StartupNorth

Year: 2012

  • Hot Sh!t List 2012

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    We have been tracking startups and people for a while. In 2011 was the first Hot Sh!t List, but it won’t be the last. There are a number of amazing individuals in the ecosystem like Mark MacLeod (LinkedIn, @startupcfo), Boris Wertz (LinkedIn, @bwertz), Dan Morel (LinkedIn, @dpmorel), Debbie Landa (LinkedIn, @deblanda), Chris Arsenault (LinkedIn, @chrisarsenault), Dan Martell (LinkedIn, @danmartell), Jesse Rodgers (LinkedIn, @jrodgers) and others. Over the past 7 years the community has grown, and connected, and continues to help each other.

    But this list is different.

    It’s not about the people who have raised the most money, or who have the biggest social graphs. It’s about who we expect to talk about over the next 12 months. Be it the ideas, the companies, the impact, etc. My goal was to find a mix of the unsung heroes, the founders, the developers, the doers, the troublemakers and the faces of different companies across Canada that we think are amazing/interesting. What do I mean by “interesting”? Well it depends. But these people are doing the stuff we’ll be talking about over the next 12 months.

    The list is no particular order. But there is no denying it, these folks are the:

    StartupNorth Hot Sh!t 2012 BadgeHot Sh!t List 2012

     

  • Canadian VCs are being cut loose, and that’s a good thing

    Mark MacLeod just wrote a post about Canadian VC that cuts to the chase

    If there are any clouds on the horizon, they relate to the disappearance of the US / Canadian border when it comes to VC. When I first entered the startup World, you had no choice but to raise seed and series A in Canada. Only then could you tap the US funding markets. That’s no longer the case.

    [ . . . ]

    There is a perception (rightly or wrongly) that US investors are better than Canadian ones. And that given the choice, founders would raise in the US. Whether this is true or not is not the point. It’s the perception and with the borders coming down it represents a real risk to Canadian investors.

    Mark did it in the nicest possible way, so a lot of people may not have noticed that he just condemned the entire Canadian VC model. It was something I didn’t even have the guts to do lately, so I was surprised to see Mark call the spade a Spade and get on with the conversation.

    The border is gone and the game has changed. Mark argues that Canadian VCs need to pay up more, build their brands and build their networks. That’s a great start.

    Canadian entrepreneurs have been told for years to step up and build global companies. It was hard and confusing to hear at first, but I think we’ve managed to do it. Whether it is Tobi in Ottawa, Kirk in Toronto, Ryan in Vancouver, Oleg in Toronto, Mike in Toronto, Kenshi Wilkins and Eric in Vancouver, Yona in Montreal, Temo in Montreal etc etc etc [I’ve missed so many here — more to come on David’s Hot Shit List] — I would argue that Canada is producing more world-class entrepreneurs more quickly than ever before.

    We’ve spent the last 10 years being told we weren’t bold enough and need to think bigger. The argument has shifted and our startups now know what it means to be world class and they are doing it.

    It’s time for the Canadian VCs to step up and do the same.

    It doesn’t take nearly as much to get a US based VC to take a look at a Canadian deal anymore. If they have never done a deal in Canada before they usually have a friend who is just a call away who has and it can be demystified pretty quickly. The legal headaches are gone as well.

    If you are a VC in Canada, focused on the Canadian market, then you have far more competition for deals now than you did even a few years ago and the job is more thankless than it has ever been.

    So here’s the challenge for the the new players in Canada. Rho, Celtic, OMERS, iNovia, Relay, Golden, Klass, Wertz, Round13, etc…

    Entrepreneurs are going to start telling a story about under-paying, small thinking and isolated VCs. As US VCs roll off the redeyes in to Vancouver, Edmonton, Toronto, Montreal, Halifax and elsewhere it should be you who is bringing them to town to see great deals which are priced right and which are built to succeed from right here in Canada.

    The challenge is that you, like the entrepreneurs you fund, now have to be world class. That probably means being on a plane more often and pulling the trigger on deals within days, not months.

    Nobody should start a VC fund in Canada today unless they want to work as hard or harder than any startup founder they will fund.  It is no longer a job for ex-bankers and management consulting dropouts. The job is hard, mostly thankless, and more competitive than ever.

    That’s why I love this shakeout we have undergone and the one that is continuing today. VC in Canada had to go through the wringer so that we could end up with a handful of the best and most capable operators who can help springboard Canada further on to the world stage. We aren’t going to do it through myopic provincial funds, big corporate funds or economic development agencies.

    It’s going to happen through hungry hustler GPs who have something to prove and only a little time to do it in.

    Canadian VCs need to be startups themselves, because in the end only Startups can save venture capital in Canada.

  • Find a cofounder

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    When Jevon and Jonas and I first met back in 2006 it was because we shared an interest in early stage, emerging technology companies. We were excited to have found other people in Toronto that were interested in the same things. Startups. Technology. Emerging business models. Funding. It was great. It was early days, it was easy to connect with others to figure out who was interested. And to move things forward. We wrote about the stuff we found interesting, hosted events that we wanted to attend (anyone remember StartupEmpire), and have tried to be tireless promoters of high potential growth technology startups in Canada. We’ve tried to connect engineers and designers. But as the community has grown we’ve done a very good job outside of repeated participation at events in connecting potential cofounders.

    How do you meet a cofounder?

    This is where Founder Dating comes in.

    FounderDating brings together super talented entrepreneurs with different backgrounds and skill sets to start innovative new companies. All too often you know people with similar backgrounds and skills sets to your own.  We help you find co-founders with complimentary skill sets.

    The thing that Founder Dating brings that are crucial:

    • High Quality – everyone is screened for quality and readiness. Applications and members’ identities are confidential (many have jobs still) but a few of the folks who are part of the network are founders or early employees from: Stackmob, Snapfish, Zynga, Gilt and Loggly, just to name a few.
    • Balanced – member base is 50% engineers/50% non-engineers
    As Paul Graham says, “Not having a cofounder is a real problem. A startup is too much for one person to bear.”  It’s true you want someone complimentary in skill sets, but you also want someone who is going to be able to weather the ups and downs with you.

    What Founder Dating is Not

    1. They are not “speed dating for cofounders” – they don’t do speed dating, never have, never will.
    2. You do NOT need an idea to apply.  Just need to be ready to start something or at least work on a meaningful side-project (20ish hrs/week).
    3. This is NOT only for first-time entrepreneurs – a huge % of our members are repeat entrepreneurs
    4. FounderDating is NOT a meetup/event – per the above, we’re an online network and as first introduction to your round and the community you’re invited to an initial event but the power is in the network you become a part of.

    We need to unlock Founder Dating for Toronto. Get on it!

  • Not all founders are created equal

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    I was reading an excerpt from Noah Wasserman’s The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup (Kauffman Foundation Series on Innovation and Entrepreneurship) about Founder Dilemmas: Equity Splits and it struck home. Equity splits and distribution are often the key issues related to power imbalances, perceived injustice and tension amongst cofounders.

    In Noam’s dataset, 73% of founding teams split equity within a month of founding, a striking number given the big uncertainties early in the life of any startup. The majority of those teams set the equity in stone by failing to allow for future adjustments to equity stakes if there are major changes within the team or the startup…

    Setting the early equity split in stone is one of the biggest mistakes founders can make. With their confidence in their startup and themselves, their passion for their work and their mission, and their desire not to harm the fragile dynamic within the nascent founding team, cofounders tend to plan for the best that can happen. They assume that their early, high levels of commitment will last long into the future, rather than waning as the challenges of founding begin to sap their passion for the idea and for each other. They assume that no adverse events will change the composition of the team.They also tend to take a very short-term view of the factors that should affect equity splits.

    Sometimes it just doesn’t work out, and a founder will choose to leave the company or have the choice made for them. The question is how do you create a set of agreements that is fair to all of the cofounders. Often we think that standard employment and shareholder agreements cover much of the difficult situations that we can encounter with cofounders. But as cofounders it starts by really understand what you each are looking for, and then making sure your agreements cover the specifics of your situation.

    10 Critical Cofounder Questions

    1. How should we divide the shares?
    2. How will decisions get made?
    3. What happens if one of us leaves the company?
    4. Can any of us be fired? By whom? For what reasons?
    5. What are our personal goals for the startup?
    6. Will this be the primary activity for each of us?
    7. What part of our plan are we unwilling to change?
    8. What contractual terms will each of us sign with the company?
    9. Will any of us be investing cash in the company? If so, how will this be treated?
    10. What will we pay ourselves? Who gets to change this in the future?

    A couple of things. I think all founders stock should vest. I like it when founders purchase their initial shares with a one-time acceleration clause for a small percentage at purchase (3-5%). I like when founders’ stock reverse vests with a traditional one year cliff. The initial vesting acceleration is because things can change at 6 months and it seems fair to value the capital risk that each founder has taken at purchase. And the one year cliff because it is standard. What I’ve seen a lot is founders that don’t do the small initial accelerated vesting clause.

    The other thing I like to see is an Employment Agreement with Termination clauses, in particular, an acceleration on vesting regarding “Termination by the Corporation without Cause”. I like to see a single trigger acceleration with 6-12 months of stock vesting on termination without cause (I’m not alone). The goal is to be fair and to protect each cofounder and the corporation if things don’t workout.

    What tips do others have for equity splits? acceleration clauses? terms? That as cofounders we should put in our agreements.

    Other Resources

     

  • The Startup Backoffice

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    Scalabiity Inc

    StartupNorth contributor Ray Luk (LinkedIn, @rayluk) announced the launch of Scalability Inc. (@scalabilityinc). It’s a great service that provides backoffice services including bookkeeping, accounting, government filings, payroll, record keeping, and human resources. It’s the combination of tools and the people with the expertise to help with timing that can make a huge difference. Ray seems to have nailed a need in the marketplace with Scalability Inc.

    It’s great to see startups building these unsexy tools, and sharing their experiences. It’s particularly interesting to see how many Canadian startups are playing in the unsexy backoffice space. Scalability Inc., Wave Accounting (announced $12MM from Social+Capital), TribeHR ($1MM from David Skok at Matrix Partners), Shopify ($22MM from Bessemer), Dayforce (acquired by Ceridian), it seems like Canadians like critical business apps.

    @StartupCFO backoffice talk on oct 4 2011 at Founderfuel

    What are the must have tools that you are using in your startup’s back office?

    Sales & Inventory

    Analytics & Business Intelligence

    CRM

    Human Resources

    Accounting & Payroll & Expenses

    Invoicing

    Payments

    Legals

    Bookkeepers & Accountants

    What are you using in the back office? Who are the consultants and providers that we’ve missed?

     

  • How Rob Ford is Failing the Startup Ecosystem

    What has he done for us lately?

    I don’t often look to politicians to help out startups. Typically when they do, they mess it up and make it worse than it was before. And probably if I looked at Rob Ford’s track record of do-little-ness, I’d think even less of trying to push him to get involved in our just blooming, fragile startup ecosystem.

    But, being here in New York the last few months, I have seen Mayor Bloomberg involved in some helpful, innovative projects. In fact, in a fascinating report about the New York startup ecosystem titled “New Tech City“, on page 24, specifically outlines the “Bloomberg Effect” and some of the tactical steps he’s taken to bolster New York’s early stage, rising tech startup community.

    “New York’s tech sector has benefited greatly from an unprecedented level of support from Mayor Bloomberg and his top economic development officials.” –New Tech City Report

    I’d love to hear this said about any government entity at any level in Canada.

    Now I know some of you have distant (errrr… recent) memories of political thoughtfulness gone wrong (cough cough, the inadvertent disappearance of the entire angel investing class). The typical refrain I hear from folks in the tech scene is something like “Gov’t should provide money and get out of the way”. But I’ve seen the Bloomberg administration do a lot more, successfully.

    For instance, here are two extremely low cost areas where city politicians can help startups – promotion and their powerful networks. I’ve been at four startup events here in New York in three months, and Mayor Bloomberg has been at two of them.

    “He’s visited scores of start-ups, given major speeches at local industry events such as Tech Disrupt and the NY Tech Meetup, and last year installed a chief digital officer to help coordinate promotion efforts. As the “mayor” of City Hall on Foursquare, he’s even become an avid user himself.” — New Tech City Report

    The city hosts an event called NYC Big Apps. Basically the city has been opening up up more and more data each year and runs a contest to see who can build the best mobile apps based on that dataset. The event has about $50k of awards, the grand prize winner gets $10k. The event looks to be partially covered by sponsors (BMW’s venture arm seemed to be prominent at the event). Folks from NYC’s Economic Development Council are there en masse, helping facilitate introductions between investors, well networked folks & startups. If you are a winner, you’ll get a chance to pitch to some of NYC’s best investors (many of whom support the initiative and help judge the apps themselves) – Fred Wilson et al. Not only can you see Mayor Bloomberg at events the city runs, but you can see him at other big events in the city – Disrupt, NY Tech Meetup, etc.

    Wouldn’t you love to see cities get involved with key startup folks in the city (like say Howard Gwin or Boris Wertz) and run some interesting events akin to Big Apps. I’d also love to see prominent politicians supporting existing events like say Demo Day. How about hanging with Rob Ford at Startup Drinks?? Yeah, didn’t think so… but maybe a hipper, cooler city councillor?

    On top of that, politicians could easily use their followership and social media outreach tools to preach and promote local startups. I’d love to see Mayor Ford tweeting about reading his Kobo, or hear Vancouver’s local government talk about their usage of HootSuite. I’d love to see some city councillors buying a new shirt using Buyosphere. Anything really to show they know entrepreneurs exist and can use every piece of help they can give.

    Why Isn't Rob Ford Talking About Toronto Startups Like This?

    Less talked about in the NYC Tech City report is that NYC is overhauling their own contracting/vetting procedures so smaller startups can bid and have a chance on winning meaningful business with the governments. Why shouldn’t City Hall’s use Freshbooks for instance, or FixMo? Presumably it would offer some real cost competition vs the usual city hall tech vendors.

    Or better yet, how about introductions and biz dev help? New York’s Economic Development Committee actually runs events abroad (like in China), where they use their network to provide trade excursions for local New York startups. I know, because we participated in one of them (in China). We had the chance to meet lots of industry leaders in China and received meaningful business development introductions.

    And then there are the “dream-big” projects. New York has created a private-public partnership, providing millions in funding to build a new engineering school with Cornell, in New York City. Or how about a high school devoted to software? I mean we have high schools for the arts littered across Canada… and I’m pretty sure that a software oriented high school might have a bit better of a business case than say… the Etobicoke School For The Arts.

    Cornell's Proposed New Engineering School In NYC

    So, dear Canadian politicians, I dare you to be creative and get more involved. You can actually help startups out! Talk to influential key people in your local startup scene and ask them “how can we help?”. Use stuff created by local startups, evangalize and promote the crap out of them.

    And I’d love to hear more from our audience on ways that your local gov’t has helped (or has not helped) from within your own communities.

    PS – A weird corollary post might be titled – “How startups should get involved in government and politics”. When are some of you going to become city councillors and mayors? 🙂

  • Hot Sh!t 2012 Nominations

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    It’s been 376 days since I put together the Hot Sh!t List 2011. And we’re looking to round out the list with some the next generation of to be watched entrepreneurs. Who in Canada is better than all the rest?  Perhaps we’ll can get custom awards modelled after  Philippe Starck’s Flamme D’Or.

    Who do you think should be on the list? Help us find the next generation of up and coming Canadians. In particular we’re looking for those folks behind the scenes, the developers, business developers, growth hackers, marketers, etc. that often don’t get the sames recognitions as the CEO or founders. But they are critical to the success of Canadian startups.

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  • Blueseed or Canada?

    I was recently asked to comment on Blueseed. And I have not been following the issue very closely. I have held a number of non-resident visas during my stay in the US as a student, employee and entrepreneur. I have held at various times during my time in the US an F1 visa, H1B visa, TN-1, B-1 and been an applicant for permanent residency. So I understand the intricacies of working with INS and making sure that I hold the appropriate entry documentation at all times. So I understand for many foreign entrepreneurs the bureaucracy that drives an initiative like Blueseed and the reforms for the StartupVisa initiative when trying to get access to the US.

    But why do Canadian entrepreneurs care? If you can’t get into the US on an appropriate visa, should you care about an offshore community.

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    For Canadian entrepreneurs and founders looking to immigrate to Canada, we have a number of very similar benefits to the US, and we are probably an even better place for most people to live. There are a number of benefits just based on our proximity to US cities with strong startup ecosystems.  Vancouver is in the same timezone as the Bay area. Toronto, Waterloo, Montreal are in the same timezone as Boston and New York. I think that Canadian startup ecosystems are amazing and I’m not alone (see Startup Genome’s report and their methodology). Toronto placed #4, Vancouver #16 and Montreal #25. We have strong story of investments (Hootsuite, WaveAccounting, Fixmo, ScribbleLive, Kik, Wattpad, TribeHR, Achievers, etc.) and exits (Dayforce, Rypple, Varicent, Postrank, PushLife, Bumptop, SocialDeck, Cognovision, Radian6, etc.). The next 5 years look like a great time for startups in Canada.

    Canada is a great place to live

    Mercer cites Vancouver (5) followed by Ottawa (14), Toronto (15) and Montreal (22)  as having the best quality of living. The Economist cites Vancouver, Calgary and Toronto as #3, 4 & 5 best places to live (see http://en.wikipedia.org/wiki/World’s_most_livable_cities). We have a ways go to improve compared to places like Norway (Canada #20 on best place to be a mom). All in all, the quality of life in Canada is amazing. The access to health care, education, culture, capital, security, is unmatched (in my opinion). Sure it’s a little cold but man it just makes patio weather so much more valuable.

    Connecting beyond Canada’s borders

    We have a growing expat support community with The C100. With strong ties in the Bay area, NYC, Boston and now the UK. We have a Canadian government that is starting consultation on a new “startup visa” for new immigrants.

    Canada is an awesome place to be an entrepreneur. And we offer a high quality of life. I can’t imagine being anywhere else.

  • CVCA, #FFdemoday and AccelerateMTL

    Chris Arsenault (LinkedIn, AngelList, @chrisarsenault) sent me a message yesterday about writing about the CVCA conference. And I was looking at the conference trying to figure out why as an entrepreneur that I might want to attend this event. It is “the premiere networking and professional development event for Canada’s venture capital and private equity industry”. Well I don’t work in venture capital or the private equity industry, and the professional development I can get that at Ladies Learning Code or Udemy or O’Reilly. So why should I care? Maybe a “free Blackberry Playbook” would get me to pay for the registration. Disclosure: RIM is a sponsor of StartupNorth, though we don’t have any free Playbooks. 

    Then it struck me.

    1. FounderFuel DemoDay
    2. AccelerateMTL
    3. CVCA

    My goodness, this is an incredible opportunity for Canadian entrepreneurs. If you plan this correctly, you can connect with investors, other founders, folks form NYC, Boston, the Bay area. While the specific sessions at CVCA aren’t necessarily my cup of tea, you could sit in the lobby at the Fairmont Queen Elizabeth and meet every investor in one shot.

    CVCA attendees will have a “free Blackberry Playbook” . Just like LinkedIn, I’d be building an HTML5 optimized version of my application and making sure as hell it works like gold on a Playbook (which has a great implementation of WebKit browser). You could call the Fairmont and set up an espresso stand and give away coffee to everyone that demos your application. Hell if nothing else a big sign with “Free Latte” for all of the hung over CVCA attendees and have a student running to a local coffee shop for fulfillment. Great opportunity to get out and hustle.

    On top of all of this you get to see some brilliant demos at Founder Fuel. This is going to be a killer event, and you could make it a very interesting opportunity to get in front of potential investors, partners and folks from outside Canada for relatively little cost.

  • Spilling the secret sauce

    Editors Note: This is a guest post by Cory Mcculloch (Linkedin, @CoryMacculloch). Cory studied law at UofT, works at Brooks Law and was a summer student at Cognition LLP. Follow Cory on Twitter @CoryMacculloch.

    The following is not legal advice and may not be full depiction of the law. Do not rely on anything stated below without first speaking to your lawyer. By publishing the information below, there is no creation of a lawyer-client relationship.

    At every entrepreneurial event that I go to, I, without fail meet at least one person who guards his or her business idea like it is the coordinates of a hidden treasure and I am a pirate looming for an opportunity to pillage.

    While I always respect one’s decision not to disclose details about their business idea, one cannot forget about the benefits to be gained from people who, like myself, enjoy connecting entrepreneurs with others. Granted, sometimes the decision to remain confidential is wise, but I suspect people are often misguided.

    When to “shut-up”

    If you are working on a process or machine that you wish to patent (assuming you know what can be patented and what cannot be patented) and you believe that it is going to be more than year or so down the road before you are able patent it, then it may not be a wise decision to disclose details about your process or machine in its early stages. This is because of the “novelty requirement” embedded in the definition of “invention” in the Canadian Patent Act. As interpreted, an otherwise valid patentable subject matter becomes unpatentable when one *discloses how their invention works, and *discloses enough details to enable a skilled reader to make or construct that very invention. This is again assuming that the subject matter for which your “invention” is patentable Most general business ideas that people devise are not patentable inventions, and even if one’s idea is patentable, telling someone your target market and how your business idea will work is generally not enough to violate the “novelty requirement” of a patent as described above.

    If you have signed an employment agreement, consultation agreement, shareholder’s agreement, or any other agreement that has a provision labeled as “confidential information”, then for the sake of legal safety do not disclose any particulars about the related party’s business model or any secrets until you have understood the substance of your promises. Often these agreements are intended to protect the company’s “trade secrets”. With that being said, generally agreements provide that something that is already public is no longer is a secret.

    If you haven’t signed any documents with anybody but you have devised ingredients or steps for the making of a product or code, or you have received those ingredients from someone else, then it may also not be a good idea to disclose what those ingredients are. Even if you decide not to patent your invention, the common law affords a limited amount of protection for what is classified as a “trade secret”. A trade secret loses all of its protection when it is no longer is a secret.

    When it may be a good idea to reveal

    If none of the above situations apply to you and you have the ability to discuss general details about your idea (i.e. what kind of hot sauce you are planning to make and your target market) then it may be a good idea to disclose general details without disclosing the essential ingredients of your hot sauce.

    Contrary to popular belief not everyone you talk to is in the business of ripping off ideas. A very costly mistake is creating a business without early validation. The only way to get any validation is by hearing the plight and praise of potential customers and this may require some opening up. Funding opportunities, staffing possibilities, and connection building are also some essential building blocks that people may miss out on.

    So although there are times when it may be wise to not “spill the secret sauce”, there are other times when giving a little taste test can lead to valued feedback and responses.