    Compilr was accepted to present in New York to the Seedcamp list of mentors. We presented at Google’s office in front of 100 mentors or so. Presenting in front of 100 people was definitely not on my bucket list, but I got through it. It actually has helped in a lot ways. I’m definitely not worried presenting in front of 100s of people as much as I thought.

    The day after, Compilr was invited to pitch to some of Seedcamp’s core investors. The room had maybe 15 people but I was more nervous than the day before. In all honesty, I thought I blew it because I was being asked a ton of questions. I answered them all, but Carlos, one of the main guys from Seedcamp had asked a question and I got sidetracked with an answer, when someone basically said “Well, ok thanks for your time, we’ll be in touch.” I still feel like a total d-bag because I didn’t answer his question…

    At this stage I became defensive in my mind, even though I hadn’t received a yes or no to their investment. In reality, I didn’t care if I received Seedcamp’s investment or not. Personally, I was funding the company out of my own pocket, almost $150,000 a year, their small investment would only really marginally accelerate my company. I was hoping to get visibility in front of the right potential acquirers.

    A few weeks later, I was in total shock when Seedcamp told me they were willing toinvest in Compilr. Even though, I personally felt like I blew the follow up meeting in New York. When I told several of my advisors, most of them were eager for me to take the funds. While some opposed to the idea, stating the same facts I alluded to earlier, onlyone successful exit, etc…

    Our team decided to go ahead and take small investment from Seedcamp to use towards accelerating our business. Our end goal was that Seedcamp would present our company to potential acquirers like Facebook, Google to hopefully stimulate an exit, producing a positive ROI for them.

  • Should We Drink the Local Kool-Aid?

    Editor’s note: This is a cross post from Mark Evans Tech written by Mark Evans of ME Consulting. Follow him on Twitter @markevans or MarkEvansTech.com. This post was originally published in December 15, 2011 on MarkEvansTech.com.

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    In the post I wrote earlier this week about the demise of Thoora, there was a comment suggesting that “Toronto failed Thoora” due to a lack of community support to make it a “winning formula”.

    It was a puzzling comment because it suggests a community has an obligation to support a startup so it can thrive. This strikes me as an absurd idea because startups should succeed or fail on their own merits, and the ability to attract an audience near and close.

    Sure, it’s good to drink the local flavour of “Kool-Aid” but only if a startup is offering a product or service that meets a need or interest. There are lots of local startups, including some that pitch me directly, that don’t resonate because nothing something interests me or the product/service doesn’t resonate enough to warrant further exploration.

    It doesn’t mean I’m not supporting the local community; it just means a startup has a service that didn’t pass the sniff test.

    At the same time, I do think Toronto’s startup community is extremely supportive. There’s no lack of enthusiasm, energy and a willingness to share ideas, feedback, resources, real estate and time to provide startups with a boost.

    This has been a fact of life for the past five years, even before we started to see a flurry of startups appear on the scene. There has always been a strong, support community that has pulled together in different ways. A great example is tonight’s HoHoTo party, which has become a major fund-raising machine due to tremendous support from the community.

    The bottom line is if a startup needs to rely on the community to make it, it also suggests what it’s offering can’t survive  without artificial support.

    For startups, the market has to be bigger than its own backyard. It needs people to support it or not based on what’s being sold as opposed to a sense of duty or obligation.

    Editor’s note: This is a cross post from Mark Evans Tech written by Mark Evans of ME Consulting. Follow him on Twitter @markevans or MarkEvansTech.com. This post was originally published in December 15, 2011 on MarkEvansTech.com.

  • Location, location, location

    Editor’s note: This is a guest post by Lymbix founder and CTO Josh Merchant (LinkedIn, @joshmerchant). Josh was born and raised in Brampton, before relocating to New Brunswick to attend the University of New Brunswick. Josh and the team at Lymbix are based in Moncton, NB but spend time on planes between Toronto, San Francisco and New York. Disclosure: David Crow sits on the Board of Directors for Lymbix Corporation. 

    Idea – check. Cofounder – check. Home base – che-… hmm?

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    At a company’s inception, what factors do entrepreneurs consider before deciding on a location to set up shop?

    Scenario A:
    Some may automatically choose their hometown, whether it is Halifax, Brampton, or even Hazelton, as a default location. With this option, entrepreneurs have the potential advantages of already knowing the city’s particular market quirks and tapping into a network of home-grown connections.
    Scenario B:
    Conversely, others flock to a major city such as Toronto, New York, San Francisco or Palo Alto, which have a thriving tech communities. This is a great option, as we see many acquisitions and exits coming from these startup hubs.

    Is there any benefit to laying a company’s foundations in an “out of market”[1] (non-traditional) city, like Moncton? Definitely. Here are some reasons for why you might choose to set up your next startup in a location other than a major city.

    Keep Costs Low

    The average office rent and employee salary are noticeably lower in a city such as Moncton, especially compared to Toronto. The ability to limit the rate at which a young company burns through cash can be a major advantage right out of the gate. An “out of market” city injects new meaning into the phrase “cost of living.” In these locations, emphasis is shifted to the “living” part, and entrepreneurs don’t have to uniformly dread the “cost” part.

    “One of the big advantages I see, and have been privy to is the political support. In a “smaller pond” with a limited amount of startups and successful IT companies, it is easier to get quickly noticed….We have been extremely fortunate to have the local and provincial government assist in opening doors for us, providing us with early incentives to stay in NB and shine the spotlight on us, which in turn helps raise capital and grow our business.” — Matt Eldridge, CEO & Founder Lymbix

    Low Competition for Early Sources of Funding

    Getting started is cheap, but eventually everyone needs money to keep that ball rolling. Hopefully by this point, you’ve already got traction and your idea is gaining momentum. Without some form of traction, it doesn’t really matter where you are. If you do have it, however, it is easier to secure government and angel funding in a province like New Brunswick. Why? You will encounter significantly less competition – if any – for what money is available.

    Low Competition for Talent

    “If you build it, they will come.” Well, it isn’t quite that easy in a small tech community. However, there is a greater chance that there aren’t as many companies drawing the interest of the local, tech-minded talent. Your company could be one of only five fishing in the talent pool in a particular city. Let’s face it, there are smart people living all across this country – not just in Toronto.

    I can’t say for sure, but I would venture a guess that there is less employee turnover in a city like Moncton as well. This translates to less time wasted worrying about knowledge transfer, and more time invested in building a strong, diverse team that you can count on.

    “Building a company out in a growing tech community is great – it’s like a talent magnet! The more news that’s pushed out of prospering areas like San Francisco, Vancouver and Toronto, the more talented developers want to jump on an opportunity locally without having the resources to relocate.”

    If you could do it all over again?

    If you were starting out or had to do it all over again, what city in Canada would you call home for your startup? Why? 

    Acquisitions across Canada

    I wonder where Anand Agarawala (@anandx), Nick Koudas (@koudas), Ray Ready (LinkedIn), Albert Lai (@albertupdates) will set up shop for their next venture?

    Footnotes

    FN1. An “out of market” city seems to be a great ecosystem in which to nurture a startup.

    However, deciding on such a location does have its drawbacks:

    • In the early days, working closely with new clients and prospects can be a challenge in a small market. It is more difficult to have those valuable face-to-face feedback sessions away from large urban centres.
    • If and when an opportunity arises for rapid growth and expansion, you may be hard-pressed to find the quantity of talent your company suddenly requires. After all, startup life isn’t for everyone.
    • Ideas are contagious. It is easy to observe the community-created inspiration in the valley or in Toronto. A twenty-minute coffee break with an intelligent peer can spur an eight-hour hackation thanks to a flood of ideas. Motivation automation.

    Editor’s note: This is a guest post by Lymbix founder and CTO Josh Merchant (LinkedIn, @joshmerchant). Josh was born and raised in Brampton, before relocating to New Brunswick to attend the University of New Brunswick. Josh and the team at Lymbix are based in Moncton, NB but spend time on planes between Toronto, San Francisco and New York. Disclosure: David Crow sits on the Board of Directors for Lymbix Corporation.