Category: Canada

FounderFuel cohort explodes onto the scene
Disclosure: I am a mentor at FounderFuel, and I traveled to Montreal in August 2011 to see most of these companies during the mentor matching. I’ve also mentored Willet as part of my role as Entrepreneur-in-Residence (EiR) at Velocity (@UWVelocity) in Waterloo.

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I am/was impressed with the teams accepted into the 12 week FounderFuel program. Today is #FFDemoDay where after the past 12 weeks the companies get a chance to show the world what they’ve been working on. I love the art of the demo, it is so different than the pitch. I met all of the companies in August 2011 at the Mentor Matching Day, unfortunately I wasn’t able to travel to Montreal to see the demos today. It looks like the team at Founder Fuel is continuing Montreal Startup Up’s great track record of identifying and growing very early stage ventures.

I’m apparently having a bromance for the Real Ventures team. John Stokes (@iamjohnstokes), JS Cournoyer (@jscournoyer), Mark MacLeod (@startupcfo), Allan MacIntosh and Ian Jeffrey (@ianjeffrey) are putting together programs and the funding to support a strong early stage technology ecosystem in Montreal. Keep up the phenomenal work guys.

The 2011 FounderFuel Cohort includes:
- Playerize
  Playerize grows social and mobile games by providing player installs from diverse channels at huge scale.
- OOHLALA
  A mobile platform that helps students take control of their college life by powering the events, conversations and deals on campus.
- Willet
  Willet is the missing step from social browsing into shopping, and converts the mindsets of people without intent to buy into paying customers.
- Vuru
  Vuru takes complex financial statements and distills them down into clear, transparent reports that show investors the fundamentals that matter.
- Seevibes
  The TV Ratings For Social Media Audience – measures engaged audience to provide relevant data that media and advertising industry need.
- BlameStella
  Is your Internet contrivance up to snuff? Find out with BlameStella, the future of Web Monitoring .
- PlayerTakesAll
  A viral campaign & referral management platform that enables advertisers to extend the reach of their marketing efforts by 50%.
- Wavo
  wavo.me is the easiest way to collect, manage and play the music and videos being shared on your social networks.
- Editola
  Editola uses the community to build the most accurate view of every news story. The best articles, videos and opinions, all in one place.
Apply for FounderFuel 2012

The spring 2012 FounderFuel session is scheduled to start on February 20th 2012, and applicants may apply directly online at founderfuel.com until January 7th 2012. An early review of candidates will begin on December 12th 2011.

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November 8, 2011
The Changing Landscape of Venture Capital

Editor’s note: This is a guest post by Kevin Swan (LinkedIn, @kevin_swan). Kevin has cut his chops doing product management at Nexopia.com before becoming it’s CEO. He moved to the dark side with Cardinal Venture Partners and is now a Principal at iNovia Capital. Thankfully he is an MBA dropout and that’s why we like him. Follow him on Twitter @kevin_swan or OnceABeekeeper.com. This post was originally published on November 4, 2011 on OnceABeekeeper.com.

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There has been a lot of discussion recently on the changing landscape of venture funding and what it is leading to. I thought that it would be worth digging into this a bit and, as most of the discussion and data is from the United States, put a Canadian spin on it as well.

There are two driving factors that are shaping the current startup landscape – the extremely low barriers and costs to start a tech company and the availability of seed or angel funding. Now, I am the last one to think that there should be any barriers to starting a company, but you need to make sure you are not just starting a company because you can. You need to know what you are getting into and, if you plan to raise any capital, know what is lying ahead.

The number of new startups we are seeing has been increasing at an alarming rate over the past couple of years across North America. Did you see Paul Graham’s recent tweet that Y Combinator was receiving an application a minute? All that starting a legitimate company takes these days is a couple of smart people with computers. Getting to the next stage is a different story though.

The seed and angel funding market has exploded with many new “super angels” as well as emerging seed funds entering the space. It was joked that a Google engineer could quit, walk onto the street and get a $500K angel investment to start a company. This is not far from the truth as anyone in the upper echelons of web development and design talent has a good chance of getting seed money these days.

So, what is starting to happen to all these companies? Well, like most startups, they need more money. Some need money to fuel massive growth – these rounds have turned into highly competitive financings and are attracting crazy valuations. However, most (~99%) are going to run out of money while showing some progress, but not enough to have VCs scrambling to write checks. To make matters even more challenging, VC fundraising continues to drop to levels not seen since before the dotcom boom. This scenario is even more alarming in Canada.

Despite all these changes one thing still remains – it costs a lot of money to scale a company. Sure getting started is cheap, and that is great, but you are eventually going to need money to build a big business. If you are really fortunate you will be able to do this through sales, but few have that opportunity. The result is a large demand of startups needing Series A and bridge funding and a smaller supply of available funds. Many believe that this is a healthier environment as the returns of venture capital since the dotcom boom have been less than desirable as the industry became bloated. It is important to know that most VC funds have a 10-13 year life so all that money raised in the late 90s and early 2000s is just now starting to wind up.

So what about Canada?

Well, whether you believe it or not the border is becoming much less relevant when it comes to venture funding so Canadian startups (and VCs) are all in pretty much the same boat. The complaint most commonly heard in Canada is that there is not enough early-stage funding. I disagree. Great companies in Canada are getting funded and acquired. However, with the increased competition for Series A funding there are a lot of good companies that won’t be able to raise money. This does not mean that they won’t be successful, but they are going to have to take a path that doesn’t rely on venture funding. Unfortunately many don’t plan for this reality.

With all that said I, like many, are concerned with the direction venture capital fundraising is going in Canada. While it is great that US funds are now starting to ramp up investing in Canada they usually do it alongside Canadian funds – such as the recent case of Union Square’s investment in Wattpad alongside Golden and W Media. Also, Canadian funds are valuable in actively recruiting US funds into local companies. While it is great having talented investors from the US active up here it does not replace the feet on the ground that are needed and Canadian investors fill.

Editor’s note: This is a guest post by Kevin Swan (LinkedIn, @kevin_swan). Kevin has cut his chops doing product management at Nexopia.com before becoming it’s CEO. He moved to the dark side with Cardinal Venture Partners and is now a Principal at iNovia Capital. Thankfully he is an MBA dropout and that’s why we like him. Follow him on Twitter @kevin_swan or OnceABeekeeper.com. This post was originally published on November 4, 2011 on OnceABeekeeper.com.

November 7, 2011
Startup Blood Bath – What a Recession Feels Like
Today looks like a bit of a blood bath on the markets, so I figured it is as good a day as any to talk about what an economic downturns feels like for startups. I was “fortunate” enough to launch a company the day Lehman collapsed in 2008 (Sept 15th!!), and got to see the first hand impact of the downturn. We also were raising a B round during that time.

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Most media seems to paint the picture of this post-apocalyptic world where suddenly all funding disappears and everybody wakes up and the tide has gone out and everybody is naked. I disagree. To me, the downturn felt more like death by 1000 paper cuts, such as:
- Your churn will climb. Partly because of non-payment, failed credit cards, canceled credit cards, etc. If you do churn reports, “cutting back” and “not feeling the value” will increase as reasons.
- Suppliers/Partners will stop paying you in a timely way, some never. Your average AR period will start to run at first slightly longer, then much longer. You’ll probably need to hire a baseball bat.
- If you have physical product, distributors/channel will send back inventory because they are getting rid of any “risky” inventory and focusing on basics, i.e. products & goods that move easily like toilet paper and milk.
- Conversion rates will start declining for every marketing trick you try (except lowering price). And with that, cost of acquiring customers goes up. You’ll also probably just invest more into marketing as an initial reaction to declining customer counts.
- Your ISP (or any low margin, commodity supplier you use) gets “acquired” by 3 different entities in 12 months and start having annoyingly regular outages.
- Angel investors, or anybody holding debt, turn into vicious debt collectors. As terms reach they demand outrageous interest. Now you are paying 2 employees worth of interest per month.
- You are forced to lower price, at first by small amounts, and then gradually more.
So if you increase churn by 2%, increase acquisition costs by 10%, chop price/revenue by 10%, do you know what you have???
More good news, VCs and angels get caught in this churn. Exits disappear (2008 VC backed M&A was down 54% from 2007!!!) and with it RoI. Many “busted business models” appear in the portfolio, and soon they have to get written off. It gets nasty. VCs who are dying stop feeling like the Fred Wilson-ian brothers-in-arms company builders, and they start to feel more like debt collection agents. SELL YOUR COMPANY! MERGE WITH THIS CRAP COMPANY! LETS PARACHUTE IN A NEW GOLDEN CEO! PAYCUTS! WHY ARE YOU GUYS GETTING PAID?

The Good News

Here’s the first good news. Only two things on the planet can force you to die: 1. YOU – You Give Up & 2. Debt Gets Called.

The second piece of good news. Some businesses do great at managing downturns. Why? Execution and a little luck. You can track all the little death by a 1000 paper cut stuff I listed above, see that the world is changing and manage it. If people stop paying you or start delaying on payments, you gotta get out there and do some hard nose collecting. If churn starts to rise because of credit card defaults, try to bill in new ways – use different billing dates, bill in multiple smaller chunks, etc. If you have to lower price, get a new product out or a range of products so you can defend average price. If you see it coming and are fast enough, you can react and your company can survive.

The third piece of good news. All of this starts happening before big market moving catastrophes happen. Bad “paper cuts” were happening months/weeks before Lehman collapsed. In the summer of 2008 other startups I knew were having churn & credit card payment issues.

There are a lot of folks who survived 2008/2009 and built profitable businesses around Canada. Would love to hear some of your thoughts.
November 1, 2011
Wave Accounting closes $5MM from CRV & OMERS

Looks like US VCs are continuing to look at deals in Canada. Wave Accounting announced a $5MM Series A led by Charles River Ventures (CRV) with follow on participation from OMERS Ventures. It is great to see Devdutt Yellurkar (LinkedIn) looking north of the border. Devdutt has an amazing track record at CRV and previously at Rho Ventures, Sterling Commerce and Yantra Corporation. Guessing based on the press release that Devdutt will join Peter Carrescia (LinkedIn, @pcarrescia) from OMERS Ventures on the Wave Accounting board.

Great news for startups, we’ve now seen Matrix Partners (TribeHR), Union Square Ventures (Kik & Wattpad), CRV (Wave Accounting), Bessemer (Shopify), Freestyle/Greylock/Embracardo (GoInstant) and one other Sand Hill Road firm all make active early investments in Canada. This doesn’t include the Canadians that have raised during stays in the Valley during YCombinator and 500Startups – Vidyard, Upverter (True Ventures), BackType (True Ventures), Kiip (True Ventures), Rewardli (500Startups) and others.

This is great for Canadian entrepreneurs.

October 14, 2011
Getting Attention
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Mark Evans’ post about Do Canadian Startups Get Enough Attention? annoys me. It is not Mark, it is not Canadian startups, it is the assumption that Canadian media outlets should write about Canadian startups.

“But the fact is there are a lot of great startup stories that go unreported or receive a smidgen of the coverage they deserve. It is a situation that frustrates entrepreneurs, investors and people within the startup community who believe the spotlight should be burning a lot hotter.”

Let’s start by answering Mark’s implication that “startups stories go unreported or receive a smidgen of the coverage they deserve“. Bullshit! They don’t deserve coverage. They have to earn coverage. They are noise. And as an entrepreneur you need to learn how to rise above the noise and tell stories that the media want to share with their readers.We have many examples of Canadian startup success and failure stories that have managed to figure out how to tell media friendly stories. Sarah Prevette at Sprouter managed to become a media darling:
- Sprouter sprouts again
- Sarah Prevette in 2o Young Women in Power
- Sarah Prevette in Inc. Magazine’s 30 under 30 America’s Coolest Young Entrepreneurs
- ITBusiness.ca
Why was Sarah Prevette so much more successful in getting press coverage for her startup than other entrepreneurs? Is she smarter? Does she have more hustle? Is her startup more successful? I challenge Mark’s assertion that Canadian startups deserve coverage. I think the first step is doing something worthy of coverage. And as entrepreneurs we need to understand the stories that media want to tell, and begin to hustle to take away time and space from the big players. Tim Ferriss told his story about getting on national television, From First TV to Dr. Oz: How to Get Local Media…Then National Media. You have to work at crafting a story, building relationships and being newsworthy. So rather than assume that all good startups deserve coverage, how about we as entrepreneurs go out an earn it. Aim higher. Make something newsworthy.

Resources for Getting Media and PR Coverage
- StartupOttawa.com – Getting Media Coverage for Your Startup
PR Tips for Startups: How to Get and Keep Media Attention
Getting Press and Media Coverage for your Startup Company – Who needs a PR Firm?

Jason Calacanis on How to Get PR for your Startup

Tips for Getting (Follow Up) Press Coverage for Your Startup
From First TV to Dr. Oz: How to Get Local Media…Then National Media

October 6, 2011

Summer’s over, but it feels a little like Spring

2495772874_1d74fb2a1e_z.jpg (640×480) — Some rights reserved by arash_rk

Editor’s note: This is a cross post from Let the Sparks Fly! written by Mark Skapinker. It is a delightfully positive outlook on the prospects for the Canadian startup union. Mark is Cofounder and Managing Partner at Brightspark, which earlier this week was awarded CVCA’s deal of the year award.

Normally this is the time of the year that really stresses me out. It is late September in Ontario, summer is over, the leaves are starting to change colour, and while it is still pretty nice out, it’s real clear that it is downhill from here to winter, with warm days more than seven months away.

But something in the local tech industry feels a little different, and it feels like things are getting better. Some of us have been lamenting the state of the Canadian VC industry for years now, and Rim’s woes should by all rights make the local scene seem even bleaker – but people in the industry don’t seem to be listening. A whole lot of activities that are happening seem to signal an awakening spring and everyone seems just a little more optimistic.

Of note are more entrepreneurs pitching really interesting offerings. I keep meeting Canadian entrepreneurs with great ideas, great opportunities and a yearning for success.

Surrounding that are a number of exits from local companies – most notably (for the industry and especially for us at Brightspark, where we saw more than a 23X return on our investment) is the Radian6 sale to Salesforce.com. This exit proved that great, money-making businesses can be hatched in Canada with local talent, local VCs and a positive outcome for the local economy. Add to that a series of other small acquisitions along with some interesting exits.

And then there are the new micro-funds which are growing despite the stalling of the traditional industry, with experienced and talented managers helping a new series of companies – I am referring to our colleagues – Duncan and Robin at Mantella; Matt at GoldenVP; the teams at Xtreme, bnotions and Real Ventures; Daniel at Klass Capital; Bill Dinardo; and Joel at Trilogy; all who are making a very meaningful difference to our industry. MaRS is expanding, IAF is investing, I hear some traditional Canadian VCs may be finalizing new funds, and the government funds continue their part in providing capital.

We aren’t out of the woods yet, but it definitely feels like now is a great time to be part of the Internet, software, mobile, Cloud, and payment industries. Markets are growing, and these industries are creating value while the rest of the economy questions itself. If this really is a marathon, now is a great time to be heading out.

If we can keep up this momentum and deliver a few more winners, we may look back at this time as the period when the new Canadian industry started thriving.

At Brightspark, we remain thrilled with our VC fund’s performance. Our multiple exits puts our performance way ahead of top quartile funds anywhere in the world. And we think the remaining companies in our portfolio have the potential of taking our fund to new levels. Our focus on investing in great teams, markets we understand, and with an early stage fund of entrepreneurs helping entrepreneurs is paying off really well.

To those people who have written off our participation in the industry, we continue to focus on remaining a significant part of this industry, and we think the next few years could be very exciting for our funds and the Canadian industry.

Another Monster Raise – Paymentus Closes Big Round From Accel-KKR

Yesterday we posted about iLoveRewards closing a big growth round from Sequoia. Well today, another JLA Ventures company did a big round of growth money as well. Paymentus raised a big round from Accel-KKR, rumoured to be at $20mm. That’s $45mm in capital to two Canadian companies in a very short period of time. I imagine John Albright, @johnalbright, has enjoyed a celebratory cocktail or two after seeing two portfolio co’s do big growth rounds. Lets also not forget the story of Dushyant Sharma who looks well on his way to yet another entrepreneurial highlight reel entry. And of course big hats off to GrowthWorks for being the initial funders of this company and providing funds to Canadian companies when many others were not. PR post is here.

Paymentus Corporation, a leading electronic bill payment, presentment and customer communication technology and services company, today announced that it has received an equity investment provided by Accel-KKR, a technology-focused private equity investment firm. The investment will be used by Paymentus to accelerate development, drive growth, and enhance the footprint of its real-time payment network.

Paymentus’ unified, SaaS platform delivers enterprise bill payment, presentment and revenue management technology through a self-service model, simplifying, automating and streamlining the bill payment process.

I found an old post from Rick Segal, @ricksegal, about the initial investment JLA did in Paymentus, which I think is a valuable repetitive lesson for all entrepreneurs about how to build a big successful company (something Dushyant has done a few times now):

We invested in Paymentus for a number of reasons. Our basic business thesis was that there are a number of places where (surprisingly) automation of paying certain types of bills is still in an evolving state. Paymentus has identified a number of these market segments and came to us with some great traction, proprietary technology, tons of industry knowledge, and an impressive plan for growth.

Dushyant did all the right things as a start up. Self-funded until he hit milestones that started to prove out the business stood out to the investors as well as a very clear and deep understanding of the bill payment and presentment business.

We’ve done the list of acquisitions and celebrated, I think next up its time to tally the list of big raises, as I think there are more companies “going big” than we give credit.

The Upside Of Canada’s Startup Buying Binge

Editor’s note: This is a cross post from StartupCFO written by Mark MacLeod, it is a response to Mark Evans’ post The Downside of Canada’s Startup Buying Binge. Mark MacLeod is a Partner at Real Ventures, Canada’s largest seed VC fund. He is also an advisor to some of Canada’s leading startups including Shopify and others. Follow him on Twitter @startupcfo or StartupCFO.ca. This post was originally published on September 14, 2011 on StartupCFO.ca.

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Mark Evans posted recently about the downside of Canada’s recent startup buying binge. Year-to-date, we have had 22 exits in Canada. But save for outliers like Radian6 and Algorithmics, most have been relatively small. Mark correctly argues that there are long term negative implications to these early exits: losing talent to the US and not building mid to large scale companies that can really bolster our tech scene.

Can’t argue with that and I have posted in the past about the importance of large tech companies to our ecosystem. But, exits are like pizza, even when they’re bad (small) they’re good. Why?

Returns to LPs: Returns in the Canadian venture industry since inception are negative. Some funds have delivered returns, but the industry as a whole has not. That won’t work if we want to attract non-government LPs who are motivated by returns vs. policy, job creation. So, any exit that contributes towards fund performance is good.

Generating repeat entrepreneurs: The reason (I believe) why many of our exits are relatively small is that the founders behind those companies have not had a positive exit before. As an investor, you should not bet against human nature. And I think it’s perfectly natural for an entrepreneur that has the opportunity to sell early and pocket a few million to do that. The trick is to keep that entrepreneur in the system and working on the next company. The next time, that same entrepreneur will set his or her sights much higher.

Eliminating borders: It used to be an uphill battle to convince US investors to come up here. Now with the elimination of witholding taxes on exit and with our companies doing great things US investors are coming up here more often and earlier in the startup lifecycle.

So when you think about what’s happening now, my hope is that we are setting the stage for long term success and the creation of some tech giants right here in Canada. To enable that, investors need to do more of the following:

Give Canadian Startups more capital: This might be ironic coming from a guy at a seed fund, but it’s a well known fact that Canadian startups raise less than their US counterparts. I think it’s fine to operate with small $ before product/ market fit but as soon as you are ready for goto market acceleration you need serious fuel. Canadian investors and entrepreneurs need to continue building strong syndicates that include US investors that can write big cheques.

We did that at Shopify. The investor group there includes two large tier 1 funds that can help Shopify become a giant in its industry.

Enable founders to take cash off the table: As a founder you’re more likely to “go for it” if you can sell some shares and not have to worry about cash. This is common practice in the US. We need to do it more up here. It does not make sense early on but series B and up, I think it makes sense.

Surround our CEOs with mentorship: When you look at the truly giant tech companies, they are almost always founder-led. So that tells me that we have to surround our founders with peers, mentors, coaches, advisors to help them make that transition from founder to CEO.

We also need tech companies going public here in Canada, but that’s another topic for another time. So, I say bring on these early exits and realize they are setting the stage for great things to come.

The Downside of Canada’s Start-up Buying Binge

Editor’s note: This is a cross post from Mark Evans Tech written by Mark Evans of ME Consulting. Follow him on Twitter @markevans or MarkEvansTech.com. This post was originally published in September 12, 2011 on MarkEvansTech.com.

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There has been a lot of euphoria and happy dances recently about the flurry of Canadian start-ups being acquired. The list includes Zite (CNN), Five Mobile (Zynga), PostRank (Google), PushLife (Google) and BackType (Twitter).

The positive news is that the flurry of deals (22 and counting, according to TechVibes) provide a huge boost to Canada’s start-up ecosystem, which needs all the support it can get. Acquisitions reward start-up founders, encourage venture capitalists and angel investors, embolden entrepreneurs, and provide a healthier landscape for people like myself who provide services to start-ups.

In short, Canada’s start-up ecosystem is on a roll and, hopefully, these deals will make things even better and more active.

But there is a downside to these start-ups being snapped up. Many of them are early-stage companies with interesting technology but perhaps not a lot of customers or revenue. Rather than a business being acquired, it is the ideas, intellectual capital and, as important, the people that are being purchased. Many acquisitions are fuelled by the need to add strong talent to jump-start the growth of a business or service. Zynga, for example, was looking to boost its mobile development capabilities so buying Five Mobile was a quick way to do it.

The problems with many of these deals are two-fold:

Many start-ups are snapped up before they get a chance to gain real traction and evolve into small or medium-size businesses that employ dozens or hundreds of employees. It means the loss of an opportunity to build a high-tech community that features a “middle-class” between start-ups and large players (most of them U.S.-owned) such as Microsoft and IBM. In an ideal world, some of these start-ups would grow into an Open Text or, heck, a RIM.
Many of these deals involve some or all of the start-ups’ employees moving out of Canada. PostRank’s employees, for example, moved to the Mountain View, CA. after the Waterloo-based company was acquired by Google. It’s an M&A-driven brain drain when the best and bright entrepreneurs, developers, etc. get sucked south of the border. Granted, many of them will likely return to Canada with more experience and some dollars in their jeans but, in the short-term, it’s a loss for Canada’s high-tech and start-up community.

I recognize that, in the scheme of things, these are nice “problems” to have. After all, it is better that start-ups are being acquired and investors rewarded as opposed to no M&A activity, which afflicted the start-up landscape for far too long. My point is it is also important to recognize there is a downside, even though it is something we can happily accept.

Category: Canada

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So what about Canada?

The Good News

Resources for Getting Media and PR Coverage