StartupNorth

Category: Canada

  • Game On Finance – Browser going to wallop Super Mario

    Last week we got our finance on at Game On, a top notch event by Interactive Ontario that brought together thought leaders from the games business. Right from the start it was apparent the games industry is incredibly diverse.



    Over half the attendees were in the console game business, by and large a mature industry. More than a few people didn?t appreciate their industry being called mature? but what else can you call it when $15 million is required to create a new console title and there is virtually no way to get a project financed without the backing of an established publisher like Ubisoft or EA. “The large investments required rule out venture capital interest” noted Randy Thompson of Argon Venture Partners, so financing a title more closely resembles feature film (without the promise of Hollywood glamour). Eric Zimmerman, Co-Founder of Gamelab, made a particularly incisive point by posing the question ?do ever more realistic lumbering 3d giants really drive greater entertainment value??

    Also in attendance were developers of mobile games. The mobile games business is currently controlled by carriers who use their decks (the preset homepage and application managers) to strong arm developers, control billing, limit distribution, and take a hefty cut. The challenges of mobile game developers are many, perhaps the most significant being porting (ensuring a game will work on the 1,500+ mobile phones on the market). Phil Giroux of Magmic Games, one of the most successful mobile game companies out there, noted Magmic spends significantly more time porting than creating new titles. There are definitely some opportunities in the mobile space for startups, but my guess is that they involve less game development and more figuring out how to ensure games work across devices. How many of you have tried entering the mobile application space? Have any of you succeeded?

    Bowser - Game OnBy far the most exciting space at least as far as startups are concerned is internet gaming. The flash enabled browser represents a distribution channel larger than xbox, playstation, and wii combined. There are of course challenges, internet users have grown accustomed to free. John Walsh, CEO of Groove Media, really blew the crowd away with their plan to monetize free games with in-game advertising and upgrades. Others must also be impressed, the Toronto based Groove Media has already raised $30 million, talk about taking it to the next level!

    We met a great group of Canadian entrepreneurs at Game On Finance. Vikas Gupta of Transgaming Technologies, John Walsh of Groove Media, and Nathan Gunn of BitCasters. We?ll be following up with profiles of each over the next few weeks, cause one thing is for sure, Canadian entrepreneurs will be behind the next revolution in gaming.

  • Canada Needs to Realize The Technology Business is a Race

    Canada’s pace in the technology industry is too slow. Commercializing innovation and business are a tough race. Only the swift and the lucky survive. I’m starting to believe the heart of the problem lies in our attitude. We plod along and make excuses as others pass us.

    When you meet technology people from Silicon Valley, you’ll notice that they are in a race. They’re in a race to get to work, to get food and get back to work, and to do whatever they need to do to be productive as much as possible. They’re in a race to raise more money than their competitors, grab talent from anywhere they can, sign deals and build big companies. They’re in a race to thrive.

    When you meet technology people from Africa, you’ll notice that they are in a different kind of race. They’re in a race to adopt mobile technology, to communicate easily where in recent memory it was quite difficult. They’re in a race to stop infectious disease, ease the burden of massive migrations of refugees, and stop the famine and drought that threaten so many. They’re in a race to survive.

    When you meet technology people from Canada, we’re not in a race. We’re watching the race from the sideline. We act like technology entrepreneurship is closer to farming than shark hunting, as if risky business isn’t necessary to make the next Google or Microsoft. We putter around as if slow and steady actually wins races to innovate and grow technology businesses. We fail to light a fire under young entrepreneurs, like the ones that started every major tech company you can think of, and our best venture capitalists are putting their ships on “coast”. In a world of accelerating change, those are very dangerous habits. We need to lose our current attitude quickly.

    If you have any illusions that our major media and technology conglomerates are going to take care of this job for us, please give up your fantasy now. Dinosaurs don’t know how to innovate. Our mobile data rates are worse than third world countries and they’re spending money to slow down your internet connection. That isn’t innovation, that’s strangling the golden goose before it can lay eggs. Startups are starving while they get fat on high prices for mediocre services.

    My friends in the Canadian tech community are doing a lot to try and help technology startups. David Crow, Boris Mann, and Jevon MacDonald are all collaborating with multiple parties to improve the situation. I wholeheartedly support them in their efforts. But I think we have an entrenched culture of mediocrity that needs to be surgically removed.

    The biggest change has to be in our attitude. We need to become bold, we need to embrace risk, we need to aim for the stars. We need to take big chances, learn the lessons from failures, and have some great successes. The only thing holding us back is the size of our own dreams, and our determination to see them fulfilled.

    Will Pate is a street smart web geek, Community Evangelist at ConceptShare and co-host of commandN. This is his first post on StartupNorth.

  • The Do's and Don'ts of Raising Capital

    The Wellington Financial Blog is probably one of the most underrated in Canada. Not only are these guys the real-deal, but they have some serious guts and don’t pull punches for anyone.

    Yesterday they published a great but simple list: The Do’s and Don’ts of Raising Capital. The blog is not startup focused specifically, you can think of it as a Bay Street version of StartupNorth, but the topics are worth reading about when you have time. They also have the occasional scoop on Bay Street gossip, like today’s (or should I say, yesterday’s, or last month’s) CIBC news.

    Do?s:

    1. When you ask to meet with an prospective investor, have a defined amount or money in mind, or at least a range, and know what the use of proceeds will be.

    2. Prepare an overview, and there?s nothing wrong with PowerPoint. The pitch can be 15-25 slides long. No one needs a 50 page deck for the first meeting; there?s no way you?ll get through it all during the first session in any event (see below).

    3. Ask for 60 minutes, and no more. That should be all that you need for the 1st meeting.

    4. Show up on time.

    5. If you are bringing your own laptop, make sure you know what you plan to do with it during the meeting: run the show on a wall, link in to an overhead projector, etc.

    6. If you feel you need a non-disclosure agreement executed prior to the meeting, don?t be surprised that the prospective investor might want you to sign their own – rather than yours. If you see 100 or more companies a year, you can imagine how hard it would be for the investor to execute 100 different NDAs.

    7. Review the website of the investor prior to the meeting. If you don?t know what type of firm it is (equity vs. debt vs. LSIF vs. agent vs. principal), you might be wasting your time – and theirs.

    8. If you are going to engage an agent, make sure you know what role you want them to play. Some deals benefit from an outside advisor, and some may not. As much as VCs don?t like to think that entrepreneurs feel the need to spend part of the raise on fees, one wouldn?t do a deal with lawyers or accountants. But if you get an agent involved (and sometimes that agent/advisor can also be a lawyer or an accountant if they have the specific expertise), use them for the hard stuff, like telling you what is practical on the key negotiating items, what?s ?market?, and so forth.

    9. If you get a term sheet and are trying to compare one investor?s proposal to another, make sure you ask about prior deal references. The price/terms of a deal are only part of the decision-making process, or at least they shouldn?t be the sole criteria. Ask to speak to a couple of prior investee companies, and ask how many deals have closed in the past year or two. Do at least some due diligence on the group you are talking to, as not all teams/funds are the same – by a long shot.

    Don?ts:

    1. Don?t send a 10 page NDA to a firm. This is the deal: we investors promise to not steal your idea or tell a competitor about it. We promise to keep your private data private. We promise not to poach staff we meet during the process. That shouldn?t take 10 pages to document.

    2. Don?t ask for a meeting, pitch your story, and show a forecast that ?isn?t board approved?. If you aren?t yet ready to raise capital, why ask for the meeting?

    3. Don?t go into a pitch without knowing ?where your existing investors live?. That?s code for: know whether or not the current investors will play on the upcoming round or not.

    4. Don?t send a PDF of your financial model. It?ll only make the investor wonder why you don?t want to share the working excel version.

    5. If you are raising anything post an Angel round, don?t ask for a meeting if you don?t have a financial model ready. Having a pitch meeting and then sending a model a couple of weeks later ensures that 1) the iron may now no longer be hot, 2) the VC might have come to an uneducated, yet quick, no, or 3) you?ll seem disorganized, which may be normal for early stage companies but not a confidence-builder.

    6. Don?t compare yourself to Google, as in: ?What we?re doing is more robust than Google?, ?What we?re doing is harder than Google?, or ?We are going to be the next Google?.

    7. Don?t bring five or six company people to the first meeting. There are rarely enough chairs anyway, and don?t some of these people have jobs that don?t involve raising capital?

    8. Don?t say you?ll send follow-up material ?in a couple of days?, and then go silent for several weeks. If you ask for a meeting to raise capital, and the prospective investor is interested, be conscious that they see 500 or more ideas a year and can?t possibly waste five minutes let alone a couple of hours.

    9. When you do send forecasts, don?t send a budget that shows revenue going from, say, $1 million this year to $100 million in three years? time. People will think – fair or not – that you?ve lost your mind.

    10. When talking future valuation, don?t use numbers that involve ?billions?. As in, ?We?ll be worth north of a billion by 2012?. People will think – fair or not – that you?re on crack.

    11. Don?t be offended if the investor turns you down, as long as they are polite about it.

  • Razzle.ca is no more, sort of

    Razzle LogoRazzle.ca, who we covered both when they launched and when they botched their few shipments of products, is now dead.

    I do not know they guy(s) behind Razzle, but I am guessing that they have learned a lot of lessons with this startup. I am guessing it is only a matter of time before they come back with something else, and I am willing to give them the benefit of the doubt. Hopefully next time there will be no fake forum posts, questionable explanations or “supplier issues”.

    A family member of mine did order a set of headphones from Razzle and they came brand new, unopened and in perfect condition. The placeholder page says they are “rebooting” the site, but I get a sense that the founder just felt overworked and under-appreciated. A few too many mistakes will sink any startup, and this appears to be an example.

    Update:

    It appears that despite the message on their website yesterday, Razzle is up again and has a pair of refurbished headphones for sale.

    razz2.png

  • vencorps.com – Crowd Sourced VC gets cooking

    vencorp.pngI dropped Sean Wise an email today about Vencorps.com and he said that they would be making some announcements at the end of this month, but it appears that David Crow has beat me to the punch on writing about it.

    VenCorps is a collaboration that includes the software and experience of Cambrian house, but with a focus on providing capital and guidance to entrepreneurs. Cambrian house has been successful using their model, which is crowd-sourced software, and there would absolutely be no better partner out there for building something like this, so that is certainly a good start.

    The model basically involves your idea being vetted by the public for an initial vote, and it then moves on to a sort of due-diligence process and a more formal vote, where an “elite group” will do the decision making. It’ll take a few viewings to decipher their flash animation, but give it whirl.

    VenCorps is a venture capital seed fund leveraging the wisdom and the participation of an elite crowd to build better start-ups. VenCorps enables entrepreneurs and angel investors to act collaboratively using collective knowledge, networks, and experiences.

    Does this make sense for startups? Will it get enough attention? Is this a revolution in how companies are funded? I am going to sit tight and wait to see this thing in the wild before I make my own judgments about it.

    What about you?

    • Would you share your idea with the world in the hopes of getting access to a group of angels?
    • Do you see this as potentially different from current angel groups or VCs?
    • Will this method be better at picking winners?

    Best of luck to Sean and the rest of the team, we will cover this as much as we can as it comes to life. This is innovative and risky – the sort of thing that nobody has tried yet. For that reason alone, I am cheering it on. Somebody has to get out there and give it a shot.

  • Blognation Shuts Down

    Blognation finally folded today. I have no idea which side of the story is true and which parts are false, but it doesn’t really matter. I won’t link back to all the posts, there would be too many to go back and find.

    Tris Hussey has been blogging at ca.blognation.com since April (I believe — I can’t seem to tell from the site). Tris has done a fantastic job of covering Canadian tech startups and has given us especially great coverage of West Coast startups. He has also scooped us on a few great stories.

    I am bummed that Tris won’t be blogging about Canadian startups for the next while at least. Canada is losing out on this one, for now at least. It was the editors/writers of Blognation who got the worst end of the deal.

    Tris has posted that he is looking for full time work, specifically as a community manager. I have heard from a few companies recently that are looking to hire someone in the same type of position, so I am pretty sure that it won’t take long for Tris to land on his feet, considering his depth of experience in building communities and in the blogging tools space.

  • Extreme Ventures – Early Stage Venture Capital

    amarsun.jpgWe promised you a surprise at StartupCamp Toronto, and we did our best to deliver. At the end of the night, we asked Sundeep and Amar from Extreme Venture Partners to come up, tell us about themselves, and take some questions from the room. Extreme VP is a new venture fund based in Toronto, and this was their coming out so to speak.

    Jumping in to the startup scene here and telling everyone you are a couple of freshly minted VCs can’t be easy to do. I was excited to introduce the guys because I am one of many who believe that venture capital has to change in Canada. I don’t pretend to have all the answers about where venture capital is going or where it should be going, but if a new venture fund is going to try and do things differently, I am on their side.

    When I first got an email from Sundeep and Amar I was intrigued, excited and a little pessimistic. My guess is that those are the exact same feelings that most people in the room had at StartupCamp. The fact is that a large number of startups in Canada are going to need some sort of capital, whether it is early stage, acceleration capital or expansion capital later on. As Albert Lai said when he kicked off with his keynote: finding early stage and acceleration capital in Canada can be painful, if not impossible.

    Amar (on the left in the above photo) is an engineering grad from Waterloo who has spent the last 5 years working as a VC here in Toronto. He has worked on something in the area of 40 transactions in that time, and has learned a lot about “traditional” VC it seems. Sundeep has some notches on his belt, having founded and sold a few successful startups over the last few years while living in San Francisco.

    Sundeep and Amar have not raised a huge fund by any stretch. At $10 million, they aren’t taking a management fee out of the fund, nor can they afford to throw money at unrealistic startups. What they plan to do is invest early in good ideas and provide up to $1 million in funding over the life of a company.

    There are a few things that I think sets Extreme VP apart from other Canadian VCs: They can do deals as small as $25,000, they try to complete a deal within 1 month if it is a ‘yes’, they are probably more tuned in to what is going on right now with web startups than most other VCs, and they have a good set of connections that they can use to help the companies that they fund.

    One thing that has impressed me so far is that they are also accessible. Even before they officially ‘launched’ their fund, I saw them out at democamps, pub nights, and breakfasts where I could not find another VC if I tried. To me, that says something. The other thing is that these guys are actually doing some deals. In a short period of time they have funded something in the range of 3 startups and I believe they have more that are looking good.

    What do I hope Sundeep and Amar accomplish? Disruption. I hope they are a wake up call to many of the VCs in Canada who have taken their deal flow for granted. By being accessible at the grassroots level, Extreme VP will see valuable deals before they land on the desks of the more established VCs. Some of them may have to hit the ground and start looking for good deals before they get picked up by the new guys in town.

    Contact: Sundeep & Amar, Extreme Venture Partners

  • Finally, Wireless Competition Explodes in Canada

    The 3 stoogesShove over Rogers, Bell and Telus. In announcing the rules to the upcoming (May 2008) advanced spectrum auction, industry minister Jim Prentice has blasted open the doors to new wireless competition in Canada. Here is a quick overview of the new rules:

    • 40 of the 105 available megahertz will be set aside for new entrants
    • Incumbents will be required to allow roaming on their networks at reasonable rates (this is crucial as any new entrant may start regionally and take up to a few years to establish full national coverage)
    • Incumbents will be required to share towers with new entrants (significantly reducing startup costs and redundant infrastructure)

    The government has given the would-be entrants (and pretty much everyone except for the existing telcos and their bankers) everything they were asking for. The game is on for startups and new entrants in the Canadian wireless space. So get to it. The crew here at StartupNorth are just this minute back at the orbiting headquarters, scrambling beneath couch cushions for the mere few hundred million in change needed to finance a spectrum bid and national roll out.

    Even if launching a whole new wireless carrier is a little out of your league, this is great news for tech entrepreneurs in Canada. Despite recent improvements, Canada has long lagged the world in terms of mobile adoption, open access to networks and affordable data rates. With wireless rapidly becoming ?the new last mile? of the internet, our ability to innovate is going to depend on the emergence of a competitive wireless market. Assuming the new rules bring real competition to Canada, this announcement is the best thing tech entrepreneurs could hope for.

    If you want a hint of where the wind is blowing for open and competitive wireless markets, look no further than Google?s recent announcement of the Android API and Verizon?s move to open their network to non-Verizon devices (even non-phone devices). Time to get out that whiteboard, and dust off those pitch decks.

    As if this weren?t big enough news itself… The other reason that we?re bringing you this story on StartupNorth.ca is to announce that, starting Monday, the North family is getting a little bigger. WirelessNorth.ca will be launching and joins the StartupNorth family as a partner site. Tune in for more coverage of mobile startups, industry trends, device reviews, and everything awesome yet to come from the Great Wireless North.

  • 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.