StartupNorth

Author: David Crow

  • DemoCamp with Fred Wilson

    Mark your calendars.

    Fred Wilson of Union Square Ventures will be keynoting DemoCamp Toronto # 27 on October 6, 2010.

    EquentiaHow did we pull this off? Well the big shout out goes to William Mougayar at Eqentia, this would not have happened without the support and efforts of William. In case you haven’t seen Eqentia, they power custom portals for media monitoring, competitive intelligence, knowledge tracking and more. They power two sites that I use daily to track the Canadian emerging technology scene: CVCA and NextMontreal news widget.  We’ll be launching a full Eqentia powered news portal in the next couple of weeks.

    The full details about DCT27 are still being locked down. The venue is still to be determined. The venue is the bulk of the ticket price. The goal with ticketing has always been cost recovery and we’ll aim to keep tickets inexpensive (current model show about $25/person less for students). Fred Wilson, Union Square Ventures

    DemoCamp Toronto 27 Details

    • Date: October 6, 2010 [Hold the Date – iCal]
    • Time: 11:30am – 3:30pm
    • Location: To be determined
    • Notify me when tickets are available

    I want to demo! Pick me, pick me!

    We’re also looking for up to 5 local demos that match the investment thesis at Union Square Ventures. If you think your company has the right stuff then you should apply to demo.


  • Open House at Bootup Labs

    Bootup LabsJevon, Jonas and I are all heading to Vancouver for Grow Conference happening Aug 19-21, 2010. But I’m hear in Vancouver hanging out at Bootup Labs.

    Bootup Labs is holding open office hours this week. Basically if you’re a startup and you’re in Vancouver and you want need some touchdown space, you should visit Bootup Labs.

    Bootup Labs
    163 West Hastings Street
    Vancouver, BC

    David Crow at Bootup Labs
    Hanging out in the middle of Bootup Labs

    This is a fantastic place. There is a fantastic vibe. There seems to be real evolution and growth of Bootup Labs since the dark days. I’ve been hanging out the past day or so with:

    There are a lot of companies, entrepreneurs and things to like happening at Bootup. I am really impressed with a few things.

    1. The space – it is gorgeous. It’s the right mix of location and finish. The offices are safe, comfortable, and interactive. There’s a great mix of open working areas, private meeting rooms, a kitchen and private offices with sliding doors. The natural light. And it’s nice but not posh. As companies demonstrate traction, there is incentive to find different space, for example Dimerocker has moved out. Having Mozilla and Strutta as “anchor tenants” also reduces the risk to Bootup Labs. It also means that there’s a lot of fun interesting people flowing through.
    2. The location – it is right on the edge of Gastown. There is a great mix of restaurants and other things going on. I had breakfast at the Medina Cafe just around the corner from the office (best breakfast I’ve ever had). There’s the Fluevog store. It’s a great neighbourhood that has come a long way since I first visited Bryght in 2005.
    3. The companies – all of these companies and the entrepreneurs working there are pushing really hard and demonstrating traction. There are exits, see Layerboom acquired by Joyent. And there are a lot of good things happening.

    My recommendation is that if you’re in Vancouver you come hang out at Bootup Labs with us. Ping me @davidcrow or @startupnorth or just drop by 163 West Hastings St in Vancouver. I’ll be here until August 20.

  • Conspiracy theories and hockey talent

    Photo by Kenny Louie http://www.flickr.com/photos/kwl/4398396665/
    Photo by kennymatic

    The brain drain. Canadian actors in Hollywood. This was a common thread for a in Canadian media outlets. But there is something new going on in tech north of the border. International corporations have been snapping up Canadian startups and talent. Foreign investors (think US Venture Capitalists) are looking north of the 49th parallel to actively deploy capital in high growth, scalable companies. Just look at the recent track record of activity in the past 9 months.

    Recent Exits

    • Layerboom acquired by Joyent.
    • Plan9 acquired by Apple.
    • Sysomos acquired by MarketWire.
    • SmallThought acquired by Twitter.
    • Opalis acquired by Microsoft.
    • Bumptop acquired by Google.
    • Sitemasher was acquired by Salesforce.
    • CoverItLive was acquired by Demand Media.

    Recent Foreign-led Investments

    • Highland Capital Partners invests in Montreal-based Beyond the Rack.
    • Bridgescale Venture Partners invests in Toronto-based Dayforce.
    • Bridgescale Venture Partners invests in Toronto-based Bluecat Networks.
    • FTV Capital invests $35M in Toronto-based Varicent.
    • Altos Ventures invests $4.5M in Toronto & SF-based Kontagent.
    • Metamorphic Ventures invests $1.5M in Toronto-based Chango.
    • Grandbanks Capital invests in Toronto-based iLoveRewards.
    • Grandbanks Capital invests in Toronto-based xkoto.
    • Panorama Capital invests $8M in Calgary-based Tynt.

    So just what is going on. Why the sudden interest and opportunity?

    1. A History Lower Valuations, Less Capital & More Traction
      When you look at the historical news archive from the Canadian Venture Capital Association (CVCA) about the state of venture capital in Canada you begin to see a common thread. Canadian companies generally raise less money than their US counterparts at each stage of growth. This leads to lower valuations and more traction from local investors and has created a generation of Canadian entrepreneurs that are used to funding growth from profits. In 2009, the US market saw US$18 billion invested through venture capital. Canada startups only raised approximately US$1 billion representing 5.5% of the US number (source: Wellington Fund blog). The challenge is that the Canadian economy is approximatley 12.5% of the US economy and this leaves a significant gap in the amount of potential capital being deployed to Canadian startups. There is a gap in the level of investment and the overall economic performance in Canada. This leaves a huge opportunity for other funding sources.
    2. Strong Local Communities
      When you look across Canada entrepreneurs are using the web, events and models developed locally and internationally to connect each other, share information and build successful startups. There are examples ranging from government funded initatives like the Accelerator Centre in Waterloo, WavefrontAC in Vancouver, the RIC Centre, MaRS, Lead to Win in Ottawa, and Communitech (there are a ton more). There are grassroots movements like DemoCamp, MontrealNewTech, StartupCamp and LaunchParty happening across the country. There are an emerging set of incubators and early investors like BootupLabs, Extreme Ventures, Montreal StartUp/Founder Fuel, and Mantella VP. These communities provide entrepreneurs opportunities to connect with other entrepreneurs and seed investors to share methods, pursue informed development and find mentorship and funding.
    3. Close Proximity
      As soon as you decide to get on a plane, the game has changed. It’s not about can I drive to a board meeting in less than 45 minutes. It’s about can I make return travel in the same day. Flights to Vancouver from San Francisco are only minutes longer than flights to Seattle. If you’re leaving the comforts of Silicon Valley to travel to Seattle, Boulder, or other destinations than you should consider Vancouver. Toronto and Montreal in the same geographical proximity to Boston, New York and Chicago. The decision for most investors has less to do with travel and more to do with finding great companies whose growth can be accelerated. Having an international border throws a couple of new complications (see the next section Taxation Reforms) into the mix but it should not prevent investment or acquisition. There might be taxation and immigration impact on
    4. Taxation Reforms
      Charley Lax at Grandbanks Capital was a vocal critic of Section 116 of the Canada Tax Act. However, on March 4, 2010 Finance Minister Jim Flaherty announced amendments to the Act that excluded shares of Canadian private companies. Basically, this removed a major tax barrier to foreign investment opportunities. A few of the deals listed above where completed before the changes to Section 116, significantly more seed and early-stage deals involving capital from US investors can be seen.

    The times are a changin’

    Grow 2010

    Conspiracy theories of Canadians infiltrating American companies are mostly true. But the brain drain is a thing of the past. Silicon Valley is heading north to find new deals, new talent, and new opportunities. Grow Conference in Vancouver is a prime example of the exploration north of the border. Elite investors like Rob Hayes of First Round Capital, Dave McClure of FoundersFund, Jeff Clavier of SoftTech VC are heading across the border to engage with Canadian entrepreneurs and startups. The Canadian Tech Mafia, sorry the C100, continues to show a strong presence with Rob Chaplinsky from Bridgescale, Chris Albinson of Panorama and others.

  • My favourite flavour Vanilla Forums

    Vanilla Forums 2

    Congratulations to the team at Vanilla Forums. In the past year they’ve attended TechStars in Boulder, moved to Montreal, and released version 2 of Vanilla Forums. What is Vanilla?

    “Vanilla is an open-source, standards-compliant, multi-lingual, theme-able, pluggable community forum.

    Over 350,000 sites use Vanilla Forums to manage feedback, spark discussion, and make customers smile.”

    There are competitors ranging from bbPress, phpBB, and punBB (like others we’re torn between bbPress and Vanilla – the proxyConnect plugin allows us to integrate Vanilla with WordPress). But Vanilla is a leading solution offering a great user experience, simple customization and hosting with a large user community. Plus they’re funded by our friends at Montreal Startup which makes them an easy choice.

  • A year in the life

    GuestlistHappy 1st Birthday Guestlist!

    Guestlist has had a couple of weeks. On July 12, 2010 they launched their paid service which finally allows the company to generate fees for the great service they provide. We started using Guestlist for events starting on September 24, 2009 for DemoCamp Toronto # 22 aka An Evening with Yossi Vardi.

    “What began as a dare between three friends to actually finish a software product has turned into full-fledged web service that has helped hundreds of event organizers sell tickets online and keep tabs on their cash flow. Over that period we’ve collected half a million dollars on behalf of our users, a near-majority of which was delivered directly to charities. All powered by word of mouth.” – Ben Vinegar, Guestlistapp

    It’s been a great year for Guestlist enabling over $500,000 in transaction revenue. This is great traction for the small team. Sure it’s only $10,000 using the 2% paid service fee. But this is fantastic traction given that this is a part time project with all 3 team members working other jobs. The demonstrated traction helped the team realize the potential of Guestlist as a business.

    “That’s the story of what our team put together, part time, over one year. We can’t say it was easy; building and maintaining a quality application part-time requires a lot of dedication and free time. That’s why we’re excited to announce that 2/3s of our team has opted to work full-time on Guestlist going forward.”

    If you’re planning an event and you want a great event application, I can highly recommend Guestlist.

  • The Entrepreneur’s Guide to Customer Development

    The Entrepreneur's Guide to Customer DevelopmentI was reading Eric Reis’ Lessons Learned blog yesterday and he talked about The Entrepreneur’s Guide to Customer Development. I begrudgingly read Steve Blank‘s Four Steps to the Epiphany, which is a must read for any entrepreneur (begrudgingly read because it is not the easiest reading). It is a great book, but it’s tough reading.

    “And Steve is the first to admit that it’s a “turgid” read, without a great deal of narrative flow. It’s part workbook, part war story compendium, part theoretical treatise, and part manifesto. It’s trying to do way too many things at once. On the plus side, that means it’s a great deal. On the minus side, that has made it a wee bit hard to understand.” Eric Reis

    I bought a copy yesterday based on Eric’s recommendation. It is a phenomenal resource for learning Customer Development. Patrick and Brant have done a great job writing an understanable how-to guide for using Customer Development and Agile Development in a Lean Startup. The book includes a shout out to our friends Dan Martell at Flowtown and Sean Ellis at 12in6.  

    The book incorporates the wisdom and experience of real world practitioners of Customer Development in the 5 years since the inital publication of The Four Steps. For the first time a lot of entrepreneurs will hopefully begin to understand a technology adoption lifecycle and the marketing of products/services. I wrote a chapter in Cost-Justifying Usability back in 2005 where I had first encountered Steve’s Customer Development Methodology from his course notes in 2004 at Stanford (yeah, I know that’s crazy). In the chapter, titled “Valuing Usability for Startups”, I argued that getting out talking to customers and testing your hypotheses were key to success. However, I proposed using the Bell/Mason Diagnostic for evaluating the stage of corporate development in order to calculate Return-on-Investment of usability. In hindsight, I probably should have instructed entrepreneurs and usability professionals to look at processes like Customer Development to search for a “repeatable and scalable business model”.

    The Entrepreneur’s Guide to Customer Development is a short mandatory introduction to using customer and agile development to search for a  repeatable and scalable business model.

    Discount for StartupNorth Readers

    A few quick emails to Patrick today, and he offered to provide StartupNorth readers a 25% discount on any version of the book. First ten StartupNorth readers to go to CustDev.com can use the discount code.

    Discount code: STARTUPNORTH (limited to the first 10 users)

    Good luck!

  • Getting Traction

    Photo by Bierlos http://www.flickr.com/photos/bierlos/4591931914/
    Photo by Bierlos

    Traction trumps everything for angel investors. Traction is the proxy by which you can determine how well a startup is doing. It demonstrates that the team is able to execute together. That the product has a market with real customers.

    “Traction is real customers. If you charge for your product, it’s real paying customers. If your product is free, it’s a real user base. In other words, traction is a signal that your team can produce real results in a real market.” – Gabriel Weinberg

    Traction means a lot of different things. Is traction revenue? Maybe. Is traction number of uniques? Depends. Is traction conversion rate? Sometimes. Traction differs at different points in a company’s lifecycle, but it designed to show that there is a demand for the product/service you are building. And it’s not always revenue. There are different milestones for startups at different stages of development. The goal is to get to product/market fit quickly with a minimum viable product. Then establish metrics to measure and evaluate product performance.Dave McClure‘s Startup Metrics for Pirates is a great summary of the types of metrics startups can build into their applications and marketing analysis to track the effectiveness of their ability to attract, convert and retain customers.

    Startup Metrics for PiratesView more presentations from Dave McClure.

    How do you avoid expensive build, market and fail attempts?

    Elements of a Startup Growth Curve by Sean Ellis
    Elements of a Startup Growth Curve by Sean Ellis

    Now you’ve got your metrics. You validated your minimum viable product. How do you get traction without spending a ton of cash?

    Go figure out what you can do for zilch. That’s right nothing. Nada. Zip. Zero. Zilch. Assume you’ve got a marketing budget that is zero dollars. Then go figure out how you’re going to spend it to find, convert and retain customers. Pick a big, ostentatious goal. A million uniques. A million dollars in revenue. 25 new paying customers. The actual numbers are going to be specific to your startup. But the goal is to drive those numbers for as little (think $0) as possible using:

    • Extreme customer service
    • Inbound marketing
    • Conference submissions
    • Social media engagement
    • Blogging

    There are a lot off different activities that startups can do to help drive customers. Go drive real traction. Get to’er.

    Need some inspiration. Check out:

    What are your favourite examples of startup marketing on the cheap?

  • StartupDrinks – YYZ, YUL, YYT, YQM, YYC, YHZ, YFC, YSJ

    StartupDrinks LogoFriendly neighbourhood reminder that tomorrow, June 30, 2010, is StartupDrinks (well tonight in Saskatoon & Regina). On June 30, 2010 you can join entrepretreneurs in:

    Jevon is going to be hanging out in Halifax. Ray is going to be in Montreal. Jonas, Bryan and I are planning on being at Grace O’Malleys (aka Granuaile), 14 Duncan St, Toronto, ON.

    It’s a great opportunity to get out of the office. To be social. To connect with others that are struggling building companies like you. What will we be talking about? We’ll be talking about “How to grow your traffic from 1k to 35k on $0” and other things. What do you want to talk about?

    Here’s

  • The best laid 15 year plans

    Southern Alberta Railroad Tracks
    Photo by ecstaticist

    OMERS and ABP announced the launch of INKEF Capital, a € 200 million venture fund that is focused on deploying € 100 million in Canada in 5 years.

    “In the first five years, € 100 million is anticipated to be invested in start-ups in each of the territories, the Netherlands and Canada. The initial portfolio will naturally be weighted towards early stage companies which will mature over the fifteen year term. Deal flow will come from various sources, including technology transfer offices of universities, informal investors, regional funds and from spin-offs of new technologies by existing companies.” 

    This is great. It’s nice to see new capital getting ready to be deployed to Canadian entrepreneurs. What’s interesting is the reason that INKEF believes it is differentiated than other capital:

    “INKEF Capital distinguishes itself from other investors by its long term investment horizon and active mentoring of the start-ups.”

    Makes me wonder what the other firms have been doing? Passive mentoring? It will be interesting to gather more details as content becomes available (Currently http://inkefcapital.com/ is not active and the WHOIS record returns a registrar and intellectual property firm in the Netherlands). This looks it is a direct investment vehicle for OMERS & ABP,  “programs for direct investment as a promising new strategic option”.  I can’t wait to hear Mark McQueen’s take on this, but given we’re in Day 9 of his hunger strike I suspect that you’re stuck with my limited insight.

  • Can you pitch in 6 slides?

    Can you pitch your company in six slides? I can’t believe that Fred and Brad raised the first USV fund with only six (6) slides.

    “We learned to simplify our story and we learned how to create six killer slides. And killer slides are not slides with a dozen bullets each. They are six powerful points that combine to tell the meat of the story.

    So when you sit down and build your pitch deck, think of six slides that will inspire and leave something for the imagination. The best part of six slides is that you will get through them in time to have a real substantive conversation face to face about your business. Imagine that.” – Fred Wilson

    Constraints are a great thing. They help entrepreneurs filter and focus their presentations and messages. Getting your pitch down to six slides is going to be a challenge, and challenges are fun. I’m a big fan of the sequence of slides recommended by David Rose’s, chairman of the New York Angels, but even this sequence is 15 slides.

    1. Company Title Page
      Start with the name and logo of the company, the name and title of your presenter, a one-line description or tagline about the company, and the dollar amount of the round you are raising.
    2. Business Overview
      Boil down your elevator pitch to one sentence. Tell us what you sell or do in very concrete language. This sets the context for the rest of your presentation.
    3. Management Team
      Show us your talent and experience, with one line of background (two lines max!) on each member.
    4. Market
      What’s the environment in which you operate, how big are the segments, what are the pain points?
    5. Product
      How do you solve a customer’s pain? What exactly do you do? This can be illustrated with a clear product or screen shot, or a simple process diagram, but if we don’t know what you do, we won’t know why we should fund you. (But don’t spend too much time on this, since you’re pitching the company here, not the product.)
    6. Business Model
      Who pays whom, how much, for what and from where. What does this mean for annualized revenue streams?
    7. Customers
      Who are they, how many are there, how do you distribute to them, and how are they attracted and retained?
    8. Strategic Relationships
      If you have any, make sure we know about them.
    9. Competition
      Who and how threatening are they? What are the differentiation factors? Include both direct and indirect competitors. Remember that everyone has competition, even if it is just “the old way” of doing something.
    10. Barriers to Entry
      How will other potential competitors be kept at bay?
    11. Financial Overview
      Show us your top-line revenues and expenses, and EBITDA two years back and four years out.
    12. Use of Proceeds
      Where will our money take you?
    13. Capital & Valuation
      How much have you raised previously, who are your current investors, what are you looking for in this round, and how do you come to your suggested valuation?
    14. Review
      Provide a brief summary of what you said, in this same order, narrowed to the five or six most important points.
    15. Contact Info/Next Steps
      Lead us into the next step, such as a follow-up meeting for due diligence…and include your contact info!

    I can immediately reduce this to 7 slides, it’s not 6 but it’s close. The goal here is not to provide all of the information in these slides but to boil down the critical information to the salient points. I have been using Business Model Generation and the work of Alex Osterwalder to help build a better understanding of business model, value proposition, key partners and revenue streams. This combined with the slide sequence is a really effective way to model your business, customers, partners, costs and revenues.

    Business Model Canvas Poster V.1.0