StartupNorth

Category: Canada

  • Courting Advisors – A Guide for Founders

    Editor’s Note: This article was written by Danny Robinson and Boris Mann. Danny is a founder of Perch and long-time entrepreneur who has built companies on both sides of the border. Boris Mann is a managing director at Full Stack, a napkin capital investment firm in Vancouver.  Both Danny and Boris are investors in Contractually .

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    One of the great things about the tech industry is the generousity of people, who have ‘been there and done that’, to share their time with entrepreneurs. The energy of sharing, connecting, approachability and equality makes startups so attractive.

    Lately, there is an increased demand for attention and engagement of advisors and mentors. And, in speaking with other advisors in the community, there is a feeling that some entrepreneurs are exploiting the system and taking advantage of the good will of others. It’s not necessarily intentional or deliberate. Entrepreneurs are trying to get meaningful advice to maximize the outcomes of their companies for the least cost.

    There are increasing demands on advisors, and it is partially the role of the advisor to manage their workload and volunteer time. But it is also the responsibility of entrepreneurs to understand the circumstances of when to ask someone to join your advisory board and when not to.

    A Quick Guide to Recruiting Advisors

    When a founder feels like he/she could use advice from someone experienced in a certain area. Whether it’s getting go to market strategy, product design, fund raising, corporate structure, making introductions, or simply adding credibility to the company (though don’t overplay the advisory board when raising capital – see Mark Suster’s post). Getting an advisor to help you out with skills that you don’t have inside the company is a great way to move forward.

    • One of your early “asks” to anyone you meet is to help introduce you to a potential advisor
    • 1 – 3 official advisors is a good number to aim for initially

    Finding an Advisor

    It is the responsibility of a founder to source and reaches out to an advisor and asks to meet. There is no obligation for anyone to become an advisor. This is like a dating process. The goal is to build a relationship over time, where there is value for both the advisor and the founder in the role.

    • Leverage your existing personal and professional networks to connect with individuals that have shared interests
    • Use LinkedIn and Clarity.fm to identify and connect with potential advisors.
    • Attending local events, joining an incubator, and working at co-working spaces are additional ways to get introduced to potential advisors

    Advisor Expectations

    As an advisor:

    • You meet for coffee, get on the phone, and get to know the entrepreneur and how you can help. Maybe your personal skill set isn’t relevant, but you know someone else that would be a great advisor / investor / customer / channel / whatever.
    • You don’t expect compensation up front, you don’t lead with paid consulting offers (this is a huge red flag)
    • You show you can be helpful first in moving the startup forward.

    There is no obligation to engage with a startup. You should not expect compensation and you should always create more value than you extract.

    Standard Advisory Board Terms

    But back on the founder side, here’s where it seems there is a bit of a problem in Canada: no follow through.

    After accepting and otherwise being happy with the advisor’s help, you should reward them with an offer to officially join the advisory board.

    Our guidelines for standard advisory terms are as follows:

    • 0.1% – 2% depending on the level of advisor.
      • The level depending on the advisors’ stature in the community, but also their level of involvement. 0.5% is a good level to think about starting from, and 2% is extremely rare unless the advisor is directly helping close customer deals or raise money.
    • Do not offer cash.
      • It’s extremely rare that there would be a cash component. If cash is requested from the advisor, walk away, and look for a more sophisticated advisor. For further clairty, if the advisor will be in putting multiple hours per week, they’re not an advisor, they’re a contractor, in which case, cash compensation may be appropriate (see Brad Feld’s Compensation for [Advisory] Board Members).
    • Options vest monthly over 2 year period.
    • Either can terminate upon 30 days written notice.
    • For pre Series A companies, the strike price is set to about 10%-20% that of the last round of financing, or pre-financed companies, the strike price should be about 10% of the estimated value of the company.
    • Advisor agrees to one phone call or in-person meeting per quarter.
      • But no need to dwell on the terms of what they will do for you. Your initial meeting should be representative of what you will get in return, so pay no attention to getting specific on the details here. If it’s not working out, you can both get out of the deal anytime.
    • Generally, you should expect your advisor to follow up on your meeting with thoughts and links and verify that he/she will make the introductions promissed and in general do what they said they would.

    Assuming the advisor accepts, entering into an agreement like this will explicitly link your success to theirs, and add their credibility to yours. Vesting them in your company’s success spreads out your champions, and creates more winners for the community at large.

    As a startup founder, you’re going on a long arduous journey and you’re going to need a lot of help along the way. Building a strong set of advisors will be one of your first “asks”. These are people that can complement your skillset and fill gaps on your team, and add credibility (sometimes called social proof or traction), especially for first time founders.

    If anyone has helped you in a meaningful way, and you have simply not known the proper etiquette, I encourage you to retroactively offer up advisory board options. Let’s make sure that us friendly Canadians are known for our official follow through, as well as our friendliness.

    We’ve worked with Contractually to host an Advisory Agreement template that we’ve used for years.

    You can sign up for Contractually [Ed. note: Both Boris and Danny are investors in Contracutally] and use it directly with their free plan, or be old-school [Ed. note: at StartupNorth we prefer old skool] and use it manually.

    Thanks to Fasken Martineau for making this template available.

  • Stop stressing about startup competitors

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    A couple weeks ago I tossed and turned for hours, unable to sleep because of a TechCrunch article announcing the launch of a potential competitor.  This happens once every month or two, and I’m sure everyone can relate..  This occasion was particularly annoying.  A friend forwarded the techcrunch article to me which I opened while settling into bed for the evening.  An hour of research on my iPhone later, I’m back downstairs coffee in hand, still doing research.

    The funny thing is that the logical part of me realizes that startups worrying about other startups is irrational.  But yet I can’t help myself from trying to find chinks in their armour and points of differentiation.

    The good news is that I’ve gotten good at waking up the next day and realizing that a startup worrying about another startup competitor is like a 2 year old worrying about another 2 year old making the deans list instead of them.

    It’s a war, not a battle, and chances are, both startups will evolve in a way that makes them no longer competitive.  Some will be competing for the deans list.  Some will be competing for the track team, but most will have dropped out.

    But still … in my last startup, I can’t tell you how many hours of sleep I lost mulling over Xobni, Dropbox, Threadsy, reMail, ClearContext and others.  With the exception of Dropbox and maybe Xobni, have you heard of these others?  Probably not.  In hindsight, they’re actually really good examples of why you shouldn’t worry that much about startup competitors.

    1.  They’re guessing … just like you

    We were scared of Xobni, largely because of their uber connected and super alented team.  Specifically Jeff Bonforte.  But everyone’s guessing in Startups.  Everyone.  Including Jeff.  Cofounders backgrounds, vanity metrics, and techcrunch articles mean nothing.  Xobni was iterating like crazy at the same time we were.  In the end, it looks like they might be acquired by Yahoo in a deal that doesn’t represent a huge win for investors.  Everyone’s guessing.

    2.  Some pivot

    Threadsy was building an all one one messaging system – combining facebook, twitter, email, etc.  We thought it was genius … so much so that we were doing the same thing.  Turns out Threadsy (like us) couldn’t make a business out of it, started building social graph analytics, and eventually were acquired by Facebook.  Most times your competitor won’t be building what they’re currently building in another 6 months.  Most times, you won’t either.

    3.  A lot die

    Most competitors will die before they hit product market fit.  A lot of times, that has nothing to do with the product and everything to do with cofounder squabbles, life getting in the way, bad investors, and the million and one other things that can go wrong.

    4.  Some acquired and stop innovating

    We thought reMail and Gabor Cselle were onto something.  They were former google / former YC, so easily intimidated us.  We were building something similar called All My Mail and had visions of making the iPhone’s mail app not suck  Google eventually acquired reMail but didn’t exactly use the technology to innovate and several years later, it’s mailbox that’s innovating the mobile mail experience.

    5.  Markets can support multiple players

    Dropbox scared us.  Former YC (again), great founding team, great investors.  But our product (and I’d bet a half dozen others) was ahead of theirs.  But we got scared and pivoted away.  In hindsight, that market is massive, able to support more than one player.  Box.net has obviously proven that..

    Competition in startups is an interesting thing.  It’s something we can’t help but stress about.  But it’s illogical.  Because in startups, there really are no Goliaths.  We’re all Davids, and the real fight that we have is with convincing users to change their existing habits.  Back in the day, our biggest competitor wasn’t dropbox.  It was email, and the people that used it to share documents, too lazy to change their habits.  That’s the case for most all startups.

  • Build launches in Atlantic Canada

    Wall art on the Build Ventures/Volta wall

    Patrick Keefe is announcing his new fund today called Build Ventures, a $50m early and mid stage fund based in Halifax.

    The guy is a Harvard MBA, an Oxford grad, former Atlas Ventures principal, Boston Consulting Group executive and he built over a dozen Starbucks coffee franchises which he then sold back to Starbucks corporate. When you meet Patrick and dig in to his background you start wonder where the hell this guy came from.

    What’s even better is that Build is the in-house fund at Volta, a new startup crash pad in Halifax that currently houses 10 startups. The fund has taken up residence at Volta and has been a key part of getting it started.

    The fund has just launched so it hasn’t announced any investments yet, but we are excited to see which deals they do first.

    Volta and Build are two big leaps for the startup community in Atlantic Canada and when you consider it alongside what has been happening in New Brunswick with Launch36 and Startup Week, as well as a recent string of big exits, it seems like things are accelerating incredibly quickly.

    The next major event is the Atlantic Venture Forum in June which is being keynoted by Paul Singh.

  • Hot Shit List 2013

    Copyright Muppet Studios

    It’s the time of the year where we either make you a hero or we make you hate me a little more. As stated in the previous comments, this could very well be The List of People That David Crow Wants to Be Associated With (but I think I established that is a different list). Either way, the commenter is correct, the list is something and it is highly suspect and by no means complete. If you don’t like the list, leave a comment. If you think I left genuinely left someone off, leave a comment (ps suggesting yourself, either demonstrates your overly inflated ego or you might not realize that your suggestion by itself if a reason to be left of the list). I’m open to being corrected and having the list added to.

    Past issues of the list include 2011 and 2012.

    For 2013, the list is divided between those we expect to break out (Breaking Glass). And those that are taking it to the next level (Going Big). Basically, you will be hearing from or about these people over the next 12 months. So everyone get in a circle, it’s time for the 2013 instalment of the Hot Shit List.

    Hot Sh!t List 2013

    Breaking Glass

    Going Big

    The icons are courtesy of Anil Zaimi, though I haven’t spent the necessary time to make this work with our stylesheet and theme in WordPress.

  • A Startup for All Seasons

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    Is it me, or does it feel like there are 2 distinct seasons of activity in the startup community?

    • Post Christmas Pre-Summer (aka golf season) Holiday
    • Post First of School and Pre American Thanksgiving

    Whether it is reality or bad cliche, it feels like there are 3-4 months of the year where nothing gets done. But no more!

    Thanks to events like Startup Festival and Grow Conf, the summer season for Canadian startups is getting stronger and more important. There are localized opportunities to connect with investors, strategic partners, and potential customers at events like the aforementioned Startup Festival and Grow Conf plus Jolt Demo Fest, Atlantic Venture Forum, Metabridge and others. (You could go to CVCA in Banff, and golf with the Canadian VC landscape, that might up your chances of raising funding).

    Things for Startups To Do

    1. Apply to pitch at StartupFest. Startups get access to press, investors, and a chance at a $50k investment prize from the organizing committee.
      Deadline: Friday, May 10, 2013 5pm EDT.
    2. Apply to be one of the 45 Canadian startups at the Metabridge retreat. You’ll get access to investors, advisors and a great cultural event.
      Deadline: Friday, May 10, 2013 5pm PDT.
    3. Apply to throwdown at the Smackdown at GrowConf. Winners will get access to press and investors. Plus more Debbie Landa.
      Deadline: Tuesday, August 13, 2013

    There are a lot of opportunities for Canadian startups to get access to both local and foreign capital, corporate development folks and press by participating in these events. Take a bit of time, and figure out which ones you benefit from attending. Plus it’s a great excuse to get out of the office and hustle.

     

  • Hardware and Startups

    [Editor’s Note: This is a guest post by Gideon Hayden LinkedIn , associate at OMERS Ventures and previously founder of Tradyo. Full disclosure: I work with Gideon at OMERS Venture and I have tracked his progress at Tradyo with his partner Eran Henig over the past few years.]

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    “You know, one of the things that really hurt Apple was after I left John Sculley got a very serious disease. It’s the disease of thinking that a really great idea is 90% of the work. And if you just tell all these other people “here’s this great idea,” then of course they can go off and make it happen.

    And the problem with that is that there’s just a tremendous amount of craftsmanship in between a great idea and a great product. And as you evolve that great idea, it changes and grows. It never comes out like it starts because you learn a lot more as you get into the subtleties of it. And you also find there are tremendous tradeoffs that you have to make. There are just certain things you can’t make electrons do. There are certain things you can’t make plastic do. Or glass do. Or factories do. Or robots do….

    And it’s that process that is the magic.” – Steve Jobs quote as quoted by Travis Jeffery of 37 Signals

    The lifecycle of consumer hardware startups is undergoing a rapid transformation (see Chris Dixon’s Hardware Startups). Consider the well known Pebble Smartwatch; the first example of a company that perhaps unintentionally used crowdfunding to demonstrate demand for their concept long before they had the ability to produce it at scale. The $10.7M raised significantly decreased the upfront risk for the company, allowed them to avoid dilution by avoiding traditional financing methods, and decreased their inventory risk due to this ability to accurately forecast demand before production.

    This change in the stage of demand generation represents a new paradigm for hardware startups. Whereas before they likely had to build and scale manufacturing prior to generating demand for their product, they can now accurately forecast this simply by gauging reactions to a proof of concept video.

    However, the purpose of this post is not to highlight all the good stuff surrounding this method of funding for hardware startups; I think those are largely well known and accepted. Instead, I’d like to address what other impacts this change has on the lifecycle and trajectory of a company.

    Exploring the Impacts

    Firstly, with large surges of excitement and accompanying pre-orders surrounding these campaigns, a company has to jump from a conceptual and iterative stage to become an operational company thereby skipping a lot of crucial steps in between. Perhaps one of the most important steps they must skip is the pricing strategy for each unit. Without sufficient vision into QA, returns, defective products and COGS, they can’t accurately work these costs into the price of the product. Furthermore, if we look solely at the numbers, the outlook for the company is bleak as they’ve already locked into a certain price with their pre-orders, as well as a specific timeline, and this can end up costing the company huge amounts of money down the road.

    See below to visualize this change:

    Old World:

    Team → Concept → Seed → Prototype → Financing → Design/Manufacture/QA → Iteration → Pricing of product → Pre orders → Distribute

    New World:

    Team → Concept → Seed → Prototype → Pricing of product /Timeline commitment → Video launch → Pre orders → Financing (maybe) → Design/manufacture/QA → Distribute → Iteration

    In the new world, companies price their product very early on, and jump from video launch to production. This places them on a trajectory that perhaps they aren’t ready for.

    Let’s consider other impacts of this change:

    • Risk is transferred from the company to the consumer
      • In the old world, consumers saw a pre-order to launch time of 2-3 weeks. In this model it changes to around 9 months to 1 year.
      • The increase in time from demand generation to product in market is far longer in the new world. No Kickstarter hardware campaign has brought their product to market in less than 9 months from the close of their pre-orders – meaning consumers have to wait far longer than they’re use to for the product.
      • The 9 months to 1 year is long in terms of time from pre-order to time of distribution, but actually very short when we put this in the context of the stage of the company and the typical time between conception of a product to larger scale distribution.
      • Effectively what this means is the risk is transferred from the company to the consumer. In the old world, companies would have to take shots in the dark and validate their concept after an upfront investment in manufacturing. Today even if the product is a flop consumers will have to pay.
    • Less appetite from consumers for second chances
      • Whereas in the past consumers may have given hardware products second chances (see Jawbone UP V1 vs. V2), by the time these products are in the consumers hands there may be less interest and far less enthusiasm to give the product a second chance.
      • The amount of time from showing intent to gratifying their demand is so long in this case, that they may have even written it off even by the time they receive it. All this means is you better strike some resonance with the consumer on this first push.
    • Feedback Cycle Lengthened
      • The cycle between launch and iterations to the product is far harder to manage in this model. By the time you’ve scaled operations feedback is just beginning to roll in – and you may lack the resources to implement the needed changes to the product.
      • Perhaps the more important feedback cycle in the new world has become the software iteration cycle that sits on top of the hardware. Often this takes a backseat as scaling manufacturing is a massive task unto itself, but in today’s world, this is where the real value stems from.
    • Shipping incomplete products
      • As mentioned, much of the value stems from the SDK attached to the hardware and providing the infrastructure to allow developers to build applications on top of the platform.
      • With an underestimation of the time required to scale manufacturing, SDK’s often take a back seat and the products ship with limited functionality – far more limited than demonstrated in the concept videos.
      • Furthermore by accelerating the demand, companies often miss out on the experimentation/iterative phase of prototype development. They commit to a timeline and have to choose a solution before they may be ready.
      • With the demand to scale operations so quickly, the QA process inevitably takes a hit as well and can result in higher costs down the road.
    • Discovery and experimentation phase cut
      • In the new world, the video launch occurs before scaling of production happens. This process can teach a company a tremendous amount, but because they have often committed to a timeline and promised a certain product, they’ve locked themselves into something that is great conceptually, but may not be feasible in reality.
      • This discovery and experimentation phase is shortened greatly, and as Steve Jobs mentioned, this is the process that is magic.
    • Inaccurate Timelines
      • 84% of kickstarter/pre-order projects will miss their deadlines.
    • Threat From Incumbents to Pick Off Technology
      • Proven demand with an inability to act allows bigger competitors to jump in and launch competitive products really quickly – seeing this now with Apple/Sony and Pebble

    One of the classic problems that lead to startup’s demise that we hear of all the time is pre-scaling. Companies start building out the core features of their business without truly knowing what they are. As they increase their burn rate to high levels, their margin for error becomes extremely low by the time they reach market. If that initial product doesn’t hit a nice trajectory, they’d better find it fast because the cash in the bank will only last them so long before they have to raise again, and if they haven’t proven anything by that time, it likely won’t be an attractive prospect for investors resulting in a down round, or worse.

    This is not to say that this new process is a negative shock to the ecosystem, quite the opposite actually. I think crowdfunding and proof of concept similar to that of concept cars spurs innovation and creativity, and encourages new entrants to shoot for the stars; something we always need more of.

    However, the risks of the new world have not yet been explored in depth, nor have they actualized as many of the relevant companies are still very young. Many processes like QA and iterative industrial design inevitably decrease in quality and leads to lower quality products shipped, higher cost of returns, and inaccurate pricing of the product; a dangerous game to play.

    Crowdfunding and pre-orders is definitely a good thing, but perhaps we need to recognize where along the lifecycle of a company this process exists, and what exactly it proves. It does not mean the company is successful, but merely represents one proof point out of many needed along the journey to building a great company.

  • DemoCamp Halifax 3 – David Crow edition

    logoGreat news. Democamp is going back to its roots (it is happening at a bar this time) and Milan has lined up David Crow to speak. He will be in town because he is working with The Next Phase on some stuff so it seemed like a great time to put him to work.

    David is the co-founder of StartupNorth, founder of DemoCamp, co-founder of Nakama (ask him about this one… a wee bit ahead of its time), co-founder of Influitive and is currently in residence at OMERS Ventures. He has a better pulse on the Canadian Venture and Startup community than anyone else. He’s also a father to two of the sweetest little girls you will ever meet.

    This Democamp is going to be kept small and 100% focused on great demos from high potential startups. It will be a lot of fun. Think of it less as a conference and more like a chance to hang out with some friends. We are calling it Mini because we are getting rid of the frills but I promise the startups and their demos will be as BIG as ever.

    The event is free for Entrepreneurs and Students. We could use a few sponsors to cover costs, so please get in touch with Milan if you can help out. These sponsorships are a great value because they are just meant to keep the event out of the red.

    You can register on Eventbrite.

  • Dog Yogurt or Why angel invest in Toronto

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    [Editor’s Note: This is a guest post by Chris Maeda LinkedIn . Full disclosure, Chris as he mentions in the article, was an investor in Influitive, a company I co-founded. Chris is the CEO of Brick Street Software and an active angel investor. He’s looking for deal flow and we will be hosting a series of Founders & Funders in Toronto, Halifax, Vancouver and a few other cities to connect those that start high tech, high potential growth companies with those that fund them. Subscribe to Founders & Funder$ notification list for updates. If you’re looking to connect with Chris, my advice, is to reach out to him on AngelList, but hey, it worked for me and I’m a sucker for patterns.]

    I’ve been an angel investor in Toronto since 2011.  Towards the end of the dot.com days, I traded my SOMA loft for a New Hampshire cottage, partly as a by-product of some public company M&A transactions.  I began investing with a New Hampshire angel group in the mid-aughts.  I like living in NH, but the deal flow you see there is quirky.  There weren’t very many software deals, and New Hampshire has a lot of trees and cows, so the angel group ended up looking at non-software deals, like online wood pellet distributors and dog yogurt manufacturers.  When I was hearing the dog yogurt pitch, I had a what-the-hell-am-I-doing-here moment of clarity and quit the angel group.

    Then two things happened.  First, my company, Brick Street Software, decided to set up a customer support center in Toronto so I started coming to Toronto for business on a regular basis.  Second, Influitive was advertising a round on AngelList.  I met the Influitive founders (Mark Organ and David Crow) and, after verifying that they were not planning to enter the dairy products business [Ed. Note: I have a dairy allergy so I’m kind of anti-dairy], I invested in their pre-venture rounds and joined their board.  I recently invested in a second Toronto company and am working on a third.  I’m starting to see patterns for why Toronto is great place to invest.

    1. Activity, talent pool, and competition:
      As I tell my American friends, Toronto is the New York and Los Angeles of Canada.  So almost everything that happens, happens in Toronto.  I’m sure I just ticked off a bunch of people outside of the GTA, but this is reality when viewed from the US.  The software talent pool is pretty good; there are lots of startups but everyone complains about a shortage of capital.  So this forces Canadian entrepreneurs to have a bootstrap mentality and means that valuations are not outrageous.  The seed funding bubble has come to Canada but its not as gassy as the US.
    2. Lots of public money and assistance:
      the US does not have SR&ED credits, IRAP grants, refundable HST, or the network of publicly-funded innovation centers that you find in Ontario.  A Toronto company that I’ve invested in has probably raised as much money in grants as it has from investors.  This means the Canadian government is reducing my dilution and (hopefully) goosing my investment returns.  Thanks, guys.
    3. Corporate customers are nearby:
      Many of the large corporate buyers are headquartered in Toronto.  I rode along on a sales call to a large Canadian company.  I usually have to get on an airplane for something like this; in Toronto I can take a cab.   I can even take transit if I’m not in a hurry.
    4. Better for international business:
      There are a number of little things that make Canada a good place for an international business hub.  For a variety of reasons, Canadian employees are less expensive than Americans, and the NAFTA treaty makes it easy for Canadian companies to expand into the US with minimal US headcount.  You can have bank accounts in foreign currencies (e.g. US Dollars and Euros). Finally, and perhaps most importantly, the Canadian market is so small that startups have to plan for international expansion from day 1.

  • The scarcest resource: successful companies

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    I feel like I keep having the same two conversations: either about “the lack of venture funding in Canada” or “how we build a better startup ecosystem”.

    Often the conversations happen, one right after the other. The lack of venture funding is about how Canadian VCs don’t get their business because they can’t raise money. And that VCs in Silicon Valley are funding companies in the same space as theirs. Therefore Canadian VCs are conservative and because others in a similar space are getting funding in Silicon Valley/New York/Boston, they are able to raise money there too. This is proof that the ecosystem in Canada is weak. And further evidence that even with the new $400MM in funding for venture funds, that because of the conservatism in VC the ecosystem will continue to remain weaker than the ecosystems elsewhere.

    <sigh type=”le” />

    I am reminded of the comment that I wrote on Mark Evans blog.

    “I have a weird role, because I work for a VC now, but I have always believed that it is by building better founders that we will save ourselves.

    A healthy ecosystem is one where you are building successful companies. These companies make money. They have growing customer bases and revenues. Because if you aren’t building successful companies you can’t do the other things.

    Successful companies are run by successful people/founders.

    Successful companies hire people and put them in roles enabling them to succeed.

    Successful companies need lawyers, accountants, agencies, design firms, etc.

    And successful companies eventually realize they could grow faster if they didn’t have to amass the profits from operations to do bigger, bolder, crazier things that allow them to be more successful.

    This is where investment comes in. The opportunity to grow more successful.

    It’s not about giving money to starving entrepreneurs because we have an entrepreneur shortage. We have a successful company shortage. We have an abundance of entrepreneurs. The question is how as an entrepreneur I do the things to demonstrate I understand the risks related to building a successful company. And at different points through out my corporate development, there might be a reason to raise money to go for something bigger.

    There are a ton of resources to learn what successful companies at different stages look like. Check out http://StartupNorth.ca I’ve tried along with @jevon @jonasbrandon to share my opinion, as an unsuccessful entrepeneur, what I’ve seen the successful entrepeneurs and companies do.

    You need to build something that is worthy of investment. Go bigger. Go further. Demonstrate that you can build a successful company. And mitigate the risks of growth. But only when you demonstrated you know what a successful path is, should you think about raising money to grow.

    The risks change at different stages of investing. It’s riskier the earlier you go, i.e., the are more risks and each risk might be unknown. But overall it’s about building a successful company.” – David Crow

    Successful companies…

    “If we want more entrepreneurs, how about we teach them to be, you know, entrepreneurial: self-reliant, innovative, customer-focused, not a bunch of browners trotting off to Ottawa for a pat on the head?” – Andrew Coyne, March 21, 2013 in National Post

    I am still boggled at the number of entrepreneurs that tell me that “Canadian VCs just don’t get what we’re working on”.  It’s your responsibility to clearly and effectively communicate why your company is successful given the current stage of corporate development. And if you think that it is easier to communicate this to foreign investors, then you should front the $600 and buy a plane ticket, and head to Boston, NYC or Silicon Valley and go through the exercise there. Raising money is hard. I think it gets harder the further away from the money you are, and the earlier in corporate development.

    Being a successful company takes more than just saying “we’re the next Facebook”. You need to understand your stage of corporate development and the risks in getting your business to the next stage. Event better if you can communicate this effectively (eloquently) to people that might want to make an investment. But just saying “we’re the Facebook of <x>” doesn’t mean the company is fundable.

    We have a successful company shortage

    Successful companies are the scarcest resource in the ecosystem.

    What’s common when we talk about one Microsoft, one Yahoo, one eBay, one Amazon, one Google, one Facebook, one Twitter is that there is “one”. It’s the prowess to build great products, great teams, great marketing, happy customers that make for lasting companies. It’s is not the opinion that makes these companies great. It’s market cap, revenues, platform penetration, customers, users, etc.

    Here is a game: How many billion dollar Canadian technology companies can you name without saying RIM or Nortel?

    “It is the increasingly important responsibility (of management) to create the capital that alone can finance tomorrow’s jobs. In a modern economy the main source of capital formation is business profits.” Peter F. Drucker, 1968 (from Drucker in Practice)

    Traction, in all it’s shapes and sizes, is very hard to argue with. There are strong treatises ranging from Dave McClure’s AARRR: Pirate Metrics for Startups to Ben Yoskovitz & Alistair Croll’s recently released Lean Analytics. But it is hard to argue with companies demonstrating traction, assuming that you are knocking down the right milestones to raise a round. But this is all key to understanding, for many companies you don’t raise money because you can raise money, you raise money so you can go faster, go bigger, go further than what you would on profits alone. (Not sure what metrics you should be presenting, check out Ben & Alistair’s metrics for different types of companies at different stages of corporate development).

    Lean Analytics at Different Stages by Alistair Croll and Ben Yoskovitz

    (Image originally published by Eric Ries on Startup Lessons Learned).

    So rather than focusing on whether or not the people involved have the skills, experience or track record to be in the positions they are in. It’s better as entrepreneurs that we focus our energies on knocking it out of the park. Stop focusing on the politics of the ecosystem and start trying to demonstrate real success metrics for your company. Ultimately, it’s not a beauty contest  nor is it about favouritism or cronyism or nepotism. It’s about demonstrating that you can build something successful.

    You want to build a stronger ecosystem

    If you want to make Toronto and Canada a stronger ecosystem, the go build something successful. Don’t worry about the pundits, the bloggers, the opinions. Worry about your existing customers, your potential customers, your market, your competitors, your employees, your bottom line, etc.

    Since I already said it: You need to build something that is worthy of investment. Go bigger. Go further. Demonstrate that you can build a successful company. And mitigate the risks of growth. But only when you demonstrated you know what a successful path is, should you think about raising money to grow.

  • An Apology to Laura Fitton

    Last week, I hosted GrowTalks in Toronto, a conference for entrepreneurs focused on metrics, marketing and growth. The conference brought an amazing set of speakers to Toronto. And personally I was excited to finally get a chance to hang out with Brant Cooper, someone I have been connected to digitally, but until last week had never met in person.

    Then something happened after the conference, that put Toronto, our community and our values as Canadians in a very negative light. I am hoping that there is lesson, perhaps a “teachable moment“, around treating folks with respect and what we should do when we mess up.

    Laura was wearing a dress with her company’s logo on it when she gave her talk. This exchange happened on Twitter:

    twitter.pistachio.conversation

    My goal is not to vilify the individual but to highlight the subtle interactions that often happen in the community that can make it more closed and less approachable (this is not the first time we’ve had a similar conversation). The goal isn’t to ostracize or vilify the individual, so please don’t start a witch hunt.

    I know this interaction does not represent what my Toronto startup community is all about. My community is generally respectful of people. I believe we are great hosts when folks from out of town visit to share their time, expertise and insight with us. My community understands people like Laura and Brant are rare and valuable and have a choice in how they invest their time and when they choose to invest it in us, we’re grateful.

    But I also believe a community is defined by how it reacts when folks do things that fall outside of what the community defines as acceptable. After seeing this interaction I worried that unless someone from Toronto made it clear that this isn’t what we’re about, our public silence would be seen as a statement that we think it’s OK to be disrespectful to conference speakers (or heck, anyone, for that matter). I’d like Laura (and anyone else watching from the sidelines) to understand that we noticed, and we are appalled.

    Which brings me to the second part of this teachable moment. None of us are perfect. I personally have a colorful history of amazing screw-ups. Miraculously, people forgive me. I think they forgive me because I let them know I’m not TRYING to be a jerk, but sometimes I hurt people anyway and if given the chance I will try hard not to do it again. They forgive me because I’m trying to be better.

    If you were the Tweeter in this particular incident there are things you could do to avoid the inevitable backlash caused by your poor behavior.  You could delete the Tweet. You could change your Twitter handle. You could remove your photo. But that doesn’t really convince anyone that you weren’t trying to be hurtful and it certainly doesn’t make Laura feel better. Apologizing does.

    In the future I hope we treat our speakers with more respect and if we blow it, we have the good sense to say we’re sorry and try better next time.