StartupNorth

Author: David Crow

  • StartupDrinks – August 26, 2009

    Updates

    • ExtremeU Social is happening on August 26 from 5-7pm. Start out on the patio at Extreme Ventures with the ExtremeU companies and then head over to StartupDrinks at C’est What?
    • Montreal RSVP at TechEntreprise. Happening at Brutopia.
    • Ottawa RSVP at Guestlistapp. Happening at Metropolitan Brasserie.

    It’s time again. StartupDrinks Logo

    Bryan Watson of NACO and Robin Ahn of CEOFusion have stepped up to help coordinate the next installment of StartupDrinks in Toronto. Heri of Montreal Tech Watch and Raymond Luk of Flow Ventures are hosting the Montreal event. And Scott Annan from Mercury Grove is stepping up to host an Ottawa event.

    The kickoff Toronto Startup Drinks followed hot on the heels of DemoCamp and was a great event.  We are keeping the startup community alive, one pint at a time on Wednesday, August 26, 2009 at local fave C’est What!

    It’s a simple concept: a grassroots effort to make sure startup folks get in touch and stay in touch.

    Toronto

    • Date: Wednesday, 26 August, 2009
    • Location: C’est What, 67 Front Street East, Toronto, ON (map)
    • Time: 6pm until late
    • Sign up using Guestlistapp, then join us on the night for a to meet other entrepreneurs!

    Montreal

    • Date: Wednesday, 26 August, 2009
    • Location: Brutopia, 1219 Rue Crescent, Montreal, QC (map)
    • Time: 6pm until late
    • Sign up at TechEntreprise, then join us on the night for a to meet other entrepreneurs!

    Ottawa

    • Date: Wednesday, 26 August, 2009
    • Location: Metropolitan Brasserie, 700 Sussex Dr., Ottawa, ON (map)
    • Time: 6pm until late
    • Sign up using GuestListApp, the join the gang at the Metropolitan.

    Everyone is welcome.

  • The sky is falling

    “we have a structural problem and this means Canada’s ability to drive innovation will weaken and we will see the overall economy suffer.” – Gregory Smith, President of the CVCA

    The CVCA has released their Q2 2009 Venture Investment data.

    • Venture investment down 42% from 2008. $179M in 2009 compared to $309 at the same point in 2008. This includes a $50M placement from OMERS for PublicMobile, which when removed makes the numbers even worse.
    • Average deal size decreased to $1.9M from $2.9M, this means that Canadian companies have less available resources than US competitors. 

    So it’s bad. Really bad. This is not the first time. It probably won’t be the last time we hear about the troubles of Canadian VCs. Anybody really surprised?

    The VC industry in Canada has been in turmoil for a long period of time. There are regulatory and structural hurdles, which the CVCA is actively lobbying politicians for the support. This includes lobbying for support to SR&ED tax credit programs, offset agreements, incentives for investment, etc. I’m not sure that “establishing a blue chip, limited-life panel comprised of company executives, university presidents and venture capitalists with the express mandate to devise a road map for Canada’s technology industries” will provide the solutions necessary to Canadian entrepreneurs. And while I think that VCs are an important part of the ecosystem to support and nurture entrepreneurs, they are only part of solution. It is the entrepreneurs and startups that will save venture capital in Canada. 

    What does all of this mean?

    • Number of investors will continue to decrease
    • Valuations will continue to decrease
    • Customer uptake will be slower
    • Need to become cash flow positive
    • Acquiring entities will favour profitable companies

    Does this sound familiar? It’s pretty much verbatim out of Sequoia Capital’s R.I.P. Good Times presentation or Ron Conway’s email to his portfolio. This is not new or news to Canadian companies. Raising money has been difficult for a while in Canada. Our investors have preferred later stage investments, in the H1 2009 just over 60% of all of the capital when to later stage deals (Series B and later). We’ve seen a need for companies to be able to demonstrate a product, customers and market potential just to raise early funding.  

    There are Canadian ventures that are growing and successfully operating on revenues. Along with a set of emerging technology ventures that have closed non-traditional funding rounds. Well.ca raised $1.1M from angels. J2Play was acquired by Electronic Arts. It’s possible to raise money, to get acquired, to operate successfully during tough times. You just have to execute better than your competitors.

    So what is an entrepreneur supposed to do?

    1. Read How Startups will save Venture Capital in Canada.
    2. Read R.I.P. Good Times. and Ron Conway’s email to his portfolio.
    3. Stop worrying about the state of Venture Capital in Canada.
    4. Start building real businesses with real customers driving real revenues (if you need to raise money there are other sources of capital).
    5. Look for growth in markets outside of Canada (while this includes the US, it should not be limited to US only growth).
    6. Execute, execute, execute. You’re only as good as your last deal. So find customers, keep them happy, and keep innovating.

  • Backbone Magazine’s Top 20 Web 2.0

    Backbone Magazine announced their “PICK 20 round of Canada’s leading Web 2.0 pioneers” that includes 4 companies form our list of web startups to watch, it’s a great list of Canadian technology companies and startups.

    The List

    1. FreshBooks, Toronto
    2. Myca Health, Quebec City
    3. CoveritLive, Toronto
    4. Viigo, Toronto
    5. Radian6, Fredericton
    6. Filemobile, Toronto
    7. BoardSuite, Toronto
    8. NowPublic, Vancouver
    9. Tungle, Montreal
    10. HootSuite, Vancouver
    11. ThoughtFarmer, Vancouver
    12. AfterCAD Online, Vancouver
    13. TeamPages, Vancouver
    14. The Manufacturing Innovation Network, Kitchener
    15. Well.ca, Guelph
    16. Clarity Accounting, Vancouver
    17. Voices.com, London
    18. Taglocity, Vancouver
    19. PollStream, Toronto
    20. Pixton, Vancouver

    The majority of the startups on the PICK20 list are in Vancouver (8) and Toronto (5). It’s a great list of Canadian startups.

  • Because Startups Need Each Other

    “Because startup entrepreneurs need each other.”

    The Philly Startup Leaders have published a manifesto for startups. The manifesto embraces the call for community. It reminds me of the passionate call that Jevon led with "How Startups will save Venture Capital in Canada” and “I love my city, and so should you”. It is about enabling entrepreneurs! And more importantly, it is about the realization that we are a community, we need to support each other.

    Starting a company can be a long and lonely journey.

    Each milestone is a small miracle—from idea to prototype, from first employee to first customer, from first revenues to first profits and eventually to a thriving, successful business.  Most startups fail along the way.

    To survive this journey, startup entrepreneurs need many things. They need access to funding and talent.  They need support from their government and their community.  They need opportunities to educate themselves and their team.

    But more than anything else, startup entrepreneurs need each other.

    Toronto, Waterloo, Montreal, Vancouver, Ottawa, Calgary, Halifax. We’re all very lucky. We have growing, thriving communities of entrepreneurs. We’re connected to each other. It is our responsibility to help each other. To make the connections. To build the fabric. To call bullshit. To build the next great thing.

    This is beyond just casual connections. We have a lot of disparate resources and individuals. I’m not suggesting that we need “one ring to rule them all” but that we need to do a better job helping entrepreneurs connect with each other. And this will requires a personal commitment to an open, creative community and conversation. We need to build something like the PSL Values.

    Philly Startup Leaders Values

    1. We know our niche: startup entrepreneurs.
      Our focus is our advantage.
    2. We are a community.
      Starting a company alone is painful.  Along the way, our greatest need is the company and support of entrepreneurs like ourselves.
    3. Our community depends on deep, open and frequent communication.
      This kind of communication is essential for our members to get to know and trust each other.  As an organization, we earn the trust and loyalty of our members by communicating with them in the same way.
    4. We believe in lean and flexible leadership.
      Bureaucracy and hierarchy tend to stifle entrepreneurs.
    5. We don’t replicate other organizations and events in our ecosystem.
      Instead, we support other organizations by partnering.  We produce only unique and complementary content.
    6. We encourage entrepreneurship within our organization.
      Any member can champion a cause they believe in.  When they do, they have access to the same resources the leaders do.
    7. We believe that entrepreneurs of all experience levels should mentor one another.
      We have all had great teachers, and it’s our responsibility to give back to our community.  This includes our fellow entrepreneurs and those who ought to be.
    8. We love our city and our region.
      We walk the same streets as Benjamin Franklin, an entrepreneur whose inventions and institutions have survived for generations.  We are inspired by our history and proud to be writing its next chapter.

    What can I do?

    1. Participate.
      This is the very first step. Blog. Tweet. Comment on posts. Share links. Attend events. There are lot of events designed to help entrepreneurs connect with other entrepreneurs and others in the community. In Toronto, check out the YouSayYeah Community Calendar. In Vancouver, check out the Bootup Labs Events page. In Montreal, check out TechEntreprise. Use social media to connect with others. The reason we started StartupNorth was to make it easier to find out about Canadian startups.
    2. Patronage.
      It might sound a little like protectionism, but it’s about supporting your community. What was the last product or service you purchased from a startup? From a local startup? If you work for an established company, you should be looking for tools, people, companies, products that give you a competitive edge. Look for vitamins or painkillers, remember this is not a charity activity (though it often feels like it). We are all looking for competitive advantages, and there are lots of startups with new solutions to problem. Look at StartupIndex to find new startups. If you’re a startup, and you want some additional coverage, drop us a note (but check out previous stories iLoveRewards, GigPark, make it easy for us to write a story about why people care). 
    3. Provide feedback.
      When you find a startup, an entrepreneur or a product that only sort of fits what you are looking for, share the information back with the company. Help them build a better product by giving them customer or potential customer feedback. What were the key features that were missing? What was wrong with the pricing model? Why won’t it work in your corporate IT infrastructure? This is valuable information that a lot of young startups need to gather to iterate and improve their offering.
    4. Celebrate failure.
      Did you take a job working for an established company because your startup failed? Share your stories about what worked, what you did wrong, what you’d do differently if you could do it again. How? See # 1. Hire a failed entrepreneur (I know I appreciate the opportunity provided by Microsoft Canada to be startup guy in Canada running BizSpark). We’re all in this together, it feels like I’ve been working with and for startups since the beginning of time. And if I’m lucky, I’ll be doing this for many years in the future. And I know I’ll have a few great stories about what I did wrong.

    It’s up to all of us to celebrate the startup successes and failures in Canada. Personally, if you’re a startup I’d love to hear what you think StartupNorth should do to help you.  Please comments with your suggestions for stories formats, events, site improvements, etc.

  • One small step for startup kind

    “I believe this Nation should commitment itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to earth. No single space project in this period will be more impressive to mankind, or more important for the long-range exploration of space; and none will be so difficult or expensive to accomplish." – John F. Kennedy

    Yesterday was the 40th Anniversary of the lunar landing. The Apollo program is an interesting concept for early-stage startups. It was a self-imposed race to beat the Soviets. A lot of startups need to feel the pressure to succeed, and having timelines, constraints and competition often helps amp up the sense of impending doom.

    For the Apollo program there was competition. There were extreme timelines. There were budget constraints. All of these were much bigger and longer than the plans for startups. But there was a clear goal (“landing a man on the moon and returning him safely”), and constraints (“before this decade is out”). And most importantly the money wasn’t the end, it was a necessary means to accomplish the larger goal.

    Clear Goals

    Beating the Soviets. Recovering national pride after the failed Bay of Pigs invasion. It was an effect of the Cold War. But there was competition. The historical analysis of the program looked at a variety of success factors including Big Hairy Audacious Goals that included:

    • “a chance of beating the Soviets by putting a laboratory in space”
    • “a sporting chance of sending a 3-man crew around the moon ahead of the Soviets”
    • “an excellent chance of beating the Soviets to the first landing of a crew on the moon (including return capability, of course)”

    The definition of goals included both the engineering constraints but also a prediction of the potential of the competition. Startups need to set big goals. The goal should specify the desired outcome, not the path/method for achievement. 

    Competition

    The goals need to be in context of their operating environment including that of their competitors. I really hate when an entrepreneur tells me they have no competitors. The number of times that this is true is rare. Most companies and products have competition. Stop being afraid to talk about your competition. Understanding where you fit in the competitive landscape can help you figure out your product offering, your time to market, potential marketing events. It makes it a lot easier to know who is the bad guy? Trust me, you should be diligent and honest about who you are competing against. Having a clear competition makes it easier to see where you should spend marketing dollars, what conferences to attend or avoid, and build strategies that either embrace or ignore the competition.

    Constraints

    Money is one of the easiest constraints to understand. Unfortunately, when you’re working part-time out of your basement/garage/spare room, you don’t have the impending sense of doom that money is a constraint. The runway for side projects is a long. I think this leads to thinking that raising money is the end goal.  “We’ve raised a million dollars”. This is meant to be the beginning of the journey. The money is for a purpose, it’s meant to help you grow, build, market, acquire, etc. Raising money enables you to do the real work. It allows you to either increase the rate of acceleration or lengthen the runway. But it’s just the beginning. Equally said, SR&ED is a great benefit to companies, however, when you decide to focus on SR&ED credits to keep the company afloat instead of finding new customers you’re doing the wrong thing.

    Money in the bank/Monthly expenses = How long until we are dead – Phil Morle

    The change over the past 20 years is that the monthly expenses have decreased. It no longer costs hundreds of thousands of dollars for hardware, development environments, net access, etc. The price of servers continues to fall, and with the advent of cloud computing and dynamic loads it is becoming variable with the load on your site or application. Development environments are free. Usually the single biggest cost for a startup is talent. Oh wait, you’re not paying yourself and you don’t have any employees. This has 2 side effects, it reduces the monthly expenses thus lengthening the runway, but it can also have adverse side effects like not forcing entrepreneurs to be self critical of their ideas and their progress. 

    Figure 1: The Startup Runway 
    Figure 1: The Startup Runway from Phil Morle on Pollenizer

    I like Phil Morle’s method for using the runway:

    Pick a date in the future (this is point D on Figure 1). Let’s say 18 months from now because that’s roughly what John Doerr of Kleiner says is good runway. And then begin working backwards, determine the point where you will need raise more money or find a paying customer (this is point C). This point needs to be a few months before the end of the runway to allow you a margin of error and the time necessary to close financing or the deal. Continuing backwards in time, you need to be at feature complete (point B on Figure 1). Yes, there is a long time between points B & C but this is to allow you to drive adoption, build press and momentum and refine your existing product and pricing. It brings us to right now, what is the minimum feature set that you can plan, design, build, test and deploy between now and 6-12 months from now.

    Lessons for Startups

    “Startups fail from a lack of customers, not product development failure” – Steve Blank

    You’re goal is to prove your business before time runs out!

    1. Define the end of the runway
    2. Set clear goals and metrics that will prove your business
    3. Identify the constraints – financial, talent, technological, etc.
    4. Focus on customers and markets from day one

    Additional Reading

  • Friday Night Fights

    Whether you think of the UFC and mixed martial arts (MMA) as bloodsport or entertainment, there’s no denying that it is big business. Sure it’s still a bunch of individuals pounding the hell out of each other, but it’s an interesting brand building exercise capturing the attention and wallets of  18-34 year old men.

    Dana White along with Frank and Lorenzo Fertitta, as Zuffa LLC,  purchased a near bankrupt UFC for $2 million in 2001. By 2006, the UFC grossed more annual pay-per-view revenue than any other ‘”combat sport” promotion, think boxing, mixed martial arts, etc. The 2008 estimated revenue was close to $250 million through a mix of pay-per-view, live event tickets, television deals, advertising, video game promotion deals, and other varied revenue streams. It had become a huge business. Big enough that Mark Cuban has creating HDNet Fights as a promotion and leveraging the HD television outlet to highlight other combat sport promotions.

    Love it or hate it this is big business. It’s no longer “human cockfighting” as it was referred to by Sen. John McCain (R-Az).

    So how do organizations like Zuffa LLC and Oscar De La Hoya’s Golden Boy Promotions make money. And what can software startups learn from these marketing organizations. MMAFrenzy provides “A Look Behind the Curtain: Zuffa’s Finances Come Into Focus” that provides a breakdown of the financial side of a private company. And Portfolio.com provides insight into the wheeling and dealing that is Golden Boy Promotions

    Television Licensing & Promotion

    Television promotion is about “the people who create something worth watching and the audience”. Both Golden Boy and Zuffa have crafted television deals to help them reach fans beyond their strong base. Golden Boy Promotions has a deal with HBO and Zuffa has a deal with SpikeTV to broadcast their shows to cable audiences. For both promotions this allows them to focus on building brand awareness, create superstars and sell their live pay-per-view events. In the case of Zuffa, this has resulted in the creation of new content specifically for their television broadcast partner with the reality television show, The Ultimate Fighter (orignially created for $10M), and a host of other shows out of the archive materials from live events. The networks either sell premium cable subscriptions (HBO) or advertising (SpikeTV) based on their audience reach and demographics. Better content equals more diverse people watching, which allows for a shift in advertising demographics (details on Traditional Television Business Model and Video on Demand). The Ultimate Fighter has become the “most-watched original series on SpikeTV” with over 1.8 million viewers.

    Pay-per-view Revenues

    UFC has 5.1 million pay-per-view (PPV) buys in 2007. The PPV are split with the PPV distributor. The PPV buys number is reported for most major sporting events, Yahoo!Sports has a summary of the 2008 business which the UFC was reporting $237.9 million on 5,315,000 buys (average price of $44.75/purchase). Assuming a 60/40 split between Zuffa and the PPV distributor that generated approximately $142,740,000 in revenue.

    Live Event Ticket Sales

    Average ticket price in 2007 was $250/ticket. For example, UFC 99 attracted 12,800 fans and had a live gate of $1.3 million for an average seat price of $101.56. Different venues and fighter cards have different results, UFC 90 drew 15,359 fans and had a live gate of $2.85 million for an average seat price of  $185.92/ticket. (As a side note, these figures include the seats/tickets that the UFC gives away as part of the promotion. If you assume that 30% of the seats are given away to promotion companies and others the price per seat changes to $145.09 and $265.61 for each event respectively). The interesting part is that these numbers do not include any of the costs associated with running a live event: arena, security, medical staff, athletic commissions, promotion, etc.

    Other Revenue Streams

    The great thing once you have an audience, content and a recognized brand you can look for an infinite number of ways to monetize it. You start to ask questions like how do you find new audiences? How do you increase the average revenue per user (ARPU) of your existing users? What are new channels for reaching the audience? What other partnership and revenue generating opportunities exist?

    Video game rights licensing. Subscription internet video. Wait it seems that was tried and failed. No it looks like another opportunity presented itself with Heavy.com. Apparel deals with TapouT. Once you’ve built an attractive global brand, the world is your oyster. Zuffa has negotiated broadcast distribution rights in Australia.

    What can startups learn?

    1. Build a product that people want to pay you for
      I know this sounds cliché. And is not always as straightforward. Just look at the broadcast licensing and pay-per-view revenues for sports promotion. There are complex relationships between the people that produce the content and the people that watch the content. It involves cable companies, advertisers, intermediaries. But it starts with creating a product that people will use, in this case a product that people will watch/use and pay you for.
    2. Engage and support your loyal fan base
      The goal of the adoption funnel is to move from awareness to loyalty. You need to nurture and support the audience that is passionate about your product/service. Go read Kathy Sierra or Saul Colt to learn about how to inspire your customers to become evangelists. It’s about figuring out how they help their customers “kick butt better than their competitors”. Who are your super stars? What are you doing to help them kick butt?
    3. Don’t be afraid to self promote and create superstars
      You’ve got to love Golden Boy Promotions, the UFC and Saul Colt. They are masters of self promotion. Dana White, who owns 10% of Zuffa, has become an instant celebrity from his appearance on SpikeTV’s The Ultimate Fighter. The non-stop promotion of UFC Pay-Per-View events through the SpikeTV audience (2.8 viewers million for TUF9) help reinforce known revenue streams while building characters and superstars. Do all of the commercials feel like their cross promoting other UFC events? Well there is a reason for that, 75% of the UFC revenue comes from PPV sales. Startusp need to find ways to promote the features and solutions that help solve problems, inspire users and make superheroes. Rinse, lather, repeat. By refining their messaging and telling a better story, startups make it easier for customers to tell their story. Saul Colt (who is a big deal) does a great job promoting his companies (Zoocasa, FreshBooks) the power of community and sharing and asking the audience to promote using the channels that are important to users.
    4. Diversify your revenue streams
      There are many different ways to diversify revenue streams. Look at consulting companies that run training events (educating others about great design). Music television channels that are game companies (isn’t it all about music distribution regardless of channel). Go read Peter Frisella’s 2 awesome posts for a review of the different types of business model (part 1, part 2) to figure out your business model. Have a look at Alex Osterwalder’s Business Model Generation and look at his presentations on SlideShare to learn his Business Model Canvas.

    Building a successful startup is hard work! But after watching combat sports, building a startup sure beats the hell out of getting punch in the head for a living.

  • Weekend Reading

  • StartupDrinks – July 29, 2009

    startup-drinks

    DemoCamp Toronto 21 is sold out! But that is no reason that startups in Toronto shouldn’t get together.

    Raymond Luk from Flow Ventures will be in town for DemoCamp and suggested that we host an informal StartupDrinks event the night that immediately after. July 29, 2009 coincides with the next Montreal StartupDrinks and for Ray it maximizes his time in Toronto to meet entrepreneurs and hear about the great things going on in this city.

    What is StartupDrinks?

    A simple concept: startup culture in cities around the world gathers around a bar to have a pint and discuss what they are working on, what they need help with and what they can do for each other.

    Basically, the idea is that if you are involved in a startup or looking to get into a tech startup, come have a drink, meet new people and discuss startups. No rules, no keynotes, no schedules, no sponsors, nothing fancy, just some plain good old drinks, great people, hopefully good weather, hopefully awesome startups to talk about 🙂

    Where is StartupDrinks Toronto?

    The location is still up in the air. It’s looking like it will be at Pogue Mahones at 777 Bay St starting at 7pm.

    Where do I register?

    Really simple. Sign up for the Canadian Startups! Facebook Group and then RSVP on the event page.

  • Weekend Reading

  • Weekend Reading