Somehow missing from the GoInstant story is that they had picked up an extremely impressive list of customers, including several of the top ecommerce brands for whom I’m sure salesforce.com wanted deeper presence.
In fact its a double pay day for startupnorth. Jonas Brandon also was one of the super early investors in GoInstant and I’m sure is taking home a nice chunk of change.
Big Congrats to Jevon and the GoInstant Team, its not every day a small startup based out of Halifax builds $70mm of value in a short 2 year period and gets acquired by one the most successful technology companies.
The other day I attended a tech talk hosted by Facebook. Their internal platform team was talking about how they manage the Facebook framework and code base.
The presentation was titled “Code Is Written To Be Read”.
Immediately my gag reflex kicked in. Code is written to be read??? Really??? I literally can’t remember the last time I sat there and thought “hmmm, how readable is this code, I wonder if so and so will be able to understand this”. Having said that, I think I was the only person from a startup in attendance, most were from Google, Zynga, and other larger tech firms. So perhaps I was the wrong audience for this topic.
Whatever their problem is, it is not mine. In my world I have one reason to write code – TO SHIP.
“Code is Written for Users to Use It” (i.e. just ship or shipping is a feature) – that is the startup equivalent mission statement.
And this is where all the “maintainability” coding trolls come in and leave comments like “yeah, but it’ll be huge advantage if we can iterate quickly and get a v2 out and so on and so forth, thus we need code thats easy to maintain”.
No.
Here’s the reality – your product is likely going to fail, so if you wasted time and money making fancy abstractions, doing code golf, and focusing on elite coding craftsmanship… you blew it. You failed. You should have finished it 2-4 weeks earlier instead.
You have to EARN maintenance as a problem. You have to EARN v2. You have to EARN the right to practice expert craftsmanship. If you get there, if you really get to the point where maintaining your code base is a problem for you where many other developers are reading your code… congrats! You’ve succeeded. Go nuts, rewrite everything. You deserve it!! Forget every word I am writing, and go attend the Facebook tech talk and take diligent notes.
But for most of us, we are not going to earn that right. We are going to fail or pivot or leave or get acqui-hired or whatever. That code is going to get thrown in the trash never to be touched again. So how’s that clever FactoryOfTaskFactories abstraction feel now?
And that’s why you probably don’t want to hire Facebook or Google engineers for your startup. And more so, if you are a new grad engineer who aspires to be a startup founder one day, that’s why you don’t want to join Facebook or Google.
Look, it’s not that there is something wrong with those developers. I’m sure working at Facebook or Google is fantastic. It is the closest thing to a tenured prof position you can get in this field. The problem is that they operate under significantly different operating conditions than you do (unlimited money, unlimited time, lots of technical resources, working across massive teams, etc + MASSIVE scale problems, huge performance requirements,petabytes of data, etc). They learn a very different craft than you do.
Your craft, the startup developer craft, is simple – “get things done”. The other parts of the craft, you have to earn.
(caveat – if you are building a startup focused on platform or tools being used by other developers, your craftsmanship should be excellent)
(disclaimer – I have nothing against facebook or google, they are full of friends of mine and other wonderful and smart ppl)
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? 🙂
So I read most of the news this morning around Kobo and the links being passed around. Generally I was miffed. When folks in the startup scene complain about media doing a lame job covering entrepreneurial stories, this is a great example. The story being published in the media is “Indigo sells Kobo”, “Indigo builds Kobo”, etc, etc. All Indigo, all the time. Probably due to PR agencies spinning the story that way, and also due to lazy business journalism. Well, having chatted with a bunch of folks involved with Kobo, I have a different take on the Kobo story:
Mike Serbinis
If you are in the startup scene in Toronto and you have not heard of Mike Serbinis – shame on you. He is another example of an amazing entrepreneur in the community who has been wildly successful. The first company he started, DocSpace, was an internet leader in security. He founded it in 1997, and went on to sell it to CriticalPath in 1999, for whom he was CTO and EVP marketing for some time. Throw in a master’s in engineering, a few patents, and you can see why folks were pretty excited about his return to Canada, joining Indigo in 2006.
The Indigo/Shortcovers/Kobo story is as such. In 2007, 2008 Serbinis starts lobbying Indigo about the coming sea of change called “ebooks”.
In April of 2008, Shortcovers is created within Indigo. Shortcovers is an online ebook store and mobile app meant to work across the plethora of new smarter devices – Apple, Android, BlackBerry, Palm, etc. Access to books on any device.
This date is important, April 2008. If you think this is just another dumb Canadian “me-too” play, you should look up the launch date of the Kindle. The Kindle launched in November of 2007. And Amazon blew the Kindle launch, and had no stock available until April of 2008. Every attempt before April of 2008 at ebook readers and online ebook stores had been nothing short of disasters, ripe with lost capital. Let me double down on this point:
ebook Sales 2007-2010
In 2007 and early 2008 it was NOT obvious that ebooks would be a big factor, and that Indigo should meaningfully go after the ebook space.
So Mike Serbinis, within Indigo, stared at this in 2007/2008 and said “Indigo should enter the ebook space”. Wow – those are some big brass entrepreneurial balls.
So they create Shortcovers. Shortcovers name was from their original “gimmick” in that they let folks buy books a chapter at a time. Shortcovers was a pure ebook store & software client. No hardware. They were originally intending to put their ebook app on as many devices as possible. No hardware. So somewhere in 2009, things change.
Kobo is Created
Serbinis then goes on to do the unthinkable. At some point in 2009, he see’s the only way for Shortcovers to get critical mass adoption is to launch its own hardware. Whattt????
Shortcovers is a software company. Serbinis is a software exec – CIO & EVP Online at Indigo. Indigo is a brick and mortar retailer. They have ZERO hardware background. That’s a big-ass, high-risk pivot folks!!
So he goes off with his “lets build a device” vision and convinces Indigo to spin them off into their own business, but also gets Indigo to cough up another $5mm as part of a $16mm round where he gets Borders, RedGroup & one of the most famous Asian investment firms around – Cheung Kong Holding.
In early-mid 2009, it probably looked like launching a new ebook reader was a good idea. By the end of 2009 though, everybody and their sister was launching a new ebook reader. Check out this article: http://www.zdnet.com/photos/ces-2010-top-10-new-e-book-readers/382181. Everybody I know who went to that CES said “maannnn, so many ebook readers”.
I remember talking to Dan Leibu, CTO of Kobo, who in early 2010 was nervous as hell about launching their own device. He said something to the effect of “if we had known so many ebook readers were going to launch, we probably wouldn’t have launched our own”.
Kobo launched in July 2010, well after many of the above devices were in market. How did they do? The rumour on the street is that Kobo cracked $100mm in sales in its first 12 months. $100mm in revenue in its FIRST YEAR!!! They only raised $16mm in their A round and built a $100mm revenue company in 12 months. That is simply unbelievable. How about you other startups, have you done 10X your initial investment in revenue yet?
And how did the rest of the industry do? Anybody know where the Skiff Reader, the Plastic Logic Queue, the Alex Reader, and so on and so forth ended up? Probably not with $100mm in sales and a $315mm acquisition.
And that my friends is why I’m miffed at the coverage on Kobo. This is a wild and crazy story entrepreneurial story full of big risky moves. Its a story of an entrepreneur doing things that only great entrepreneurs can do – even making elephants dance. And its a rare story in Canada, and as such a story that deserves proper coverage.
Today looks like a bit of a blood bath on the markets, so I figured it is as good a day as any to talk about what an economic downturns feels like for startups. I was “fortunate” enough to launch a company the day Lehman collapsed in 2008 (Sept 15th!!), and got to see the first hand impact of the downturn. We also were raising a B round during that time.
Most media seems to paint the picture of this post-apocalyptic world where suddenly all funding disappears and everybody wakes up and the tide has gone out and everybody is naked. I disagree. To me, the downturn felt more like death by 1000 paper cuts, such as:
Your churn will climb. Partly because of non-payment, failed credit cards, canceled credit cards, etc. If you do churn reports, “cutting back” and “not feeling the value” will increase as reasons.
Suppliers/Partners will stop paying you in a timely way, some never. Your average AR period will start to run at first slightly longer, then much longer. You’ll probably need to hire a baseball bat.
If you have physical product, distributors/channel will send back inventory because they are getting rid of any “risky” inventory and focusing on basics, i.e. products & goods that move easily like toilet paper and milk.
Conversion rates will start declining for every marketing trick you try (except lowering price). And with that, cost of acquiring customers goes up. You’ll also probably just invest more into marketing as an initial reaction to declining customer counts.
Your ISP (or any low margin, commodity supplier you use) gets “acquired” by 3 different entities in 12 months and start having annoyingly regular outages.
Angel investors, or anybody holding debt, turn into vicious debt collectors. As terms reach they demand outrageous interest. Now you are paying 2 employees worth of interest per month.
You are forced to lower price, at first by small amounts, and then gradually more.
So if you increase churn by 2%, increase acquisition costs by 10%, chop price/revenue by 10%, do you know what you have???
A Broken Business Model that is Not Fundable.
More good news, VCs and angels get caught in this churn. Exits disappear (2008 VC backed M&A was down 54% from 2007!!!) and with it RoI. Many “busted business models” appear in the portfolio, and soon they have to get written off. It gets nasty. VCs who are dying stop feeling like the Fred Wilson-ian brothers-in-arms company builders, and they start to feel more like debt collection agents. SELL YOUR COMPANY! MERGE WITH THIS CRAP COMPANY! LETS PARACHUTE IN A NEW GOLDEN CEO! PAYCUTS! WHY ARE YOU GUYS GETTING PAID?
The Good News
Here’s the first good news. Only two things on the planet can force you to die: 1. YOU – You Give Up & 2. Debt Gets Called.
The second piece of good news. Some businesses do great at managing downturns. Why? Execution and a little luck. You can track all the little death by a 1000 paper cut stuff I listed above, see that the world is changing and manage it. If people stop paying you or start delaying on payments, you gotta get out there and do some hard nose collecting. If churn starts to rise because of credit card defaults, try to bill in new ways – use different billing dates, bill in multiple smaller chunks, etc. If you have to lower price, get a new product out or a range of products so you can defend average price. If you see it coming and are fast enough, you can react and your company can survive.
The third piece of good news. All of this starts happening before big market moving catastrophes happen. Bad “paper cuts” were happening months/weeks before Lehman collapsed. In the summer of 2008 other startups I knew were having churn & credit card payment issues.
There are a lot of folks who survived 2008/2009 and built profitable businesses around Canada. Would love to hear some of your thoughts.
Yesterday we posted about iLoveRewards closing a big growth round from Sequoia. Well today, another JLA Ventures company did a big round of growth money as well. Paymentus raised a big round from Accel-KKR, rumoured to be at $20mm. That’s $45mm in capital to two Canadian companies in a very short period of time. I imagine John Albright, @johnalbright, has enjoyed a celebratory cocktail or two after seeing two portfolio co’s do big growth rounds. Lets also not forget the story of Dushyant Sharma who looks well on his way to yet another entrepreneurial highlight reel entry. And of course big hats off to GrowthWorks for being the initial funders of this company and providing funds to Canadian companies when many others were not. PR post is here.
Paymentus Corporation, a leading electronic bill payment, presentment and customer communication technology and services company, today announced that it has received an equity investment provided by Accel-KKR, a technology-focused private equity investment firm. The investment will be used by Paymentus to accelerate development, drive growth, and enhance the footprint of its real-time payment network.
Paymentus’ unified, SaaS platform delivers enterprise bill payment, presentment and revenue management technology through a self-service model, simplifying, automating and streamlining the bill payment process.
I found an old post from Rick Segal, @ricksegal, about the initial investment JLA did in Paymentus, which I think is a valuable repetitive lesson for all entrepreneurs about how to build a big successful company (something Dushyant has done a few times now):
We invested in Paymentus for a number of reasons. Our basic business thesis was that there are a number of places where (surprisingly) automation of paying certain types of bills is still in an evolving state. Paymentus has identified a number of these market segments and came to us with some great traction, proprietary technology, tons of industry knowledge, and an impressive plan for growth.
Dushyant did all the right things as a start up. Self-funded until he hit milestones that started to prove out the business stood out to the investors as well as a very clear and deep understanding of the bill payment and presentment business.
We’ve done the list of acquisitions and celebrated, I think next up its time to tally the list of big raises, as I think there are more companies “going big” than we give credit.
I loved this infographics from Ken Seto, @kenseto, et al at Massive Damage, who launched Please Stay Calm a few days ago in the Canadian Apple app store. Some very useful comparative info for aspiring game makers on local Canadian app downloads.
Also I have a new request. From now on all startups should have a picture of a zombies missing an arm beside their ARPU. Especially in really serious board meetings.
As you know, something like 10 of the past 12 articles on startupnorth have been grumblings either in the article or in the comments about lack of Canadian startups trying to go big and how the ecosystem here can’t really support it.
Well check out this hot rumour we’ve heard. Apparently, Razor Suleman and the folks at iLoveRewards are doing a MONSTER round from Sequoia sized at $25mm… with none other than Alfred Lin of Zappos fame stepping on to their board. Is that big enough to settle the anti-early-exit crowd? That’s a first class round for any company anywhere.
More good news – apparently Canada gets to keep a big chunk of the company. Razor and the sales and marketing team are heading down to San Francisco, while our beloved Canadian engineering brains will not get drained.
Seriously, it had been a while since we last talked about iLoveRewards in 2008 with their also very impressive $4.7m series A round led by JLA . They are one of those companies that have silently dominated their industry, picked up lots of awards but stayed out of the mainstream startup spotlight. Kind of the classic 5 years later you’ve got an overnight success story, like this one.
I want to ask “Why didn’t iLoveRewards raise this round in Canada?” but really, they just got took a big round from one of the most renowned, deepest pocketed VCs in the world. I just don’t think most Canadian late stage investors are going to beat Sequoia money, so I’m not sure its even a relevant question.
But it is a perfect example to ask a far more relevant question “should we care about our companies raising money locally?” – shouldn’t CEOs care far more about value than about where it comes from and live with the resultant potential location issues. I’d love to hear the inside story one day on what the bidding looked like on this deal.
We’ve been focusing a lot on exits recently. Some folks have asked “why celebrate”? So many are $30-$50mm exits, who cares? $30-$50mm exits = VCs dying = ecosystem dying… or so goes the logic.
Let me tell the story of Redknee. Redknee creates billing software for telecos. Started in the late 90s by 4 mid-20s, Waterloo grads who had worked at Telus & Nortel – Lucas Skoczkowski, Vishal Kothari, Dan Macdonald, and Rubens Rahim. Without taking any VC money, they IPO’d in 2007, raised something like $30-40mm out of the IPO, and now have a market cap of about $70mm. I.e. modest success, not great success.
Here is the list of who is where now from the early days at Redknee:
Shailesh Lakhani – was director of operations, now VP at Sequoia India
Shyam Sheth – product manager, then product manager at Google, now co-founder of Fixmo
Tony Mak – was a sales engineer, moved on to VC side at OATV, now founder of Everpic (SF-based startup)
Kristin McClement – was product management, now heads up product and super early employee at Payfone (hot New York startup)
Bohdan Zabawskyj – was CTO, now CTO of a hot Toronto startup that I think I can’t name yet, and also advisor & investor to several other startups
Jeff Zakrezewski – was a dev team lead, then was managing partner at 5-Mobile (acquired by Zynga), now Chief Architect Zynga Toronto
Brian Glick – was a product manager, early guy and now lead product manager at YouTube
Karthik Ramakrishnan – was a product manager & sales engineer, now heads up product at BluTrumpet and at HatchLabs/IAC/Xtreme
So let’s tally that up – 1 modestly successful startup equals roughly 6 new companies founded and 2 new startup investors and some other people in influential places. I am forgetting people as well.
Success begats success. Probably more than money begats success. And that is why we need to celebrate even the modest victories.
One of the great things about the number of exits (be they big or small) since 2010, is that they are enabling a new class of veteran, serial entrepreneurs. The knowledge, the contacts, the street cred, the capital – the second time around can be easier than the first. And it should be good for investors, hopefully some of the returning class will go for building big companies with $100mm+ exits instead of “getting paid” with a $20-$30mm exit.
Take for instance Blu Trumpet, who launched a few days back. Led by Nina Sodhi, former COO of Bumptop – who were acquired by Google in 2010, Blu Trumpet is the first company to launch out of IAC’s Hatch Labs mobile incubator.
Hatch Labs, a joint venture with IAC and Xtreme Labs, today introduce Blu Trumpet, an app discovery wall that lets advertisers reach millions of devices with clean, user-friendly ads. Blu Trumpet uses sophisticated design to provide publishers a non-intrusive app discovery tool that users actually enjoy, an alternative to banners, and a more creative way to monetize any app.
“At Hatch Labs, we know the mobile space and we really saw a need for a new type of mobile ad platform that caters to the new app economy,” said Nina Sodhi, CEO at Blu Trumpet. “That’s why we aren’t focusing on display or pop ups. Blu Trumpet gets integrated into an app’s tab bar, allowing users to find us when they are curious and interested. The consumer is happy — and the publishers and advertisers benefit from that.”
Blu Trumpet offers consumers a new, non-intrusive way to find cool apps without searching through lists of a million apps through Blu Trumpet’s in-app ad platform, “the app wall.” While in a favorite app, consumers can view the Blu Trumpet app wall to discover new recommended apps based on those they’re currently using.
“It’s like getting a tip from a friend,” said Karthik Ramakrishnan, Blu Trumpet Product Director. “Consumers avoid intrusive pop up and banner ads, and get to discover recommended apps they’d probably never find otherwise.”
I think Nina Sodhi becoming a GM at IAC and CEO of BluTrumpet, along with her amazing bio (UW Elec Eng, Harvard MBA, VP at Merril Lynch, COO Bumptop, etc, etc), puts her up there in the elite rank of Canadian entrepreneurs. And hopefully her results at IAC and with BluTrumpet will push some of the other recent “exitees” to come back and fight the entrepreneurial good fight. For instance, Jeson Patel, Anish Acharya, Anand Agarawala – aren’t you guys all coming up to 1 or 2 years at Google.. isn’t that enough time to claim your prize and start something new??
