StartupNorth

Author: David Crow

  • On becoming Silicon Valley North…

    Photo by Loozerboy - Some rights reserved CC-BY-SA
    AttributionShare Alike Some rights reserved by Loozrboy

    I am a bit of a shrinking violet. And I hate expressing my opinion about things. Like most Canadians I’d rather apologies for things and be polite. But I hate when I get asked by journalists, policy makers and others about how do we make Toronto (or Waterloo, or Ottawa, or where ever), the next Silicon Valley. This is just such an asinine view of how macroeconomics works and the historical development of the ecosystem in Silicon Valley.

    We should not try to be the next Silicon Valley or New York City or Shenzen or anything. We are Toronto. We are Montreal. We are Vancouver. We are Waterloo. We are something different. We should reject the label because it makes us look like fools. But we should learn from Silicon Valley as entrepreneurs and policy makers to create an environment that helps stimulate a similar environment.

    This is an old conversation. Joey and I have talked about it in the past:

    Debunking the Myth of “The Next Silicon Valley”

    Let’s start by removing the first myth that Toronto, and you can substitute in anywhere, can be the next Silicon Valley. Toronto does not exist in a valley. Sure there are valleys, like the Don River Valley in Toronto but the concentration of technology startups in this location is fairly low due in part to the conservation and provincial protections.

    Silicon Valley was quoted in 1971 to describe the number of emerging semiconductor companies and the surrounding computing companies that were concentrated in the Santa Clara Valley between San Francisco and San Jose, California. As far as I’m aware there are a few companies in the GTA working in silicon like AMD. Ottawa might have been able to make a claim in the 1990s for the Silicon Valley North with companies like Nortel Networks, JDS Uniphase, Tundra Semiconductor, Newbridge Networks and others. But for Toronto, just not going to happen. Waterloo might also have a claim with Pixstream, Rapid Mind, MKS, Arise Technologies, Research in Motion, and others working in semiconductors, wireless, hardware and software.

    Silicon Valley might at best be a concept for the concentration of new economic wealth creation. It is hard to argue about the amount of wealth created in the Silicon Valley region. It has been called “The Greatest Creation of Wealth in the History of the Planet”. The number of companies and the rise of modern venture capital has created a circuitous loop, a self-fulfilling prophecy, of companies and entrepreneurs that can generate more wealth. It has created the Traitorous Eight, the PayPal Mafia, Xooglers, the Facebook Mafia, the Netscape mafia that created Opsware & Andressen/Horowitz, etc. There are lots of reasons that regions should want to emulate the economic development that is present in Silicon Valley.

    But the desire to emulate a region, does not mean that we should expropriate a label like “Silicon Valley” when in fact it has very little to do with the people, the environment, the economy that we are trying to build. I’m sure if we personified “Silicon Valley” it would be flattered, but we should be trying to be something different. We are something else.

    Zombie Economies

    No City has a Lock on Innovation by Fred Wilson (@fredwilson) refers to a great article by Chris Dixon (@cdixon):

    “The entire world is now a rival to Silicon Valley. No country, state, region, nor city has a lock on innovation in technology anymore.

    The Internet has made this so, and there’s no going back. We will see Apples and Facebooks get built in China, India, Brazil, Eastern Europe, Western Europe, the Middle East, Africa, and plenty of other places.”

    We are competing globally. Don’t believe me, look at the firefight that our most recent billion dollar Canadian technology company is in for customers, brand, and it’s own survival. We need to build global companies. There are a great number of advantages to living in Canada, but we seem to be lead to by organizations that are interested in fighting for government dollars to build innovation clusters rather than creating new entrepreneurs and new wealth. Instead we’re happy to build a zombie-economy of companies around programs like SR&ED that are often used and abused by consultants and companies to sustain companies when there are no markets, no profits, no brains, no future. All things considered, free money is free money and as an entrepreneur in Canada I would/do apply for SR&ED credits and encourage others not to leave this on the table. But from a policy perspective, it drives me crazy! I hear about academics that run mediocre companies with <$2MM in revenue but sustain because of SR&ED. They’d rather raise 50 cents of government tax credits than “pivot” and get to “product-market fit” because that would require getting customers and actually understanding that we’re in this to build successful, sustainable companies.

    SR&ED and credits from other programs (OMDC, New Media Funds, etc.) are economic realities of our ecosystem. It is capital that is available to entrepreneurs. It is potentially non-dilutive capital that can be leveraged for growth and operational efficiencies. It should be embraced and explored, but it should be understood in the context that every dollar of customer revenue is infinitely more valuable than any tax credit or government grant. We are in business. The role of a startup is to find a scaleable business model, you might not find it the first time and the freedom/flexibility that programs like SR&ED offer you is the ability to get it wrong, to pivot and to try again. These programs are not a life support system for a bunch of non-businesses (or the people that can’t find a scaleable business model).

    The Next Silicon Valley

    Who knows where it will be? Fred Wilson assumes that “we will see Apples and Facebooks get built in China, India, Brazil, Eastern Europe, Western Europe, the Middle East, Africa, and plenty of other places”. This is great news for Canada and Toronto. Toronto is a diverse immigration hub:

    • Between 2001 and 2006, Canada received 1,109,980 international immigrants. The City of Toronto welcomed about one quarter of all immigrants (267,855) to Canada during this period of about 55,000 annually.
    • Half of Toronto’s population (1,237,720) was born outside of Canada, up from 48 per cent in 1996.

    Much of what we think of as innovation, is really just the creative tension between differing viewpoints. Toronto is diverse. We are home to many different cultures, peoples, ideas and ideologies. We have the basis to be a gateway to the rest of the world as we transition out of the American Century into something new. We are an excellent breeding ground for the mashup of culture’s, people, and ideas. The next Silicon Valley might not be in Canada, but we could become the bridge between cultures.

    What can you do?

    “Fortune favors the connected entrepreneur.” @jcal7 #trueuniversity via @hnshah

    There have been some changes to the Canadian startup scene in the past few years that are critical to continuing to help Canadian entrepreneurs:
    1. Stop referring to any part of Canada as Silicon Valley North.
    2. Set your expectations high! Don’t aim to be the Facebook for Canada. Why? Because the Facebook for Canada is Facebook! You need to be trying to build global companies, and you might validate it locally first. You want to play in the sandbox with the big kids, you need to act like you can play with the big kids.
    3. Stop thinking it will be easier if you move to the Valley. If you really feel that your only solution or course of action is to move to the Valley, then go, and show me that you can make it there. Otherwise it is just hot air, and a regurgitation of some rhetoric you read on TechCrunch or VentureBeat. If you can make it Silicon Valley or Hollywood, you should go try and stop telling me that it is easier to make it there than here.
    4. Start talking about all of the other great companies in Canada. We can all be coopetition. Help your friends. Make frenemies. The more people talking about activities, startups and people in Canada the better. There are a tonne of great startups and we all need to be ambassadors for the community as a whole. End your pitch deck with: 5 most recent fundings of Canadian companies and 5 other startups in Canada any potential investor might be interested in.
    5. Support legislation that makes it easier for entrepreneurs to immigrate to Canada. Support Startup Visa Canada. This can’t and won’t hurt any of your chances of making it. To be protectionary or isolationist is silly. Embrace one of the things that makes Canada great.

  • Can’t make it to GrowConf? Try TechTalksTO

    Tech Talks TOWe’re big fans of all of the technical community efforts going on across the country. I have the privilege of going to Vancouver next week for GrowConf, but we want to return the favor to local entrepreneurs and students in the GTA. We have 5 tickets for TechTalksTO.

    The effort to encourage participation by local students was led by the team at Uken Games.

    Uken is planning on sponsoring tickets for 3-4 students to attend http://underground.techtalksto.com/. We’ll also be sponsoring the event in general. I was wondering if we could promote this giveaway through an article on StartUpNorth. We haven’t figured out the criteria for selection but we’re thinking either a short paragraph of why we should choose you and a short code puzzle.

    I have purchased my ticket for the event, but I am unable to attend. We will give away one ticket per day starting today until all 5 tickets are gone. Someone else can figure out when that is.

    Uken Games

    How to win a ticket TechTalksTO?

    To win these passes tweet the following until Thursday:

    RT to enter! “Hey @startupnorth @ukengames – Please send me to the @techtalksTO Underground ($INSERT_LINK_TO_YOUR_BLOG/COMPANY).”

    This is a great local event. For developers by developers. Must attend, like the venerable events like FutureRuby and RubyFringe. It is great to see Toronto Ruby Brigade, TechTalksTO, TechnologicTO, AndroidTO, HTML5 Web App Developers and others engaging and supporting the community.

  • Need a ticket for the Grow Conference?

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

    The sponsors of the Grow Conference are offering a chance to win one of a few tickets to some starving startups. Each day a new sponsor will give away tickets, the best way to stay on top of the latest opportunity is to follow #growconf on Twitter @growconf.

    The first ticket is sponsored by Pagemill Partners, a premier investment bank located Silicon Valley, with  with as many as 1/3 of their transactions in a given year occurring on a cross-border basis.

    To win these passes tweet the following today:

    RT to enter! “Hey #pagemillpartners – Please send me to the @growconf #growconf in Vancouver (LINK TO YOUR BLOG/COMPANY).

    At the end of each day, the Grow Conference organizers will pick the winners who will get a pass for Days 2 & 3 at the 2011 Grow Conference. You’ll need to arrange and pay for your own travel and accommodations.

     

  • Lowered Expectations

    Lowered Expectations on MadTV featuring Keanu Reeves

    I keep wondering about some entrepreneurs living in a bubble.

    Not the usual doom and gloom startup bubble or a Incubator Accelerator Bubble but a reality distorting bubble that causes them to completely forget about why people (VCs, angels, banks, others) make investments in early stage companies. They seem to read TechCrunch and think that raising capital is easy. Investors are tripping over each other to make angel and seed investments in any Tom, Dick, or Harriet that can use Keynote and string together enough words to make buzzword bingo. And, of course, with nothing more than a PowerPoint presentation and hired developer these entrepreneurs figure that they should get a $4MM pre-money valuation and be able to raise $500-$1MM, just like any of the companies coming out of YC or Techstars.

    I get emails with quotes like:

    “I am tour de force, the type of person people want to invest in. Driven, smart, visionary, able to build a tech team and an excellent communicator.”

    All I can say is, you need to wake up and smell the sweat. It’s time for me to be the harbinger of brutal honesty. The wrecker of unfettered dreams. The resetter of expectations.

    1. Ideas require execution.
    2. Your track record may not allow you to raise any capital without demonstrating traction.

    Ideas are a Multiplier of Execution

    “Same exact idea. Better execution. Big winner.” Fred Wilson.

    The section is borrowed from Derek Sivers post. Ideas are part of it, but it’s execution that differentiates. It’s execution that is the massive multiplier. Stop thinking that ideas alone will differentiate. You need to demonstrate your ability to execute on the idea as a scalable business.

    Execution = Demonstrate Traction

    Before raising money, entrepreneurs must read The Capital Raising Ladder. This article is more than 2 years old but the key principles have not changed. Make a good guess which rung you are at? Do not pass go, do not collect $1MM on a pre of $4MM. You need to figure out where on the proverbial Ladder you fall and then figure out how to demonstrate traction. Just because you observe high tech startups and you think you can do better, this isn’t a reason that anyone should give you capital. You actually need to DO better. Go do the smallest thing to get the most bang for the buck. Call it lean. Call it customer development. Call it something. It doesn’t matter. You need to go do it.

    What is traction?

    It depends (go read Getting Traction). It can be revenue growth. But since many startups are too early for revenue, or are working on Dave McClure’s Startup Metrics for Pirates gives examples of consumer web applications metrics that can be measure to show growth and serve as a proxy for future revenue. Not building a consumer facing web application? Look at David Skok’s SaaS Metrics or Designing Startup Metrics to drive Successful Behaviour. It is your job to figure out how to demonstrate traction. These are starting points.

    It might be as simple as demonstrating that you’re able to hire/build a team of committed developers. If you can’t convince a developer to work for sweaty equity, then you might have a hard time convincing others you are the right person to invest. If your expertise is unique and critical to the success of the venture but you can’t design the product and you can’t write code. And you can’t convince a technical cofounder or others that they should be able to work for sweat equity on the idea. Hmmm, it doesn’t lead me to think that you can convince a sophisticated (probably even an unsophisticated) investor that they should invest in you.

    Start kicking butts and taking names

    The goal is not to stop entrepreneurs from trying. The goal is to reset expectations about fundraising and to build world-class market changing companies. You want a $4MM pre-money valuation, go earn it! Get users! Get customers! Get big numbers on $0. What are big numbers? In true wishy washy manner, it depends. But I’ll tell you a for a startup aimed at cracking mobile for neighbourhoods in Toronto, the number of users better not be in the 100s. I’ll be impressed if the numbers are in the 10,000s, knocked over in the 100,000s and blown away in the millions. Are these number high? Are they outrageous? Maybe. But if you want a spectacular valuation, go prove to me that you deserve it.

    Want to get $150,000 from Yuri Milner? Maybe you should figure out how apply to YCombinator. If you think it is so easy, prove me wrong and go do it. Maybe I’ll start a StartupNorth Fund, that all it does is bet against entrepreneurs. If you loose the bet you owe me a token amount of money, $100-500. If you win we’d invest in the next round at the negotiated price (we don’t actually have a fund to do this, but I’d be willing to stake $10-25k for matching).

    Stop trying to get people to lower their expectations. Set you goals high. Figure out ways to hustle and be relentlessly resourceful, and make the metrics happen. I know we can build world-class companies (it was a busy funding week last week for Canadian startups). But we need to stop the charade that funding is flippant, easy, etc. Raising money is hard. Building a great company is hard. But it’s worth the effort.  Let’s go show the world that we can build bigger, better, badder startups.

  • Under the Hood – Lymbix

    We continue the Under the Hood series with a Q&A with Lymbix CTO and Hot Sh!t List member Josh Merchant (@joshmerchant, LinkedIn). (Disclosure: I sit on the Board of Directors for Lymbix and helped them with their application/acceptance to the Microsoft BizSpark One program). Lymbix has raised approximately $3.8MM in funding from GrowthWorks and other angel investors. The Lymbix team is 18 people based in Moncton, NB and continues to grow.

    Lymbix

    Lymbix Sentiment Intelligence measures the tone and emotional impact of words in everyday written language. As a global leader in sentiment analysis technology, applications powered by Lymbix provide a more definitive look at specific emotions like friendliness, enjoyment, amusement, contentment, sadness, anger, fear, and shame and give insight to the true meaning of what brings positive and negative results. In short, Lymbix delivers incredibly fast sentiment analysis and can identify the real emotion in any domain of text exposing clarity and confidence on an individual message level.

    Product Breakdown

    An engine that analyzes emotion in text. Simply put, we’ve built an emotional spell check that we call ToneCheck, which looks into the emotions written in email communications, lifting out how someone may feel – or rather, the “tone”, they’ll perceive when they read the message. This technology is built off our core engine, which is available as an API for partners to understand more user expression style sentiment analysis. As a business, Lymbix is building better business communication tools and reporting for companies to analyze communication in sales, human resources, customer support. Think of it like an insurance package fitting nicely into your risk management profile.

    How the Technology works

    We use an array of techniques to training our systems to better understand the emotional interactions in common day communication. We analyze streams of data, whether it be from Facebook, Twitter, emails, blogs, or the news, and dissect elements of “emotive context”, meaning a snippet of text that can cause an emotional arousal in an individual. This is our linguistics component of our system. We believe in human powered insight, so we then take a slew of emotive context, and blast it through our own crowd-sourced network called ToneADay.com. We have just shy of 10k raters who give us their opinions of both “real” and “fake” emotive context to gauge the levels of emotion that can occur based on parameters such as frequencies, demographics, 8 primary emotions and so forth. We then build emotional lexicons which give us the power to test any incoming queries to detect emotional relevancy. We then apply our “emotional reaction algorithms” to come up with how different emotions play a part in determining the degrees of emotion in the query. When the system ever detects something that it has never heard of it, it quickly takes action and tries to learn it. In effect, the system gets smarter the more that its used.

    Technical Details

    We’re hosted on Rackspace, as well as Azure. With Rackspace we have a cloud and private hosted solution giving us the elastic scalability that we need to service this type of NLP on a massive scale. We’re a nice blend of Ruby, Java, and C#. Sounds gross, but for us, the solution fits quite nicely.

    For horizontal scaling efforts (our API, and freemium ToneCheck users) we use multiple nodes replicated as our “workers”, sitting on Redhat using served by apache. Sinatra is used to handle the REST calls (essentially the wrapper) harnessing java – linking through sockets to provide really fast linguistic calculations on requests. We persist resident data through redis, and pull sync jobs to migrate up to the master datastore. These ‘nodes’ effectively are spawned up and down as we predict traffic congestion. We take full advantage of Rackspace load balancers to handle distribution of these requests. We monitor this bad boy with CloudKick – probably the best monitoring and performance analytics tool we’ve come across.

    For ToneCheck (pro/business), we’re deployed on Azure. Works well for our business customers to give better piece of mind of no data persistence, enterprise integration (on a domain level), and security. Essentially we’ve built a RESTful service on a Web role that wraps the same Java logic as in our cloud. We have worker roles to do some of the heavy lifting, but we try to keep things in the Web Role for high priority, super fast response times.

    As our system is ever evolving, in terms of understanding new emotive context, we use our own sync services to deploy lexicons across all our worker nodes (Azure & Rackspace). To build the lexicons, we need massive power, so we use a big hypervisor that performs all our “secret sauce” algorithms from our datastore. We have 3 layers of databases in our system, which seems crazy, but each has a niche. MySQL is basic user data for our apps and all the boring data to keep. Mongo is our dynamic datastore thats used for all our linguistic data and everything we need to build our lexicons, which is sharded for optimization and running our Map Reduce jobs. We also keep a Hadoop datastore for all the new language we’re processing for reporting and running massive queries on for some of our “in the making” linguistic calculations/improvements.

    Our development practises are pretty neat. We use continuous integration to achieve higher standards of quality for all our apps. We’re a little old school, still using some SVN repos to manage our data (Beanstalk rocks), but now we’re starting to migrate more to the Git. The team is divided up into sub teams, which are all managed independently, and constantly on two week (global) dev cycles. We do all our project management through Pivotal Tracker, and have wicked fun demo days at the end of every cycle showcasing each teams improvements and brainiac innovations to everyone (while consuming beer and pizza). Our team is very passionate about the problem we’re trying to solve, technology, and code. We’re split about 50/50 Android & iPhone, so that pretty much says it all!

    If you’re running a mail client (Outlook or GMail or Lotus Notes) you can try ToneCheck and to minimize the “cost” of dealing with misunderstandings.

    Interested in being profiled in our Under the Hood series, we are actively looking for Canadian startups building “interesting” technologies and solving “interesting” problems. Contact me by completing your initial Under the Hood submission.

  • Hacker House in Waterloo

    HackerHouse.caLooks like Waterloo is about to get an addition to the already existing hacker houses and VeloCity residence that are happening around campus.

    Does anyone remember Plurk? Plurk was the site that MSN China copied over 80% of the user experience and code for Juku (see the official Microsoft statement).  Plurk is a place where people lurk. It has been compared to Twitter. It generates most of its traffic from Taiwan.

    And now it looks like they are opening a more “mercenary/hustler driven” approach to a student dorm. Hopefully, this is the compensation they received from a Microsoft settlement, maybe it is a recruiting tactic – hiring developer talent is a challenge and finding entrepreneurial hackers for the cost of a mortgage payment + utilities is actually a really cheap acquisition tactic. With none of the overhead of the coop program and you’ve already skirted any labour laws by making them work for their own companies. Nice.

    The program aims to bring in 3-5 students and run them through the gauntlet.  Here is one of the welcome letters:

    I’m Kan [looks like Kan Kan (LinkedIn)], and I’m one of the founders of Plurk. We’re a Twitter type service and the largest microblogging service in many parts of Asia and one of Canada’s most innovative startups (heck, even Microsoft copied us in China!).  Me and two other very successful under-30Southern Ontario area entrepreneurs just recently (earlier this month) announced the launch of our Hacker House (www.hackerhouse.ca) program, inspired by the very cool Grotto (www.sfgrotto.org) and Y Combinator programs in San Francisco.

    Basically, we plan to find 3-5 of the best and brightest entrepreneurially minded, technology focused students from the Universities of Laurier and Waterloo, bring them together in a collaborative environment, and then let the magic with the support of a team of guys (us) who have fostered and executed on some of the most successful startups on the web.

    While we’re not affiliated with the university in any way, we offer a couple of BIG benefits over Velocity:

    1. If you’re accepted, we provide your living accommodations  absolutely free in a sweet pad just steps from the university for the term/year.

    2. We take more of a cooperative mercenary/hustler driven approach, providing access to server space, mentorship, capital (in exchange for the option to buy equity into your venture) and other resources necessary to launch either (a) your own venture, (b) collaborate and percolate on ideas with other participants in the program during the term or (c) get hands on experience working on cutting edge projects (particularly in the social, mobile, geo-local, gaming, data mining & search spaces) in various stages of development.

    3. While we may not have the visibility of Velocity, I can unequivocally say that the upside and quality of the experience would be far superior for those who want to execute and iterate on ideas at breakneck speed in a constantly changing market and shoot for the moon.

    Our first cycle commences at the start of the Fall ’11 school term (September 2011) and we plan to take in 3-5 students and finalize our selection process by the middle of August.  If you haven’t already finalized your living accommodations for the Fall term and like what you hear so far, I’d encourage you to check us out on www.hackerhouse.ca for more details or get in touch with me directly.

    It is a very different approach to residence during the school year. Their focus seems to be very much competitive to UW VeloCity (full disclosure: I am the EiR at UW VeloCity and will be helping the students at UW get access, build products, etc.), but it is a very different approach. The UW VeloCity program houses 70 students, provides access to University and community resources, and for all intensive purposes is opt-in. Many students get into the residence looking for a place to live and learn about entrepreneurship and high tech startups as a career path. The goal is to provide a familiarization to hands-on entrepreneurship.

    Hacker House

    It is great to see others dedicated to continuing to build the community in Waterloo.

  • TechTalksTO Underground

    Tech Talks TOAlong with the team at FreshBooks, StartupNorth is proud to support TechTalksTO. TechTalksTO previous put together a series of speakers at the Gladstone Hotel on West Queen West that feature some great talks about technology for Toronto developer community. We’re very happy to be a Sponsor and Media Sponsor of their upcoming conference event on August 13, 2011. It’s a great group of front-end, back-end and devops focused entrepreneurial technologists.

    What a great way to spend a Saturday before flying out to GrowConf later in the week.

    The Details

    When: Saturday, August 13, 2011
    Where:  Toronto Underground Cinema, Spadina Avenue.
    What:  All-day conference + After-Party

    Speaker Lineup

    After Party

    One of the best parts about our previous TechTalksTO events were the unofficial gatherings afterward. They were always a great opportunity to network and have some great conversations. We enjoy it so much, we figured for this event, we’d make it an official part of the day so your ticket will include admission, food, and drinks at the exclusive after-party Saturday evening to be held at a nearby establishment.

    Tickets

    Tickets are available NOW!.  Alas, due to the size and scope of this undertaking, we have to charge actual money for tickets for this one but we think you’ll totally get your money’s worth. Tickets will be priced at $150, including admission to the after-party, which will also get you a couple of drinks and some food. We also plan to have some food and drinks available throughout the day at the conference venue.

  • Under the Hood – Chango

    I am always curious at what startups are using for the technology under the hood. It helps define the technologies that frontend and backend developers looking for jobs might start using. It helps understand what skills are being developed in the ecosystem and where competition or coopetition for talent may exist. And I am always curious at the emerging trends of technology adoption by local firms.

    I have enjoyed the coverage of the technology at Toronto-born startups like BackType and the work of the team at BostonInno (in particular Kevin McCarthy’s The Tech Behind) and Phil Whelan in Vancouver. Dan Morel (@dpmorel) has started looking at the development processes used at Canadian startups (see: Supersize your Startup Dev Productivity & One is the Loneliest Number). If you are a Canadian startup that is building “interesting” technology, we’re actively looking for startups to profile.

    Chango

    We start the series with Chango and technical Q&A with Chris Sukornyk (LinkedIn, @sukornyk) and Mazdak Rezvani (LinkedIn, @mazdak) looking at the technology and the evolution of Chango platform. Chango closed $4.25MM in a Series B financing round led by Rho Canada and included iNovia Capital, Metamorphic Ventures, Extreme Venture Partners and others. The Chango team has doubled over the last 6 months, they are roughly 25 people (including Hot Sh!t List member Josh Davey).

    The online advertising landscape is changing rapidly, Chango is taking advantage of Real-Time Bidding to allow marketers to buy ads on the web in real-time. It means big data where time is critical because small fluctuations in price or users can have big impact on the overall effectiveness or cost.  The best analogy is a stock market, where instead of stocks, marketers can buy billions of ads each day based on how they think that websites ad slots will perform for them. The cool part about RTB is that you can combine data to put the right ad in front of the right user. This requires huge data processing skills and Chango processes information on about 60,000 ads a second.

    What does Chango do?

    We are an ad-buying platform that is built for online marketers looking to find new customers using display (banner ads). Our main goal is to eliminate wasted marketing dollars through smarter targeting. Specifically we show ads to people based on what they’ve searched for in the past – a technique we are pioneering called “Search Retargeting“.

    Unlike traditional ad networks we exclusively buy ads using real-time bidding, a new technology that is rapidly changing the Display advertising industry and allowing marketers to layer data on top of their media buys.

    Chango is unique in that it has access to billions of search terms, billions of incoming ad impressions, and has devised machine learning techniques for combining data from different sources to deliver more efficient and better-targeted campaigns for our advertisers.

    What does your product architecture look like?

    Software development that deals with “Big Data” typically has two types of challenges: big volume, or low latency. Chango has to deal with both of these issues simultaneously.

    We receive over 90,000 requests per second (and growing monthly) from our ad exchange and data partners at peak times of the day. To make matters more interesting, we have approximately 80ms to respond to any incoming bid requests. Unfortunately 30-50ms of this limit is used up because of unavoidable network latency, this leaves us only 30ms to process each bid request. As a result, we have to constantly optimize our bidder subsystem around this challenge.

    What are some of the tools and technologies you use?

    Open Source is at the heart of our technology stack. Python is the common thread that binds all of our subsystems. Our entire infrastructure is written in Python. We use a (modified version of) the Tornado Web Server for our realtime servers, and Django for the front-end.

    When dealing with super fast response times it’s critical to have a super-fast datastore at your disposal. That’s why we use a NoSQL database technology based on the proven memcached server.

    The unsung open source hero of our infrastructure is HAProxy. HAProxy handles our load-balancing across the board. We use the “keepalived” feature of Linux to keep these servers in high-availability mode.

    As far as our architecture is concerned we try to not have any major dependencies on any specific features of the third-party systems we choose. They just happen to work well for our current environment.

    How did you get here?

    Scalability is as much an art as it’s a science, but most importantly, it’s about keeping things simple. It took years of hard work, and careful tuning and measurement to arrive at where we are.

    Originally we used Java for all server-side development and Ruby on Rails for front end development. The thinking was that we needed a rock-solid language for server architecture and a rapid development environment for front-end work. This concept served us well for a little while; however, in early 2010 we realized that Java was drastically slowing down our ability to iterate quickly and effectively. A single feature was taking days to build, test and deploy.

    We bit the bullet and rebuilt the platform entirely in Python and it was probably the best decision we ever made. Not only do we have a consistent language across front end and server side development but it has enabled us to rapidly add features or test new ideas. We are fortunate to have access to the fantastic ecosystem created by the Python community.

    Where do you host?

    Our first approach back in 2009 was to leverage Amazon Web Services EC2 as a scaleable and cheap way to prototype the platform. That served us well for a while; however, the shared virtual environment meant that we had wildly variable server resources.

    We shifted to Hosting.com knowing that we ultimately needed our own equipment and if we wanted a VM environment we would need to set one up ourselves. While Hosting.com provided good support at the time we wanted the rapid provisioning we were used to at EC2 with the power of dedicated hosting.

    Ultimately we chose SoftLayer as our hosting provider of choice. SoftLayer offers a VM environment in addition with their “express” service that allows us to get 10s of new servers provisioned in about 3-4 hours! They have been extremely good about allowing us to occasionally provision a whole new parallel cluster as we do capacity planning.

    How do you monitor your systems?

    Monitoring is done through a combination of Nagios, PagerDuty, and Circonus among others. We have also built a real-time data visualization system that let’s us monitor both infrastructure, and campaign performance. We use this dashboard as our own NOC system hooked up to a TV that is mounted right in the engineering area!

    What are your biggest development challenges?

    We’ve got two distinct challenges. Our real-time, data processing, and systems engineering teams deal with problems of scalability and big data. As our business continues to grow, we need to re-examine our infrastructure and design choices. We have a very healthy culture of team collaboration, code-review, and refactoring.

    Our Dashboard team has a different set of challenges. Our self-serve ad platform is very much like Adwords in that marketers can put down a credit card and launch a campaign themselves. We need to make this an extremely user-friendly system, while keeping it powerful enough to enable people to perform sophisticated reporting and campaign optimization.

    How do you win?

    The Chango business is all about putting the right ad in front of the right user at the right time. We made an early decision that data you know about a user (ie. search data) is only effective if it is combined with a proprietary bidding engine that can make decisions in real time.

    Almost every DSP, data provider or ad network out there today does this by storing information about users in a client-browser “cookie”. They call this a user segment. The problem with user segments is that they are pre-computed and stored within the users browser. If you decide half way through your campaign that you need to adjust your audience (due to lack of performance) there is no way to do so since the information is hard coded in the users browser. The only option is to continue serving ads to this under-performing group of users and wait for that cookie to expire (typically 30 days).

    At Chango we’ve decided to make everything real-time, including our decision about who to bid on, and how much to bid. Nothing about the user is pre-computed. So the Chango ‘cookie’ contains nothing more than a unique identifier that anonymously points to all the raw data we know about that person in our database.

    Chango is hiring!

    Python Developers! There are multiple open positions in Toronto, New York & San Francisco. But if I could have anything it would be talented developers that either know python or want to learn Python.

    Interested in being profiled in our Under the Hood series, we are actively looking for Canadian startups building “interesting” technologies and solving “interesting” problems. Contact me by completing your initial Under the Hood submission.

  • BackType acquired by Twitter

    Backtype has been acquired by Twitter

    Congratulations Christopher Golda (@golda) and Michael Montano (@michaelmontano) on Twitter acquiring BackType. We’ve written about BackType since their acceptance in YCombinator (fortunate that we didn’t give iPartee their previous startup too much attention). This is another amazing acquisition of Canadian startups by a Silicon Valley company (make it 16 acquisitions since Jan 2011 see TechVibes). I think Dan was right, this could be a $1B year for Canadian startup acquisitions.

    The BackType team had already relocated from Toronto to San Francisco. And it looks like the relocation to the Twitter offices should be much easier:

    Our team’s relocating to the Twitter office. We’re very excited to not only join an amazing company that’s changing the world, but to continue building products in pursuit of our shared vision with Twitter.

    Finally, I’d like to thank all our investors and advisors, especially Y Combinator, Toni Schneider and True Ventures, Josh Felser and David Samuel from Freestyle Capital, Manu Kumar, Chris Sacca, Raymond Tonsing and Seth Berman.

    What is amazing/disappointing is that there are no Canadian investors along side the group of amazing investors assembled by Chris and Michael.

  • Founder Fuel Jam Session in TO

    FounderFuel

    Nothing like the last minute planning around here. Ian Jeffrey (LinkedIn, @ianmtl) from FounderFuel is planning on being in Toronto today (June 27, 2011) and tomorrow (June 28, 2011). He is planning on meeting with startups and founders to share his experiences launching FounderFuel, the mentorship and incubation/acceleration plan for participating startups and to talk about tech startups generally. If you are interested in talking with one of the emerging technology company incubators/accelerators you should come and talk to Ian and learn about what is being offered in Montreal. There is a lot of choice in the marketplace for entrepreneurs, and the best way to see the differences are to connect with the people behind the scenes like Ian and the FounderFuel team. This is a great way to evaluate the program, get introduced to the people, and connect.

    FounderFuel Jam Session

    Date:
    June 28, 2011
    Time:
    7 PM EDT – Presentation & Overview
    8 PM EDT – Startup 1-on-1s and discussion
    Location:
    Camaraderie Coworking, 102 Adelaide Street East, Toronto, ON, Canada [map]
    Register to attend:

    From the looks of Alexa Clark’s (@alexaclark) photo exposition at Camaraderie, it is a great space to host a startup. I know that Matt (@mattskilly) and Aron (@defrex) at Hipsell have their startup offices there. It is a great space for startups requiring a great work space, a central location, and the benefits of an enabled coworking culture.

    Beer Station at Camaraderie - Some rights reserved by LexnGer
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