StartupNorth

Author: David Crow

  • Quota is not a dirty word

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    “We are ALL in sales” – Dale Carnegie

    I used to think that quota was a dirty word. It struck me as restricting freedom and potentially forced the exploitation of trusted customers and prospects to drive the bottom line results. But I was wrong. In reality, a quota is a number that is useful to incent certain behaviours. The trick is to incent the appropriate behaviours. It is a contract between a sales person and an organization about how to compensate behaviours based on outcomes.

    “Quota is a direct path to clarity and accountability.” – Shawn Yeager

    So many entrepreneurs can benefit from contracts with defined outcomes. I was chatting with a startup last week about the numbers he agreed to with his VC to unlock the next tranche of funding. He mentioned that he wasn’t going to meet the numbers, but he still expected the VC to unlock the funding. My advice to him was very straight forward, it was to figure out how to achieve the agreed to numbers, or immediately open a conversation with the VC about missing the numbers due to changing market conditions and see if the tranche can be renegotiated. In the case of this entrepreneur, the numbers were in the funding contract, and I fully expected the VC to hold the entrepreneur to deliver on these numbers. The numbers and metrics exist to help assess the risk and the ability of an entrepreneur to deliver.

    The secret with an early stage company is to set appropriate metrics, quotas and growth numbers that incent the correct behaviours out of entrepreneurs. The good news is that there are a lot of examples of SaaS, B2B and consumer metrics that can be used.

    There are a lot of different sources of metrics and numbers. Each of the numbers needs to be considered in corporate revenue goals, past historical performance, current product development stage, market share, budget, etc. The targets and growth numbers need to be established.

    I’ve taken to requiring all of the startups I mentor, to establish 3 metrics that we discuss in our mentorship meetings. Each of the metrics must be clear enough for me to understand, for example:

    • Number of paying customers
    • Number of registered users
    • Churn rate
    • Number of pageviews or unique visitors

    And each metric should have the current measurement, the predicted growth rate and the actual target number. I try to start each conversation around the metrics. And any issues related to the market conditions, learnings, corrections, etc. Then together we set the targets as part of the planning for the next meeting. This may include a redefinition of the metrics. The trick for me as a mentor is to try to help identify what metrics I think are most useful for the startup and founder to focus on next.

    What are the metrics other entrepreneurs track? How do you set your targets and quotas?

    What are the metrics and growth rates that investors like ExtremeVP, Real Ventures, iNovia Capital, GrowthWorks, Rho and others want to see from prospective early-stage companies?

  • Did we hit a billion?

    Dr. Evil "One Billion Dollars"Today IBM just announced the $387MM acquisition of Toronto-based Algorithmics. It begs a couple of open questions. Is Algorithmics after being sold to Fitch for $174MM in 2004 still a Canadian startup? Can a 30 year old company like MKS be considered a startup? Is Eloqua who’s HQ moved to Virginia still a Canadian company?

    If you imagine that Algorithmics is the second Canadian software startup acquired for more than $300MM in the past 6 months. Then to answer Dan Morel’s question,  if this was “The One Billion Dollar Year” for Canadian startup acquisitions, yes it is.  Only if you consider Algorithmics still a Canadian startup and 30 year old MKS a startup, then combined with Radian6 the acquisitions total just over $1B, everything else is icing on the proverbial cake.

    Congratulations to the Algorithmics team and alumni.

    Adding to the TechVibes list of Canadian Acquisitions:

    1/5/2011 – Victoria’s Flock acquired by Zynga

    1/6/2011 – Edmonton’s Attassa acquired by YouSendIt

    1/31/2011 – Toronto’s Adenyo acquired by Motricity for $100 Million

    2/8/2011 – Toronto’s MyThum acquired by OLSON

    3/3/2011 – Toronto’s CoverItLive acquired by Demand Media

    3/11/2011 – Vancouver’s Sayvee acquired by Bandzoogle

    3/26/2011 –  Waterloo’s Tiny Hippos acquired by RIM

    3/30/2011 – New Brunswick’s Radian6 acquired by Salesforce for $326 Million

    4/7/2011 – Waterloo’s MKS acquired by Parametric Technology for $292 Million

    4/8/2011 – Toronto’s PushLife acquired by Google for $25 Million

    4/27/2011 – Montreal’s Tungle acquired by RIM

    4/28/2011 – Montreal’s Coradiant acquired by BMC

    5/10/2011 – Toronto’s Conversition acquired by e-Rewards

    6/3/2011 – Waterloo’s PostRank acquired by Google

    6/7/2011 – Toronto’s DealFrenzy acquired by Intertainment Media

    7/8/2011 – Toronto’s FiveMobile acquired by Zynga

    8/30/2011 – Vancouver’s Zite acquired by CNN for an estimated $25MM

    9/1/2011 – Toronto’s Algorithmics acquired by IBM for $387MM

     

  • Lean Startup Tools

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    Back in May, Nat Friedman wrote about the tools used in setting up Xamarin. They include a great set of basic tools for getting a startup off the ground with very little investment. We have seen a lot of startups using a similar set of tools and I thought that we’d compile a list of the tools that we’re actively using (and some of the others we evaluated). There are the tools and blogs listed by Steve Blank that include many

    Landing Pages

    We’re big fans of WordPress at StartupNorth. We’ve powered StartupNorth on WP since the beginning. The combination of WordPress, Premise, and the WordPress MU Domain Mapping plugin is a pretty powerful combination for creating mutliple sites and landing pages to test your landing pages. But we’ve also developed a sweet spot for Vancouver’s Unbounce, it took us less than 5 minutes to have 2 landing pages and a domain set up. We’re big believers that you can use Adwords and Facebook Ads to quickly create a landing page to test ideas before writing a single line of code.

    Analytics

    We primarily use Google Analytics and WordPress Stats for StartupNorth. We’ve been working with startups and using a KISSmetrics and Mixpanel to measure activity on their web properties and applications. Make sure you read Ash Maurya’s 3 Rules to Actionable Metrics to understand how the analytics can be used in combination with split testing and/or cohort analysis to better track your optimization before product/market fit (What do you measure before product/market fit? – check out Ash’s conversion funnel and metrics).

    Mailing Lists

    We haven’t been as proactive in building a mailing list for the StartupNorth community as we probably should have been. I’ve used have started using MailChimp because of the quick integration to GravityForms and WooFoo, but have had very positive experiences using both Campaign Monitor and Constant Contact.

    Billing and Accounting

    What is amazing is that both of these companies are local to Toronto. We use WaveAccounting integrated with our bank account and PayPal for tracking expenses, billing, and financial operations. And we use Freshbooks to bill for sponsorships. They are a must have in our back office. What we’re missing is a really easy to use and integrated payroll system (I hear that it might be coming).

    Human Resources

    For full disclosure, I’m an advisor to TribeHR. It doesn’t change the fact that they rock. It is the easiest way to get an HR system in place. And there is no better way to get feedback and help employees improve than Rypple.

    Surveys and Feedback

    We are actively using Survey.IO to gather feedback from users about the state of StartupNorth. It helps us figure out the state of our product market-fit, if there is such a thing for a blog about Canadian startups, fill it out and help us be better.

    Project Tracking

    We use Pivotal Tracker. We like them so much, we actively recruited them as a sponsor for StartupNorth. There are lots of other tools from project tools to issue tracking. Curious at what others are using.

    Source Control

    We use Github Bronze for our project hosting. Most of the code we work on is PHP against MySQL (see WordPress), though we have additional apps in development like the StartupNorth Index (which will be moving to startupnorth.ca/index shortly) but all are LAMP.

    Hosting

    Full disclosure: VMFarms is a sponsor of StartupNorth. However, their hosted VMs that are backed up and hot mirrored coupled with the outrageous “white glove” makes them a dead simple choice. We also use Rackspace Startups and EC2 for access to easy Linux and Windows VMs for development and testing environments.

    Customer Relationship Management

    We don’t have any strong recommendations. There are platforms like Salesforce that are fantastic and sales teams are used to. There is Highrise which is broadly supported with a lot of 3rd party tools. But so far, neither of these has been the clear winner for us. There is a great Quora question about “What is the best CRM for startups” that lists SFDC, SugarCRM and Highrise. There are a lot of choices for CRM including Nimble, Insightly, Woosabi, Capsule, Solve360,AppPlane, Batchbook, PipelineDeals, TactileCRM, ZohoCRM and many others.

    Conferencing, Screen Sharing & Telecommunications

    I’ve been using Calliflower for conference calling. It’s $5/call for up-to 5 callers, or for $30/month unlimited minutes and >70 participants, it’s a great solution. It is not a replacement for a office phone system.

    Google Voice and Skype have been the least expensive way as a Canadian startup to get a US phone number. This is great for me as an individual. However, this does not scale to an enterprise or an organization. I’ve been looking at Grasshopper, RingCentral and Toktumi, but I have yet to settle on a solution.

    SEO & SEM Tools

    This part of the list is pretty much cribbed from Steve Blank’s list of tools for entrepreneurs. Go read it for a more comprehensive list of tools beyond the SEO/SEM listing included below.

    What are we missing?

    I’m going to cover in the next post: discounted travel, conferences, business cards, design services, and other tricks for being relentless resourceful as a founder.

    There are a lot of online tools that startups are using to make or break their business. And there is a lot missing, monitoring like NewRelic, PagerDuty, Pingdom and Blame Stella for example. But I’m curious what are the indispensable tools being used at iStopOver.com, HighScoreHouse, CommunityLend, Idee/Tineye, Massive Damage, Empire Avenue, Indochino, Lymbix, Hootsuite, AdParlor, Locationary, Chango and others. What are you using? What gives you the edge in quickly and effectively gathering feedback to test your hypotheses?

  • The Mentor Manifesto by David Cohen

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    I am continually amazed at the horror stories I hear from entrepreneurs about finding mentors. About mentors taking large pieces of the company and not providing any value in return. It was great to see David Cohen’s The Mentor Manifesto this morning. It is great to see David take the time from his 11 cohorts at TechStars and try to explain “What does it mean to be a great mentor?”. This is an extension of his tips for entrepreneurs that includes how to Find and Engage Great Mentors as part of his top twelve startup tips.

    The Mentor Manifesto

    • Be socratic.
    • Expect nothing in return (you’ll be delighted with what you do get back).
    • Be authentic / practice what you preach.
    • Be direct. Tell the truth, however hard.
    • Listen too.
    • The best mentor relationships eventually become two-way.
    • Be responsive.
    • Adopt at least one company every single year. Experience counts.
    • Clearly separate opinion from fact.
    • Hold information in confidence.
    • Clearly commit to mentor or do not. Either is fine.
    • Know what you don’t know. Say I don’t know when you don’t know. “I don’t know” is preferable to bravado.
    • Guide, don’t control. Teams must make their own decisions. Guide but never tell them what to do. Understand that it’s their company, not yours.
    • Accept and communicate with other mentors that get involved.
    • Be optimistic.
    • Provide specific actionable advice, don’t be vague.
    • Be challenging/robust but never destructive.
    • Have empathy. Remember that startups are hard.

    I hope that I can live up to the manifesto for the companies I mentor at UW VeloCity, FounderFuel and those I’ve been working with in Toronto and Waterloo.

  • Red flags

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    This is an unfortunate story that entrepreneurs should read and understand.

    We start companies for a number of different reasons. We want to change the world. We want to solve problems. We are unemployable. We are crazy. And we stay up at night worrying about taking care of our employees, our customers, our investors.

    So it is hard to understand how well regarded funds wind down companies without providing information to employees.

    Investor immorality: The strange case of Blue Noodle

    Start-ups fail all the time. But there is a right way and a wrong way to do it. This is an example of the wrong way.

    On Monday, most employees of social media startup Blue Noodle didn’t get paid. They called their lead venture capital firm, which wouldn’t discuss the situation with them. They called their former CEO, who refused to pick up the phone. They called their lender, who said to call the venture capital firm. And thus the circle began anew.

    “In my more than 20 years of working in Silicon Valley, I’ve been involved on more failed companies than I’d like to admit, but there is always an orderly win-down process,” says John Montgomery, chairman of law firm Montgomery & Hansen. “It sounds like the VCs in this case are treating the company like a car they abandon in a parking lot with the keys in the ignition.”

    Read on…

  • Show me the money

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    I love when entrepreneurs tell me that raising capital in Canada is hard (it is). I love it even more when they tell me that they think “they should move to Silicon Valley” because raising money will be easier (it isn’t). It helps me determine which entrepreneurs are too egotistical, too delusional, too uninformed to really be effective raising money.

    There is a venture capital scene in Canada. It’s different than the scene in Silicon Valley or New York City. But there are people making investments in entrepreneurs. According to the CVCA in 2010, there was $484MM invested in IT in Canada (2010 Q4 VC Data Deck from CVCA [PDF]) with $271MM going to software & internet companies. There are issues like US Funds making larger investments than Canadian funds (looks like $2.5MM vs $1.1MM average deal size) or that US companies raise more ($8.2MM vs $3.6MM). But these are just the nature of the game. There are structural issues. It could be better. But to say it is nonexistent, that’s just wrong or lazy. And both are bad qualities in early stage entrepreneurs.

    I was asked by an entrepreneur about who where the funders in Canada. Here is my short list of companies that are writing cheques or are in the process of doing diligence on companies, i.e., prepared to write a cheque. There are a lot of companies like OMERS that are stage agnostic, but I’ve put them in the growth side given their deal history (in the case of OMERS it’s $1.5MM in WaveAccounting).

    So if you think it’s easier raising money in NYC, Boston or California. My advice is get your ass on a plane and try. Because it isn’t as easy as you might think.

    But don’t say that there is no Canadian VCs or venture capital money. Because that just makes you look like a moron.

    Suck it up, it’s hard raising money. Maybe you should talk to the Canadian investors and figure out why they don’t want to write you a cheque!

    Seed ($25k – $500k)

    Growth ($500k – $5MM)

    Expansion

    Who else is actively placing money with Canadian startups? No grant money, we’ll do that in a separate post, but who else is actively doing convertible debt or equity placements? How to define active? Either >3 deals in diligence or has deployed more than $50,000 ($25,000/placement * 2 placements). That seems fair.

    Who did I miss?

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  • More GrowConf tickets via ShinyAds & Nokia

    Grow Conference - August 17-19, 2011 - Vancouver, BC

    Need a ticket for the Grow Conference?

    The generous sponsors of the Grow Conference are continuing to offer a few free tickets to some starving startups over the next week. We call this Conference Ticket – Ramen Class.

    Today’s tickets comes from ShinyAds.com and Nokia. These are two very different companies. One is the largest mobile phone manufacturer in the world, the other is a small startup trying to get companies on to their ad serving platform. They see the benefits for startups to attend Grow.

    To win these passes tweet the following today:

    RT to enter! “Hey @nokia – Please send me to the @growconf #growconf in Vancouver http://www.startupnorth.ca/ .

    Tuesday August 9th, Grow Conference organizers will pick the winners who will get a pass for Days 2 and 3 at the 2011 Grow Conference. *Note that travel and accommodations are not included, pay for your own flights and hotels and drinks you cheap and resourceful founders.

    The Grow Conference is a unique three-day conference that brings together the top minds in business, entrepreneurship, technology, and capital to inspire and engage the next generation of disruptive entrepreneurs. It doesn’t matter if your business is on or offline, the next-gen entrepreneur knows where their customers are and how to engage them. Today’s entrepreneurs are creating new opportunities, disrupting age-old markets, leveraging technology on their path to being tomorrow’s leaders. The Grow Conference is bringing the best minds of Silicon Valley and Canada together to share lessons learned and inspire action. Be part of this entrepreneurial revolution as we work together to drive innovation for the future. GROW is more than a conference, it’s a movement.

    Follow #growconf on Twitter @growconf