StartupNorth

Author: David Crow

  • Assetize: Adsense for Twitter

    This is part of a series on Extreme University and the first group of graduates from the Summer 2009 program.

    assetize A Toronto-based startup that first went live in May 2009, Assetize has been focused on helping people turn their accounts into assets. The premise is that, similar to domain names, online accounts like email addresses and Twitter accounts also have some fundamental value because of their usernames or audience reach. However, unlike domain names – which are sold and parked in a multi-billion dollar industry – these values haven’t been realized yet.

    I met Saif and the Assetize team recently when I visited the Extreme University program, where they are one of the startups in the incubation program by Extreme Venture Partners. Assetize is trying to be the AdSense for Twitter. Just as people are able to monetize their websites and blogs through AdSense, Assetize lets users include ads in their Twitter accounts effortlessly, and helps advertisers reach their target audiences. They have built a proprietary technology in-house that analyzes each account’s content to ensure that the ads being served are relevant to followers.

    Quick Analysis

    Management Team

    The management team consists of Saif Ajani, Mike Rhemtulla and Minaz Abdulla. Separately, they have worked with numerous Fortune 500 companies as tech consultants, and have also launched 2 previous startups together. This is a young team that has shown that they can deliver in a short time period. Building a strong set of advisors and continued demonstration of traction will help them go a long way. As a side note, I’ve worked with Minaz in the past (at Ambient Vector), he is an incredibly talented engineer that has demonstrated his ability to produce and ship great code.

    Market

    According to the online marketing research firm, eMarketer, companies are expecded to spend upwards of $32B in online advertising by 2011, with almost $2.9B of it going towards social networks. Although MySpace and Facebook have been the most dominant networks thus far in terms of drawing ad dollars, Twitter is exploring advertising. As people spend more of their “media time” on social sites, agencies and brands are seeking new channels and opportunities to create connections and advertise to audiences. This is a growing space that is ripe for innovation and new opportunities.

    Product

    The goal of the product is to help users increase the value of their social media assets. For Twitter users this is a combination of relevant content, reach and connection. Users can use Assetize to find content to attract, retain and engage their connections. The process to setup the Assetize service for a Twitter account seems very simple and straightforward. Users have a one-step process to register their accounts and provide a list of topics that they tweet about. Assetize provides access to over 100,000 feeds that can be used to find and publish value-added content. The idea is that more and better content attracts a larger base of users and inject ads into the Twitter stream that have a higher response rate. Analytics is provided on links and conversations.

    The company is currently working with advertisers to build out the functionality. The core of the Assetize product is an ad matching engine that analyzes previous posts and matches users to available/relevant ads.  AdSense’s value comes from making its ads targeted to the content on web pages, and the Assetize engine aims for contextual, relevant Twitter ads for each author based on posts and conversations.

    Business Model

    Similar to other online ad networks, Assetize earns a commission basis, and share revenue with Twitter account owners. Since this commission is performance-driven, it’s a good incentive for Assetize and its members to optimize accounts so that advertisers receive good returns on their investments. The business model requires scale to have a large enough capacity of users and a large inventory of ads to continue to ensure relevancy to each party.

    Strategic Relationships

    Assetize is a young company. They are starting to build relationships with advertising agencies to help bring their clients to Twitter. As use of social media continues to grow, particularly among the lucrative 18-24 audience, no doubt many brands will look for easy, familiar steps to test advertising on Twitter. The team is eager to explore these relationships, if you are an advertising/marketing/social media agency looking to explore a relationship, they are actively looking at how to partner and work together.

    Competition

    Izea, the company behind PayPerPost for blogs that has a raised a total of $10M in VC funding, recently launched SponsoredTweets, a service that pays Twitter users to write short posts about its clients’ products. It requires more effort from Twitter users than Assetize’s service. The Twitter advertising ecosystem is continuing to develop and evolve, there is most likely room for a variety of models and engagement strategies.

    Other competitors include Be-a-Magpie, a service based out of Germany and Great Britain, and RevTwt. The coverage they received earlier in the year undoubtedly led to a good user base, but their list of advertisers seems to be lacking. If Assetize is able to overcome these two startups, they’ll need to gain better access to advertisers than its competitors were able to.

    There is always existing social media ad networks. Each of these companies has relationships and inventory, though they are not easily translatable into an effective 140 character campaign. 

    Summary

    It’s a very interesting product. There is an opportunity around defining effectiveness of advertising for social media sites, but early the familiarity of CPM and CPC that is brought Assetize may help drive early adoption with agencies and brands. There are challenges in securing a large audience, a large inventory and strong relationships with agencies. Assetize has an interesting value proposition for users looking to monetize their Twitter “assets”. Great start for an ExtremeU company!

  • ExtremeU 2009 – The Graduating Class

    extremeventurepartnersWe first covered Extreme University back in June 2009.  The 12 week program has completed and there are a great crop of early stage software startups.

    What is ExtremeU?

    ExtremeU is an investment and educational program run by Extreme Venture Partners. It is a 12 week program that provides small founding teams (2-3 people) with US$5,000/founder and shared office space for the 12 week program in exchange for 10% of the company. You gain access to shared resources (mentors, servers, outside speakers, the odd beer and/or lunch). It’s a program that is in the same vain as TechStars, YCombinator and SeedCamp, though there are significant differences in the programs, funding and delivery between these four incarnation.

    Who are the graduating companies?

    assetizesuperheroesallianceMy first commentary is only one of these companies, Assetize, manages to have a corporate web site. It’s like everyone did very well in Extreme University, but 2 out of 3 failed the required course on corporate marketing. Unbelievable, though it is possible that I’m being a cranky old man that wants to see a standard web site/blog with a home page, an about us page, a contact page, etc. One of the companies, Locationary, is launching in stealth mode. And it’s unclear if they’ll be cooperating to provide details for their launch.

    Over the next week, I’ll be providing deeper posts into each of the 3 startups (maybe) that include details about each of the companies, their market, the problem they solve, and their founding team.

    Stay tuned.

  • An Evening with Yossi Vardi

    BrightSpark Ventures, Microsoft BizSpark, Rogers Ventures, and StartupNorth are please to co-present “An Evening with Yossi Vardi” on September 24, 2009 in Toronto. Like DemoCamp and other events, you need to purchase a ticket to attend.

    Did you catch Yossi Vardi at TechCrunch50? Check out Yossi questioning Canadian startup StorySomething at TC50. He’s a funny, relevant experienced entrepreneur that has helped build the Israeli software/Internet industry. And he’s going to talk about starting a company outside of Silicon Valley. He’ll talk about selling a company outside of Silicon Valley.

    Sign me up!

    Who is Yossi Vardi?

    Yossi Vardi is one of the leading individuals in the Israeli software/Internet industry.  

    yossivardiYossi has extensive experience in the public and private sector. In the private sector, he is probably the most respected investor in Israel; has served on many boards including Amdocs, Maariv, Elite, Scitex, Bezeq, Arkia, Elisra. In the public sector, he has extensive experience in technology, including helping to set up the VC industry in Israel via Yozma. He serves on the board of governors of Weizmann Institute and the Technion. He was the chairman of the Jerusalem Foundation, council member of the Open University of Israel and serves on the board of trustees of the Hebrew University. Vardi acted as an advisor to the World Bank and the United Nations Development Program on issues of energy policy and strategy in the developing world. He is a member of the World Economic Forum, serves on the Research Visionary Board of Motorola, and on the Future Trends Forum of The Bankinter Foundation of Innovation. He serves on the advisory board of Blackberry Ventures in Ontario, and served on that of 3i, was advisor to the CEOs of AOL, Amazon.com, Allied-signal, Siemens-Albis and others.

    Yossi was the founding investor of Mirabilis, inventor of ICQ – the well known Internet-wide Instant messaging product. Among the companies he invested in, or helped to build are Answers.com, Gteko (sold to Microsoft), Airlink, Tivella, Scopus, CTI2, Foxytunes, Tucows (Toronto based), and Starnet.

    In recent years Vardi has been active in fostering a culture of innovation and creativity in Israel and abroad. He founded the Kinnernet conference, an annual, three days gathering of creative people from all over the world.

    Vardi won the TechCrunch Europe 2009 "Best investor personality" award; He received an Honorary Doctorate from the Technion, Honorary Fellowship from the Open University, and twice received the Prime Minister award for life achievements in the high tech area; he was nominated as one of The Most Influential International Executives by The Industry Standard.

    Yossi, most recently, is an Angel investor in many Israeli startups and is now focusing on unique models of investing in startups. He is  currently invested in many startups. Yossi is just returning from San Francisco where he attended the TechCrunch50 conference as one of the Panel of Experts.

    Brought to you by

    brightspark-logo bizspark rogers-logo

  • CIX Top 20 – Showcase your Innovation

    CIX Top 20 Submissions are open

    We covered CIX in the past, and the Achilles Media team are hosting another great event in

    CIX conducts an exhaustive search for the most innovative ideas, products, services and companies in the country. Each year 20 technology and clean technologies are selected via a qualified Selection Committee to showcase their innovative product and services in front of the CIX community. Each of the selected 20 will be asked to deliver a seven-minute presentation live on stage at CIX.  Recognized industry experts will act as Judges, evaluating the merit of their product or service and giving constructive feedback and guidance. The CIX community present at the event will vote for the CIX 2009 Award for “Canadian Innovation Leader”.

    I’ve written a lot about CIX (Exchanging Innovations Canadian style, CIX Survey Says). This is a similar discussion on the 2 different models presented by TechCrunch50 and by Demo. CIX is a great event to connect later stage startups, investors, and the entrepreneurial ecosystem in Canada and the US at a local venue.

  • Hockey sticks and consultants

    Exponential Growth Curve

    I’m always giving consultants a hard time. It’s not that I dislike consultants. It’s not that I think that consulting is a bad business model. It’s that a consulting model is very difficult to get exponential growth. You know that hockey stick growth curve, well it’s actually an S-curve but early it looks like a hockey stick, that is so important. I’m talking about real numbers, not projections. Revenue. Users. Customers.  (Need help figuring out what you should be tracking? Go read Dave McClure’s AARRR! Startup Metrics for Pirates). And go read Mark MacLeod about why compound growth changing your funding requirement.

    Consulting is a linear growth business. It grows based on:

    • # of consultants billing
    • # of billable hours
    • hourly rate

    Unfortunately, all of these are limiting variables. There are examples of very profitable firms and corporate structures that enable a very profitable model. I’m not discounting the profitability of the Big5 consulting firms. Consulting firms are generally limited to the number of consultants. Corporate culture are defined by the people.

    The number of billable hours is a limiting factor. There are only 8760 hours in a year. You can’t work every hour. You can’t bill every working hour. It’s just not possible. Billable hours are the currency of consulting and legal firms. Many firms require 1700-2300 billable hours/year. Just think about this: 2300 hours/year =  46 billable hours/week + 2 weeks of vacation. If you assume a 80% utilization rate, i.e., 80% of your time is billable and 20% is on overhead/email/meetings/etc.  To achieve 46 billable hours you need to work 57.5 hours per week.

    Hourly rate is generally set by the skill set and the market. Flippa. Rentacoder. 99designs. crowdSPRING. Elance. There are others willing to do it for less.The market determines a consultants hourly rate. 

    So for an independent consultant billing at $200/hour on a 57.5 hour work week at 80% utilization would have revenues of $460,000/year. This is an extremely high rate. Looking at the NASDAQ 100 using Cognizant averages $35,892 versus Apple ($1,014,969), Ebay ($551,049), Microsoft ($663,956) and others. This might be a little extreme. Don’t believe me, Hoovers.com suggests that IT/software consulting has average revenues of $160,000/employee (MarketResearch.com has this closer to $100,000/employee). Realistically the easiest way for a consulting firm to achieve exponential growth is to grow to the number of consultants working. And the risk of exponentially growing the number of consultants is that you kill the culture that attracts many people in the first place.

    “But isn’t the consulting company itself startup? No, not generally. A company has to be more than small and newly founded to be a startup. There are millions of small businesses in America, but only a few thousand are startups. To be a startup, a company has to be a product business, not a service business. By which I mean not that it has to make something physical, but that it has to have one thing it sells to many people, rather than doing custom work for individual clients. Custom work doesn’t scale. To be a startup you need to be the band that sells a million copies of a song, not the band that makes money by playing at individual weddings and bar mitzvahs.” – Paul Graham

    That said, consulting is a great way to take the risk out of a startup. The best consulting projects are the ones where you can build the software you want to sell as a product. This assumes that you have necessary legal agreements where you retain ownership of the intellectual property created during the consulting gig. This is often referred to as “bootstrapping” (read Paul Graham’s Fundraising Survival Guide to understand the tradeoffs).

    There’s nothing wrong with consulting. It’s a perfectly viable career. It’s a perfectly viable business model. But do the math, it doesn’t scale like a product company.

  • Entrepreneurship 101 starts Sept 30, 2009

    entrepreneurship101 MaRS is continuing it’s Entrepreneurship 101 program for the 2009-2010. Entrepreneurship 101 is an introductory program aimed at providing the “nuts and bolts of building a business”. The program is a 16 week program aimed at providing the basics around starting a company. Topics include:

    • financing
    • defining markets
    • hiring teams
    • protecting intellectual property
    • raising capital

    MaRS has done a great job publishing a Vimeo channel with all of the past content. These build on our Teaching Entrepreneurship with a local opportunity for Toronto entrepreneurs. This is a great way to see the theoretical side of entrepreneurship, but to gain exposure to entrepreneurial thinking and the basics of getting off the ground.

    ent101-vimeo-buildingapitch
    Building a Pitch     from MaRS Discovery District on Vimeo.

    ent101-vimeo-roleofboards
    The Role of Boards, Advisory Panels and Service Providers     from MaRS Discovery District on Vimeo.

    ent101-vimeo-marketingbasicpt1
    Basics of Marketing for Entrepreneurs, Pt. 1     from MaRS Discovery District on Vimeo.

    ent101-vimeo-marketingbasicspt2
    Basics of Marketing for Entrepreneurs, Pt. 2     from MaRS Discovery District on Vimeo.

  • Founders versus early employees

    Not everyone can be a founder. We talk about the founders of startups and companies. We focus on the founders. The founders get press coverage. They get invited to speak at events. Sometimes they get rich. But for every founder, there is an early employee that takes near equal risks in joining an early-stage company.

    Steve Blank divides the individuals associated with startups as:

    • Founders
    • Early Employees (Employees # 1-25)
    • Later Employees (Employees # 26-125)

    The majority of his division is about the temperament of the individual as related to risk and dealing with chaos and uncertainty. Not every one can be a founder, i.e., can you imagine trying to start a company with 10,000 people? It’s just unfeasible.

    “Being an early hire at a startup gives an individual the ability to make tremendous impact on an organization as it grows – and both the founders and those hires should know it.” David Beisel

    We need to celebrate the employees at startups. We need to make sure that early employees are compensated, incented and rewarded for their decisions to join startups. Early employees have a huge impact on the growth and culture of a company.

    How do you compensate early employees? Paul Graham provides a model for calculating value. As Naval points out that you still need to pay employees market rates, but with all employees you need to ask yourself “whether she [a new hire] is likely to increase the next round’s share price”. This should force companies to think about building value with each early hire, and not just filling a position.

    Title Range (%)
    CEO 5 – 10
    COO 2 – 5
    VP 1 – 2
    Independent Board Member 1
    Director 0.4 – 1.25
    Lead Engineer 0.5 – 1
    5+ years experience Engineer 0.33 – 0.66
    Manager or Junior Engineer 0.2 – 0.33

    Table 1: Options Grants in Silicon Valley for Series A from VentureHacks

    The numbers from VentureHacks are guidelines. They are rough estimates.Any one have sample option grants in Canada? Are the percentages different? I would assume that they are very similar but given the lower valuations and this may change the salary/options mix.

    Remember the goal is to incent early employees to have an emotional ownership of the product and company they are building. Equally said, potential employees need to understand what they are getting into. Darmesh Shah has a great list of insights for employees joining early stage companies. Early employees are critical for startups, and we need to recognize that not everyone can be a founder.

    I would love to hear your thoughts on being a founder or an early employee.

     

    Additional Resources

  • Hire a co-op!

    Looking for ways to get new talent? Hire a co-op! The Ontario Government has a great program to help offset the costs. It’s interesting how all of these programs are located in and around Waterloo. This is one of the benefits of starting a company in Ontario.

    I know that Kontagent, Extreme VP, Bumptop, LearnHub, Sysmos, FreshBooks, Well.ca, Idee and others have hired co-ops in the past. Here is some basic math, pay your students $15/hour for a 40 hour week for 16 weeks. It will cost you $9,600. The program will return you 25% which is $2,400. Cost for you for the 16 weeks is only $7,200. A steal!

    For each co-op student hired, your organization can take advantage of the Co-operative Education Tax Credit.  The Ontario Government recently increased the credit to 25 per cent of salaries or wages and benefits (30 per cent for small businesses) to a maximum of $3,000 per student, per term. For more
    information:

    Anyone know the contact details for UofT, Seneca, or Ryerson’s coop programs?

  • Teaching Entrepreneurship

    The first book I remember reading about starting a new tech venture was High-Tech Ventures: The Guide for Entrepreneurial Success. It is a book that was written about entrepreneurial ventures in the mid to late 1980s. Surprisingly much of the advice and particularly the venture economics remains valid. However, much of the manufacturing and marketing advice doesn’t apply 18 years later. The good news is that there are a ton of online resources that are available to round out the education for entrepreneurs.

    It’s great to see that Velocity, SIFE and Impact are making it easier for students to learn about entrepreneurship as a career path. Maybe I need to put some effort into adding content to StartupSchool.ca to make a valuable resource for entrepreneurs and students.

  • Pitching fastballs

    “Do you have some time for a coffee or beer to chat about my startup?” – Anonymous entrepreneur

    I’m happy to talk to entrepreneurs, learn about your startup and even help you out if I can. Since I have a bad habit of over committing and taking on too many activities. Let’s see there’s DemoCamp, Founders and Funders, StartupEmpire, my job (yes, I work at Microsoft), and a personal life (think 2 kids under the age of 2). Things are chaotic and busy, I’m starting to ask entrepreneurs to help me. So without more information, the answer to the above question is “maybe, help me understand why we should me”.

    This sounds familiar. It’s similar to the problem faced by investors (made more pronounced with time-constrained applications), and journalists, and customers.

    “If we get 1000 applications and have 10 days to read them, we have to read about 100 a day. That means a YC partner who reads your application will on average have already read 50 that day and have 50 more to go.” – YCombinator How To Apply

    We talk about an Elevator Pitch. Except this isn’t a world where you might have forced my focus of attention by being artificially trapped in an elevator. The goal is like a newspaper headline. It’s to make me read the rest of the story. You need to stand out. You have to be able to simply, clearly convey what your startup is going to do. The YCombinator team do a great job describing what they look for in How To Apply. The initial filtering criteria for a YC application are obviously different than the criteria that journalists use to find stories, and different that what I use when determining to take a meeting or how I can help a startup. But the process is the same.

    “What is your company going to make?" This isn’t the question I care most about, but I look at it first because I need something to hang the application on in my mind.

    The best answers are the most matter of fact. It’s a mistake to use marketing-speak to make your idea sound more exciting. We’re immune to marketing-speak; to us it’s just noise.” – YCombinator How To Apply

    This is about stand out from the pack. And helping the reader/journalist/audience member figure out who you matter to and why. Think of this as demand generation. You’re driving awareness and interest in your company, your team, your solution. The number one key is to be empathetic to the person whose attention and imagination you are trying to capture. Put yourself in the shoes of your intended audience, and help them understand what is special about your company, your product, you.

    “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.” – David Rose

    Here’s an attempt to write that opening description for a few local startups.

    • FreshBooks is a QuickBooks killer. It is a web-based accounting system allows small businesses to have accurate, professional estimates, time tracking, and invoicing.  
    • Well.ca is Canada’s online drugstore. Strong sales growth over past 3 years, raised $1.1M from angel investors in July 2009, technology focused with strong customer service.
    • Rypple is a web application that gathers anonymous feedback from anyone. Peter Thiel is an investor. Founders have a strong track record at Workbrain.
    • Dayforce is an rich internet application and web service that allows managers to visualize and plan their employees schedules and the employees to enter their timesheets. Founders have strong track record including Workbrain.
    • Kiiro is a social project management application built on SharePoint. It uses the web and Microsoft Project to improve collaboration between the project managers and the team on larger projects.
    • CoverItLive is web application for live blogging events. Companies, conferences, individuals can connect photos, tweets, live video, and rich media during events.

    This is just the beginning. But that is the point. The goal is to entice the reader to want to know more. Ideally I’d love to see a short description of what you’re building. A clear identification about how you think you’re going to make money. What you think your secret sauce is. And a brief summary of key team members. Sound familiar. It’s very similar to the advice that David Rose provides as a Pitch Coach. The goal is to take basic pitch information and digest it into a smaller, customized components for your audience. It means that entrepreneurs are going to have stop being ego-centric and start thinking about others. You need to understand what is important to the individual that you are trying to reach and to shape your message appropriately.

    For me, I want to understand what your company does/builds; the management team; the market opportunity; the business model; the stage of corporate development (pre-funded, funded, pre-revenue, etc.); why you think I care about this; and what your ask is of me. Is that too much to ask?

    Open challenge to local startups to “pitch” for a meeting in a 140 characters or less in the comments (more realistically less than 420 characters – basically 3 tweets).

    Resources