StartupNorth

Author: Jevon MacDonald

  • iBegin – From Local Search To Business Data

    ibegin logoiBegin has been doing all the right things, right from the beginning. It wasn’t that iBegin had the perfect business model from the start, they didn’t. Very few startups do, but instead of getting stuck on one idea, they have transformed within their niche and have shot in to profitability.

    iBegin started out as an experiment: a user generated local search site for Yorkville, a ritzy 4 block neighborhood in downtown Toronto. The number of visits to the hyper local site surprised Ahmed Farooq, the site’s founder, so he started exploring purchasing business listings to expand. Dealing with the data providers proved to be a big hassle. Worse still, the data providers used opaque variable pricing schemes and demanded princely sums. And so iBegin discovered a business opportunity, hassle-free fairly-priced business listings: iBegin Source.

    iBegin charges $1000 per state or province, $40,000 for the entire US, and $8,000 for all of Canada. Customers love the transparent pricing. iBegin has already made over 50 sales, 80% of which required no interaction or hand holding. And it is not just customers that have noticed iBegin… this year Ahmed received (and turned down) a buyout offer in the low seven digits.

    ibegin logoAs a local search engine, iBegin used to compete with Toronto based and venture backed startup Ziplocal, which has undergone several redesigns and appear to be struggling with the local search business model.

    It is worth reading iBegin’s philosophy. Notice what they didn’t have from the start: “iBegin was not created by a dozen people brought together to work on it. It didn’t have a CEO and CFO and other related positions. It didn’t have bankers and venture capitalists backing it with millions, helping finance user research groups, and hiring expensive and unneeded consultants and advisers.”

    Ahmed is no one trick pony. He has a number of other ventures including: vB Skins, Is My Home, and the Bloggy Network. Building a stable of successful businesses and reinvesting those cash flows, instead of raising outside financing, has allowed allowed iBegin to experiment, iterate, and evolve. Getting to product/market fit is a significant achievement.

    There are many opportunities for iBegin going forward. Next year we’ll see iBegin expanding into other English speaking countries and offering categories (e.g. health, legal) in addition to regions. How does Ahmed do do it? By listening to customers and bootstrapping his way to a big success.

    Contact: Ahmed Farooq
    Blog: www.techsoapbox.com

  • Razzle Clones Woot

    Update: Caveat Emptor
    Razzle made a serious misstep selling refurbished headphones as new. The first batch of customers felt burned and started discussing their experiences on Red Flag Deals. Razzle made another poor choice by posting a fake testimonial on Red Flag Deals (under the name lohervine); a site administrator outed them by comparing IP addresses. Razzle is offering refunds, but has not yet committed to covering shipping.

    Woot sells refurbished items all the time, but they clearly state the item’s condition. While I doubt Razzle was set up to scam users, they really fumbled the ball losing the trust of their very first customers.

    On the lighter side and as predicted, a customer ended up at Razzle.com by mistake.

    Original Post
    Razzle LogoRazzle.ca, Canada’s first deal a day site, launched today. The first deal: wireless headphones for $51.90. Too rich for your blood? Well join the site anyways, because they plan to giveaway a few items every so often.

    The Montreal based site was founded by Ryan Closs, 26, who faithfully cloned Woot. Emulating a successful concept is a legitimate business strategy, so I am not going to criticize Ryan for that.

    Think Bill Gates came up with the Windows GUI? Heck even Wal-Mart’s Greeter was an idea Sam Walton copied from K-Mart. And let’s not forget to mention the multi-million dollar exits Facebook clones are making (Germany, China). That said, I would have probably paraphrased Woot’s FAQ a little less closely.

    Today’s launch had some to be expected hiccups. Fortunately, the admins were on the ball and put out the small fires in the comments. A longer term issue might be the Razzle.ca domain name. It is pretty catchy, but direct navigation traffic will occasionally end up at Razzle.com by mistake. Those users are in for a surprise… not safe for work! There is a lesson here for other entrepreneurs, pay attention to abutting domain names!

    Congrats on the launch!

    Contact: Ryan Closs

  • Cover Your …

    Let’s face it, most entrepreneurs break all kinds of rules (the law is no exception). Starting a business is risky and time consuming; when your immediate survival is determined by your burn rate, the quality of your product, and time to market, it is easy to overlook or even knowingly ignore legal niceties.

    The thing of it is… investors want something tangible to hold onto. You won’t get very far with “we’re buddies so it is 50/50” or “we’ll figure out who owns what later”. Partners will also grow anxious without some formality and structure. Adhering to a few best practices may very well determine the near (and long) term prospects of your endeavor.

    Next Tuesday (November 13) from 12:00 – 1:00 PM EST, Cognition LLP‘s Joe Milstone will be hosting a free webinar on legal issues startups can?t ignore but often do. Well worth your time to listen in and listen up.

    What legal issues have you knowingly ignored in your startup? Post your (anonymous) responses in the comments.

  • $7,500,000 Series B and New CEO for xkoto

    xkoto logoGrowthWorks and GrandBanks Capital have announced a $7.5M Series B investment in xkoto. The startup, based in Toronto, is a leading provider of database load balancing solutions. The funding will be used to expand support of multiple database and ISV platforms, grow its U.S. presence, and accelerate sales. xkoto already counts big customers including UnitedHealthcare, Genworth Financial, InGrid, Travelport, and leading Wall Street investment firms.

    While the use of load balancing technology is already widespread for deployments of web and app servers, corporate data centers have only recently begun to seize the technology and capture the associated benefits (improved performance, lower consumption of system resources, and the viability of using inexpensive commodity hardware). xkoto claims savings of up to $295,000 on the initial hardware/software and recurring savings of $60K per year for each system replaced with a commodity system using GRIDSCALE, their software product.

    In addition to funding xkoto announced today a new Boston based CEO, David Patrick. David hails from Novell where he managed the $450 million Linux, Open Source, and Platform Services Group. Co-founder Albert Lee will become Chief Strategy Officer. Khalil Barsoum an industry veteran and Tim Wright of GrandBanks Capital, have joined xkoto’s board of directors which includes Roger Chabra of GrowthWorks, Mark Stirling of Treadstone Associates, and co-founder Albert Lee.

    This round is exciting as it represents continued interest in Canadian software startups. Is a move south of the border imminent? No decision has been made according to Roger Chabra of GrowthWorks. “The CEO is Boston-based solely because he was too good a candidate to pass up.” Rather than get all worked up about headquarter relocation, lets try celebrating it as both a fact of startup life in Canada and more importantly a sign of success in a larger market.

  • Cake Mail LogoCakeMail launched their public beta last weekend at BarCamp Montreal. The company, founded by serial entrepreneur Francois Lane, is only offering email marketing services through resellers, a pretty contrarian bet in a ?direct from the source? era. It remains to be seen whether or not offering service direct and through resellers would yield superior results, but either way there are some great lessons here for Canadian entrepreneurs.

    Get other people to sell it
    CakeMail is a white label email marketing platform. They are positioning themselves as wholesalers and doing everything possible to empower their resellers (marketing and web design agencies). I?m not entirely sure what keeping a per email pricelist off their site does when larger competitors publish comparison charts, but resellers probably appreciate the gesture.

    Open and abstracted
    CakeMail was designed from the ground up to leverage a community of developers. The UI is completely abstracted from the logic. In addition to offering reseller the ability to completely tailor the visual experience, CakeMail has opened up their API to give resellers the ability to extend the platform to their hearts content. It is a cost effective way to add functionality, experiment, and harnesses knowledge that only exists at the end user level.

    Go global
    Abstracting the interface has another benefit, localization. This is one area where Canadian entrepreneurs can really out do their peers south of the border. The company, based in Montreal Quebec, is a team of six, two of which are based in Eastern Europe. Count the fluencies. Localizing software is a big challenge and an even bigger opportunity (check out our recent post on Languify). CakeMail is already running in several languages, supports email in all characters, and is going to be quickly localized by end users.

    CakeMail at BarCampGet traction? Then funding
    Investors are risk averse. There is no better way to increase your funding prospects AND valuation, than by getting product out to paying customers. I asked Francois about the company?s capitalization and this is what he had to say:

    ?We are currently building a list of interested parties who could provide strategic synergies in addition to capital for rapid expansion into international markets. While we already have paying customers, we’d like to gain a bit more traction before starting funding negotiations in earnest.?

    So take note, this guy has a recipe for success.

  • Investment Banking for Startups – Q1 Capital launches Private Investor Network

    Raising funds for a startup is a full time job. As Craig Hayashi of Maple Leaf Angels pointed out in his recent posts, it can easily take 6 months to raise an angel round. Fortunately, there are options for entrepreneurs who want to focus more of their attention on building the business and less of their precious time on the next financing.

    Golden KeyMeet Frances Fast of Q1 Capital. She specializes in getting startups funded… fast. There is such a thing as a startup investment banker. Frances recently joined Q1, to lead their Private Investor Network, but she is not new to the industry; Frances has been working with angel groups in Canada for nearly a decade, talk about a golden Rolodex.

    If your startup needs to raise over $750,000, you might want to consider the services of an investment bank. They’ll put together your pitch book and get you in front of an interested audience; of course you’ll still need to sell it.

    Investment banking for startups… sounds fancy, what’s the catch? Well, an investment bank’s services are not free. At the close of financing they get a 7% success fee and along the way charge a retainer to keep everyone’s eye on the ball and moving toward closing a deal.

    Sure you can do it yourself. Put together your own private placement memorandum, hunt down angels and vcs, try and get a meeting, etc. But if this is your first time down the startup financing road or you have more vital things to focus on, bringing on an experienced deal maker can keep everything on track and moving forward… fast.

    Contact: Frances Fast, Q1 Capital
    Tip: Be sure to sign up for the Q1 newsletter, it is chock full of need to know info!

  • BarCamp Canada!

    BarCamp Canada LogoMark your calendars, BarCamp Canada is coming to town! Montreal is hosting Canada’s first-ever nationwide BarCamp, to be held next month, Saturday, November 3. For those of you not yet familiar with BarCamp, it is an unconference par excellence. While I can’t tell you exactly what will be presented (the schedule is set that day), I can guarantee it will be one of the most engaging experiences of the year.

    Anyone with something to contribute or with the desire to learn is welcome and invited. The only cost is participation. So plan a car pool, jump on a train, or find a cheap flight. This event you don’t want to miss.

    What: BarCamp Canada
    Where: Montreal, Quebec, Canada
    When: Saturday, November 3, 2007
    Cost: Participation (Free!)

  • ThoughtFarmer – Facebook for the Enterprise

    Thought Farmer LogoThoughtFarmer, based in Vancouver, BC, is a startup in the hot enterprise 2.0 space. Why is the sector so exciting? Because it is changing enterprise work flow, knowledge sharing, and collaboration. Try imagining university before Facebook.

    ThoughtFarmer’s journey began with a consulting project in 2004; a client wanted an engaging intranet and knowledge repository, all without staff dedicated to the project. The solution… a wiki. The product developed from there, inspired by JotSpot and the growing importance of social networks.

    ThoughtFarmer sold its first license in 2006. Yep, this is behind-the-firewall software. With companies large and small racing toward the era of software as a service, this is an almost contrarian bet. It will be interesting to follow this company and see how it all plays out. One last thing… ThoughtFarmer is profitable and not seeking funding.

    Contact: Chris McGrath

  • Amazon selects Freshbooks for new Payment Service

    FreshBooksYou have probably heard about Amazon’s new Flexible Payments Service… what you didn’t know is that FreshBooks, the Toronto based invoicing startup, was one of the very first companies invited by Amazon to try integrating the payment service. Great news all around! Amazon’s entry means more competition in the online payment market… good for consumers, good for startups. And FreshBooks was recognized by Amazon as the perfect partner to demo their newest web service utility. Think Canadian startups are going unnoticed by the web giants? Think again!

    Check out FreshBooks’ perspective on the Flexible Payment Service.

  • Mickey Mouse devours Club Penguin

    Disney2Club Penguin, based in Kelowna, has been acquired by Disney for $700M. In an open letter announcing the acquisition, the site’s founders promise to keep the site free of advertising and hint at site localization. Sony had previously attempted to acquire Club Penguin for $500M. This is a huge exit for founders Lane, Dave, and Lance. Congratulations!