StartupNorth

Author: Jonas Brandon

  • Making 2011 a BIG year

    2011 is the year for us to find some winners and to make them explode on to the international scene. 2011 is the year for Canada to pull out of the pit and to hit the track hard. It is going to get a bit crazy and you have to decide for yourself whether that is a good thing or not.

    2011 is the year we capitalize on some of the hustle of the last 3 years and when we all focus on building some huge successes.

    For a lot of people 2011 is the year of winning big.

    Economic indicators continue to suck, but it doesn’t seem like anyone cares. Competition is heating up and everyone is ready for a good brawl. Year of gluttony. Present company excepted of course.

    Howard is going to Russia. As an EIR I have been practicing sitting back in my chair, putting my hands behind my head and saying “What’s your China strategy??” (that’s a joke BTW)

    The IPO market will not be back in 2011 though. Frankly, I don’t care.

    You are going to hear less editorial from us at StartupNorth in 2011 because we are going to be focused on the big wins. I am putting my money and time to work in startups that I think are going to KILL IT. Where are you focusing on 2011?

    2011 isn’t about kumbaya for me. It’s about making the best of a good time. We live in good times. I’m not throwing the baby out with the bathwater, but I want to see the baby put to work.

    This is the year to take your shot. Either exit or go big

    Opportunities in 2011 will be outsized compared to what we have seen and may be better than we will see again for another five years.

    The bears are all tired and the bulls will be back to buying. The “early exits” and “talent acquisitions” we have seen in the last 18 months will continue, but we will also be back to some really big opportunities.

    This is the year to take that leap.

    Whether you’ve been working on an OK business that needs scale, or you have a killer founding team ready to come together to attack a huge market, then this is the time to gather resources and to really focus on making it happen.

    Can you do it in Canada? Good teams are going to get funded. Good teams and big ideas. Before you start worrying about your idea, think about your team and how you are going to execute.

    This is the year to try that big idea.

    Whatever you are passionate about, 2011 is the year when people with big ideas will finally be listened to again. No more “that will never work” — it’s going to be optimism and opportunity. People are ready to listen to visionaries again and we need them. Whether it is social change, a new startup or a research project — this is your time to roll.

    If you have been sitting on the sidelines then it is time to get off your butt and make your move. Now or never.

    Losers will be lost

    For some reason people always think that it is the losers that win in “good times”. That’s a load of crap. Bad companies will always be bad companies. They aren’t going to get any further ahead in 2011.

    Focus is still the name of the game

    Smart entrepreneurs will not be focused on valuations they are going to be focused on working with winners, because the wannabes are going to be coming out of the woodwork. Smart VCs will double down on the markets that they know well. This is not the year to spread yourself thin looking for the next sexy deal, it’s the year to double down on deals you understand and that you can ride right to the end.

    Canadian funds need to avoid being used as “runway” in later stage US deals. DIG IN and focus on taking good opportunities from Seed to Exit. Making things is still worth more than buying things.

    I normally hate predictions, resolutions and anything “year end”, but this time I am too optimistic to hold it back. I am already waving goodbye to 2010 and as far as I am concerned it is 2011 already.

  • Cognovision acquired by Intel

    UPDATE: We are hearing that the acquisition price tag is closer to $30m and possibly even higher. 


    Another great exit for the Toronto startup community and some great news in advance of CIX in a few weeks. Toronto based Cognovision has reportedly been acquired by intel. According to DailyDOOH, which covers the digital out of home market, the pricetag was $17m.

    Cognovision was the winner of the CIX pitch competition last year.

    I have to admit that when I first heard the Cognovision pitch, it felt holodeck cool. It also seemed “too good to be true” — Turns out I was wrong and the company shot to ~$1m in revenue pretty quickly. Using a camera on top of a digital display, Cognovision could give you some rough estimates that covered:

    • Actual Impressions – The number of people who look at your displays
    • Length of Impressions – How long people look for
    • Potential Audience Size – The number of people who walk by
    • Dwell Time – How long people stay near your displays
    • Anonymous Demographics – Demographics of your audience (gender and age bracket)

    Congrats to Shahzad, Haroon an the entire team.

  • It's about to get a little crazy out there . . .

    Ok, here’s the thing. The “is this another bubble?” conversation has been going on for a while, and everyone was able to agree that there hasn’t been a bust imminent so far. It might have been dragged out by the sluggish economy, it might have been a function of a lot of effort going in to building actual technology and less going in to building companies, I don’t know.

    But it is clear now that a change has taken place. I no longer talk to breathless and frustrated entrepreneurs who can’t find anyone to do their deal, instead I am hearing from frustrated and excited VCs who are trying to get in to the next hot deal. Personally, I LOVE it. Some really great deals are going to get done that SHOULD get done, but might not have just a few years ago.

    Fred wilson put the stake in the ground today and his post will go down in history as the first one to truly call the bubble.

    Things are going to get wild very soon. This is a great time to be raising capital as a startup. A lot of fundamentals are now either stable or rapidly moving up. From economic indicators (and their relation to the Web) to the creation of new funds. From consumer to enterprise. Things are good, all good. Get out there and build build build!

    NOBODY MOVE

    This is where we can easily start to make mistakes as a community. I have written about our need to think differently about the Canadian startup ecosystem and that feels more important than ever now.

    The first DemoCamps, which were started at the lowest point of the trough between the last bubble and today, were focused on finding the most innovative, interesting and valuable ideas/companies and there was very little focus on anything other than a few fundamentals. Who would pay for this? Why is it valuable? Will you be able to scale it?

    Let’s keep asking those questions and lets make sure we build STRONG startups in the next 5 years. Valuations will rise and the volume of startups will continue to increase, but I believe we can do it in a healthy and sustainable way.

    LPs need to focus on backing funds that can create value in their portfolio, not just the ones that can get them the sexiest deals (at the highest valuations no doubt).

    VCs need to avoid acting like every deal is the deal of a lifetime. We are JUST getting to a place where we can create startups in some quantity here in Canada. Overfeeding the newborns will just mean there is less for the kids who come later.

    Startups need to remember that valuation isn’t everything. A VC who understands your business, your customers and who can stick with you for longer than a few years is going to be critical. Don’t just jump at the first goofball who gives you the valuation you want. They’ll be coming out of the woodwork.

    Chances that anyone will listen to this? Zero.

  • John Ruffolo joins OMERS to manage new Venture Capital arm

    Some great news for Ontario, and the national startup community, today. We are hearing from multiple sources that John Ruffolo will be joining OMERS as Senior Vice President of Knowledge Investing. He will start in the position on January 3rd 2011.

    This position, which is focused on managing direct Venture Capital investments, has been the subject of speculation since OMERS announced that they planned to take a similar direct investment model with Venture Capital as they have with Private Equity deals, which has been a successful model for them so far. Pension and other labour sponsored funds like OMERS have historically taken Limited Partner positions in third-party funds (the VC funds you know and love already) and this hands-on approach is unique in Canada.

    John Ruffolo was previously a Managing Partner at Deloitte’s Toronto office and he conducted the survey of Canadian VC GPs that we wrote about earlier.

    John’s reputation is positive and his knowledge of both the past and current startup and Venture Capital environment in Canada is unique. It is great to see things moving ahead in the development of a new capital source for startups in Canada.

  • Has KIK finally arrived?

    I have been using kik pretty much since it launched last April. It was particularly useful for me because I was spending most of my week in the US at that time and kik allowed me to TXT back home while avoiding Rogers/Fido/Telus/Bell’s atrocious $1/message TXT roaming fees.

    The kik app was always very solid and rarely crashed, but there were often delivery problems, even on kik-to-kik messaging. It also seemed to eat up a lot of battery on the IPhone and Blackberry. Those problems seem to be in the past however and it doesn’t seem to affect my battery life anymore.

    kik seems to have finally taken off. So much so that they are signing up an average of 3 users per second and the team is struggling just to keep their servers online. They have published a few graphs showing their signup volume and it is impressive. The sudden drop resulted from kik having to take their servers offline and their app out of the app store.

    As it stands, kik is Blackberry Messenger, but it works on Blackberry, IPhone and Android. I have tried it on all platforms, and they all seem to be equally good.

    There are a handful of other multi-device messengers, such as whatsapp, and it is hard to figure out exactly what the kik business model might be in the end. They originally talked about some sort of music streaming/sales business, but it is hard to tell if that is still the plan, and frankly I am not sure that my private messaging and music worlds should be mixed up like that.

    Whatever model kik does eventually settle on, it is probably worthwhile for them to focus on continuing the growth they are now achieving.

    Kik came out of Velocity at The University of Waterloo, which we have covered in the past.

  • What do Canada's VCs really think?

    If you were to ask Canadian VCs, which Deloitte did this past April, what they think about Canadian entrepreneurs and startups, and the VC business in Canada in general, you might not get the warm and positive response that you expected.

    Based on these responses, Canadian Venture Capitalists think less of their entrepreneurial countrymen than their counterparts in Brazil, China, France, Germany, India, Israel, the UK and the United States. There is, based on this survey, a larger divide between entrepreneurs and VCs in Canada than there is anywhere else in the world.

    • Only 36% of Canadian VCs believe that an “improving entrepreneurial environment” is one of the factors that make Canada  a good place for Venture Capital. That is in contrast to 60-88% of VCs in countries such as Brazil (59%) , China (82%), France (67%), Germany (72%), India (88%) and the UK (59%).
    • When asked which factors contributed to creating a “non-favourable climate for venture capital”, Canadian VCs were again quick to blame entrepreneurs. 47% of VCs said that they believe a “lack of entrepreneurial talent to build a new company” is one of the problems with their industry. Only German VCs were more contrite – 72% of them said lack of talent was a problem. Other countries had far more benevolent VCs: Brazil (5%), China (42%), France (22%), India (15%), Israel (0%), UK (33%), US (6%).
    • Another answer to the question “factors contributed to creating a “non-favourable climate for venture capital”” that generated a big response from Canadian VCs was the idea that “reduced entrepreneurial activity” was a big factor. 28% of Canadian VCs said that they believe there is a lack of activity in Canada, that is in contrast to Brazil (3%), China (10%), France (11%) , Germany (39%), India (0%), Israel (10%), UK 14% and USA (5%).

    Is it possible that Canada is an exception to the rule in the rest of the world? How can it be that Venture Capital class investors in every other type of economy (emerging through to advanced) have a more positive opinion of entrepreneurs in their home countries?

    I decided to put the question to some of the VCs I respect the most in Canada. The folks who I believe are doing good things and who really get it. In these conversations there were a few major themes. Overall, the outlook seems pretty positive, while remaining realistic about our past performance. Nobody would agree with the consensus from the Deloitte report. Some of the responses:

    1. “It’s bullshit”. Nobody was ready to argue that the current attitude toward Canadian Entrepreneurs is justified.  The consensus was that it is the result of a lot of fund managers who got a rough ride and they don’t want to take responsibility for it.
    2. “It’s still early in Canada”. With a few exceptions, Venture Capital in Canada didn’t start until as late as 1995, and when it started it went off with a boom. A lot of money was raised by GPs who were not necessarily experienced operators (an old complaint). There are two common conclusions from this: We need new GPs who are experienced operators and We need to back the old GPs because they have finally learned their lesson
    3. “We are finally seeing a crop of 2nd-timers”. “Reward failure” is a popular refrain. The idea that entrepreneurs need to learn from doing is well established, but we haven’t seen the cycle of entrepreneurs here in Canada that we could really use. This was something that practically everyone expressed no matter how positive they were. This is a fundamental change in the entrepreneurial landscape in Canada.
    4. “The talent is here”. Canada has good product related talent. We need to focus on keeping that talent here and to build our capabilities in international marketing and channel development. “It really needs some work” is hard to argue with, but is it an industry breaker? No.
      The recent growth of seed funds in Canada is also helping to address many of these concerns. These funds are accelerating the pace of learning for new entrepreneurs so quickly that many are becoming high-quality second-timers within a few years and a very small amount of capital. This brings them back to the table with their hunger and some talent.

    Let’s move on

    This “blame the entrepreneur” attitude is now worn out. Whatever truth there is to it is in the past. Canadians are as, or more, connected to the internet than any other country and Canadian entrepreneurs no longer sit around learning from other Canadians, they are learning from a global A-list.

    In the end this is all to say: It isn’t as simple as pointing a finger and laying blame. Nobody is squarely blaming the VCs of the last 10 years for our problems, and it is similarly wrong to throw dirt back at Canada’s entrepreneurs.

    The lifetime of Venture Capital in Canada has been short and it could be argued that practically every economy must go through a “churn” phase where the asset class underperforms before a handful of factors come together in order to create a healthy industry. With some new funds starting to close and a mix of new and old blood actively trying to do the right thing, we might just have a shot at this.

    I leave you with some thoughts from Howard Gwin that I think show a fair balance of both blame and optimism for everyone involved and it contains some antidote for what’s going on. Read it in its entirety here.

    Where do we start?

    I am a “double down” kind of person.  Anybody who has worked with me has heard me yap about 80/20/80.  I think we need an 80/20/80 attitude in the Canadian tech marketplace.  We need to focus 80% of our energy on the 20% of companies that have an 80% chance of succeeding.  Set much higher bars across all of our ecosystem from mentors, to angels, to incubators, to VCs, to board members, to anyone providing advice to our community.  A few more thoughts:

    * Mentors must bring value or stay out of the game.  If founders are not coachable, move on to the next opportunity.  If VCs do not bring value beyond money, do not engage with them.  If incubators are coaching, set much higher bars for the outputs your companies produce or shut down.

    * Funding “good companies” does not work.  We need more $ in potentially great companies. Whether we are funding pre-revenue companies with seed $ or growth equity, the bar must be higher.  At a minimum, here are some high-level standards to measure potential of success independent of stage:

    • Big frigging market – no debate.
    • Massively differentiated value proposition that’s not  we are smarter, nicer, cheaper, faster etc.
    • Significant competitive barriers to entry.
    • Tailwind versus headwind – the market is out looking for a solution.  “Market makers” make good road kill.
    • Excellent team that’s open to coaching.

    If there is ambiguity over the above, the ecosystem needs to either address it or move on.

    * Post-seed VCs must spend more on less.  Work the models so companies can get through the troughs — or don’t fund them.  Available capital in Canada for venture is not enough, so we must spend our capital on the best and brightest or nothing will change.

    Founders, do not fall in love with your product or your people.  Before you talk to anyone about funding get experienced people to rip your strategy and pitch apart.   You only get a few chances to get it done so make sure they count. Network like there’s no tomorrow.  Gather people around you who have proven “big league” execution skills.  Talk to everybody who can spread the message and bring value.  Get yourself down to the Valley. Cold-call and get connected to anyone who can make your business move faster and smarter.  If you don’t your competitor will.

  • Social Intranet Summit Vancouver

    One of my favorite startups in the last few years has been ThoughtFarmer. Every few weeks I check in on them and think “Microsoft hasn’t bought them yet?”. ThoughtFarmer’s social intranet is easily the most polished out-of-the-box experiences in the Social Business Software world right now. They have decided to put on a conference in Vancouver, which is coming up very soon. There are a few spots left and we were able to get a discount code that will give you $100 off, even this close to the event.

    Conference speakers include Dion Hinchcliffe, Enterprise 2.0 blogger for ZDNet and Senior Vice President for my old company Dachis Group; Stewart Mader, noted wiki expert ; Andy Jankowski, Director of Intranet Benchmarking Forum (IBF) North America; Bert Sandie, Director of Technical Excellence at EA; and Dan Pontefract, Senior Director and Head of Learning at TELUS.

    You can see the full speaker list on the conference website.

    **Receive a $100 discount using STARTUPNORTH as the promo code**

    Oh, and check out this hilarious video to promote their newest addons for ThoughtFarmer. It is an example of low cost but effective product education and marketing by a bootstrapped startup. Steve Ballmer makes an appearance as well.

  • An enterprise startups survey

    Hey– if you are creating an “enterprise startup” (B2B) then I could use your help.

    I have created a short questionnaire that I am sending out to people who have built or are building enterprise focused software startups. This is not a formal survey, and I am not doing it for commercial purposes. What I want to do is collect the insights, advice and experience of people who have been-there-done-that, or who are in the thick of it right now.

    Please take a look and fill it out if it applies to you

  • Rypple raises $7m in new round


    Rypple has gone public about their latest round of financing which appears to include Bridgescale. Bridgescale’s participation likely came through their acquisition of Edgestone. Edgestone’s GPs participated personally in Rypple’s initial angel round.

    We will post more as we hear it.

    Here is the official word from Ryple:

    Toronto, Ontario – September 29, 2010 – Rypple announces it has raised $7 million in financing led by Bridgescale Partners. Rypple makes social software that makes workplace feedback easy. Howard Gwin, a Bridgescale partner and former EVP at PeopleSoft, and Roger Martin, Dean of the Rotman School of Management, will join the company’s board of directors.

    Additional investors include: Edgestone Capital Ventures, Extreme Venture Partners, Peter Thiel, Seymour Schulich, Roger Martin and Joe Sigelman. To date, the company has raised a total of $13 million in financing.

    “Employees and managers are fed up with HR software that sucks. They don’t want top-down performance software focused on process, not results. What people really want is frequent, useful feedback to do their jobs better. Rypple delivers this feedback so people can stay on track, learn faster, and consistently hit their goals.” said Daniel Debow, co-CEO, Rypple. “Our customers are innovative companies including Mozilla, Rackspace, and VivaKi (Groupe Publicis). Their employees use Rypple because they love it, not because they’re forced to.”

    “Rapid adoption social software is providing companies big and small with a significant competitive advantage,” said Howard Gwin, partner, Bridgescale Partners.  “Rypple is a key solution for companies today as it enables the process of continuous feedback. Their customers tell us that they have seen a noticeable improvement in employee engagement, focus, and performance since they started using Rypple.”

    “We were up and running within an hour of introducing Rypple to our organization. We were customers before we were investors.” said Amar Varma, co-founder, Extreme Venture Partners. “Our team’s love of Rypple was a big part of our motivation to get involved. People want relevant feedback at work and no other company can deliver it as easily and effectively.”

  • StartupWeekend Toronto recap – 200 people, 13 ideas and 5 winners

    This is a guest post by Chris Eben who, along with Karthik Soravanahalli and Ahmed Badruddin, organized StartupWeekend Toronto.

    Startup Weekend Toronto ended late Sunday night. While I’m still going to need a few days to reflect on the weekend, I thought I’d take a few minutes to jot down some thoughts…

    Given my initial apprehension about taking on the organization of this event, I couldn’t be happier with the way things turned out. What an amazing community of startup and tech professionals and enthusiasts we have in Toronto. Starting with the buzz that began weeks before the event, it was clear that Startup Weekend needed to come to Toronto.

    Friday night was quite something. A capacity crowd of over 200 people gathered at Ryerson’s amazing Atrium. I kicked things off briefly and explained how I got involved and what Startup Weekend is all about, immediately sensing the excitement from the crowd to start pitching and building new startups. But first we heard from Mike McDerment of Freshbooks about truly understanding the benefit you provide with your startup. Mike was followed by a great panel made up of Leila Boujnane, April Dunford and Sarah Prevette, moderated by Dan Martell who came in from San Francisco to help out. Mike sat on the panel as well. Lots of great stuff here – we’ll be posting the videos of the entire weekend when they’re ready.

    And then onto the pitches… We had 38 people come up and give 60-90s pitches. This was amazing. I was so impressed with the level of participation and the great ideas. At this point, I had no doubt the weekend would be a success. Then came what I like to call “organized chaos.” Voting on ideas followed by team formation. After the top 20 ideas were selected teams started forming over the rest of the night and following morning, resulting in 13 great ideas and teams, ready to get working.

    Now the whiteboarding, coding, strategy discussions, business model validations, etc started in full swing with mentors wandering around helping out the teams and some great insights from our Saturday night speakers (Mark Ruddock, Tim Smith and James Lanthier). After many all nighters, lots of food and coffee, and some beers, the teams were ready to start pitching on Sunday at 4pm.

    The pitching is where it all comes together. What a site to see 13 teams come up and show what can really be accomplished in a weekend-  often from ideas barely conceived until the Saturday morning, and with teams made of people who just met. Most teams actually had mockups or working code and even a few live demos. TadWanna even had 2 paying customers. While there were officially 5 winners (the top 3 as voted by the community and the judges, and 2 categories for honourable mention and the startup most likely to change the world) all 13 teams did something special.

    Congratulations to our winners! Task Ave. took 1st place and upwards of $25k in prizes. Schedify took 2nd, winning some great prizes and is already invited to pitch to the Ryerson Angel Network. In 3rd, RateHub is well on its way and has a complete new set of features for an already great web app. In our other 2 categories, Styllist got honourable mention with a really cool and working demonstration and N2O showed us how they will change the world with a Facetime app bringing doctors together from around the world.

    There were so many other great ideas and startups that I truly hope will keep going. This is an amazing time in Toronto – the community is vibrant and something is in the air. We’ve already seen the talent this city and country has to offer and I know that there is so much more to come.

    With such great feedback after the weekend, we’re going to do it again in April 2011. Mark your calendars and come out to build something amazing.

    A special thanks to my co-organizers. Ahmed Badruddin is the founder of Simpleafy, a GreenTech startup helping home owners track and better understand their energy consumption and discover ways to reduce it. He’s passionate about energy efficiency – check out his blog. Karthik Soravanahalli brought together the SIFE Ryerson team to make this event work. He’s killing it for Tim Smith at Gridcentric and finishing off his degree at Ryerson. And of course, thanks to all our amazing SIFE Ryerson volunteers!

    Thanks of course to Marc Nager from Startup Weekend headquarters in Seattle. He’s one of the guys responsible for bringing these awesome events to cities all over the world!

    If you want to talk to me about Startup Weekend Toronto, get in touch. I blog at The Low Post and am on twitter – @ceben and @startupwkndTO.

    Thanks to all our sponsors and to everyone who took part!