StartupNorth

Category: Incubators

  • GrowLab on tour

    GrowLab DemoDay 2011 - Some rights reserved by miketippett
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    Ok, it makes me laugh every time I read GrowLab. The only way it could be better is when someone describes the GrowLab companies as “GrowOps”. They really did a great job in creating a corporate name that has a set of nuanced meanings (well maybe it’s not so nuanced).

    Our friends from GrowLab are heading out on tour to find their next cohort. They are coming to:

    • Toronto – February 13, 2012 Register
    • Waterloo – February 14, 2012 Register
    • Montreal – February 15, 2012 Register
    • Edmonton – February 22, 2012 Register
    • Calgary – February 23, 2012 Register

    Sounds like an interesting night with Daniel Debow (LinkedIn, @ddebow), Debbie Landa (LinkedIn, @deblanda) and Jason Bailey (LinkedIn, @YVRJason) talking about startups, entrepreneurship, building companies in Canada, getting connected in the Valley, GrowConf, incubators and other fun things. The panel conversation is:

    Are you an Entrepreneur or a Wantrepreneur?

    What makes you different from other entrepreneurs trying to build start-ups? You are competing with thousands of entrepreneurs for the same resources, talent, and capital. How are you going to make sure that you attract the best people and funding? Is it about who you know or is it about how great your product is or the reach you have in the community?

    In Toronto that I get to host the above conversation, it means that I’m going to have to represent for the “Wantrepreneur” side. Because there is too much awesomeness with Daniel, Jason and Debbie representing the “Entrepreneur” side. It should be a fun event and a great time for entrepreneurs to get or stay connected with each other. This is a great group to provide deep insight into the experience of building companies in Canada and selling them to Silicon Valley powerhouses.

    Given the tour includes stops in Bucharest and Budapest, I can guarantee that someone will mention Summify (congrats guys).Also excited that Debbie and Jason will be joining us on Feb 16 for Founders & Funders.

  • Extreme Startups

    Extreme Startups

    Rob Lewis and TechVibes is reporting that ExtremeU (you can read our past coverage 2009, 2010, 2011) has launched a new Toronto based incubator that leverages their experience over the past 3 years. Mark Evans provides additional details that includes “$7-million in funding from Extreme Venture Partners, OMERS Ventures, Rho Canada Ventures, BlackBerry Partners Fund and BDC.”

    Extreme Startups includes a who’s who of  the Toronto startup scene as mentors:

    • David Ossip
    • Daniel Debow
    • Anand Agarwala
    • Michael McDermentt
    • Ameet Shah
    • Albert Lai
    • Leila Boujnane
    • Ali Asaria
    • Noah Godfrey
    • Ray Reddy
    • Rick Segal
    • Salim Teja
    • Derek Seto
    • Nick Koudas

    Congrats to Andy Yang, Sunil Sharma and Amar Varma in getting this thing launched. Plus how can this not be awesome with Andy Yang as Harold and Sunil Sharma as Kumar in Extreme Startupping.

    Andy Yang and Sunil Sharma go EXTREME STARTUPPING

     

  • An incubator for grownups…

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    David Crow and others (Huffington Post, TechCrunch) have suggested we’re experiencing an incubator bubble?

    Incubators are built for the young. Students exiting school are already living the ramen lifestyle. That means they’re cheap, they have no kids, no meaningful obligations and there’s a good chance they’ll work close to 24/7. It sounds dreamy, if you’re an investor.

    I’m old. I have kids. I’m not moving to Boulder or California for 12 weeks. I don’t play games in the office or do busy work. Why aren’t there incubators for me? I look at the incubators like 500Startups, YCombinator and TechStars and that is what I want. I just can’t participate. I can’t do the work and change my family life the way they’ve structured it.

    What I need from a incubator is…

    To Pay My Own Way

    While new graduates come cheap, grownups are capable of paying their own way. I’d rather work with someone who has some skin in the game over so-called low-cost labour. I’m willing to make an investment in a startup as a career choice.

    While most incubators offer low, bordering on zero, salaries that barely cover living expenses for someone living on the ramen diet. This doesn’t work for me. I need to be able plan for my family and my kids. What I need is something closer to an executive MBA program or a sabbatical. Continuing education programs are interesting because current employers and banks will let you borrow against your assets to get started. It requires larger savings or a working spouse to be able to fund my family during the initial startup experience. I’m willing to buy in to make this happen.

    Hunger, Drive

    Many new graduates will compare working in a startup with a plain old job. This startup thing is cool and all but it’s a ton of work and my buddy working at AcmeTech is already done work for the day and playing XBox online. Building a business offers you freedom. Freedom from what? Corporate politics, busy work, crappy work, basically the standard boredom of the 9 to 5. How can you value that if you’ve never had a shitty boss?

    I work for more than myself. My family and their future is what drives me forward everyday. I work hard when I’m working. When I’m not, I’m with my family and friends, I’m taking my kids to hockey, piano etc. What I’m not doing is placating my boss with more busy work.

    I want to build a successful business for me.

    Access to Mentors

    Tell me if you’ve seen this. You’re sitting around a table discussing your projects and companies. Someone leaves the table early. One of the people remaining at the table proceeds to lay out in detail why that guys venture is going to fail. Why didn’t you tell him that when he was here?

    The solution is for the guy who left early to get a cheque from the remaining person. As soon as she writes that cheque, she’ll sit that guy down and tear him apart and he’ll be better for it. Startups can drown themselves in mentors and advisors. I want to be at the table everyday with people truly invested in my project. Failure for no reason is not an option.

    Learning The Right Skills

    If you have a job today in technology and aspire to be an entrepreneur, typically the first step is to quityour crappy day job. You don’t have a team and project for your new business so you start consulting to pay the bills. You’ll be a great consultant, you’ll learn how to sell your hours, how to find clients, how to deliver services well. Skills that have almost nothing to do with taking a product to market. Once you head down this path, the likely destination is lamenting over some pints how “I was going to do product back when I left my job”.

    Startupify Me

    STartupify.me

    Startupify certainly wasn’t conceived as an incubator for grown ups, however, it does fill a lot of these gaps. While it likely constitutes a pay cut, we pay you to work on startup projects learning new technologies and the startup game. We partner you with established businesses who have a proven track record of creating sustainable businesses that deliver value to their customers. Everyone at the table has skin in the game. We go into our client companies, find and develop opportunities to build differentiated software to grow the stand alone value of their business.

    If you have work experience as software developer and are ready to join the entrepreneurial revolution, we should talk.

     

  • How a Canadian startup took investment from a european incubator

    This is a guest post by Patrick Hankinson, the CEO/Founder of Compilr.com a Halifax based startup building an online IDE which has almost 100,000 users. Patrick is also a co-founder of Tether.com.

    In early 2011, I met an entrepreneur and angel investor from London, at a Starbucks in my small province. He literally just took the red-eye from London, I could tell by his blood shot eyes. He wanted to know what I was working on and I explained what I was working on an “online IDE for programmers”. I could tell immediately he didn’t know what an IDE was…

    Talk about a pivotal experience. I was a programmer turned marketer, yet I still used very technical terms to describe what I was working on. The angel investor looked at me with a blank stare; he didn’t understand exactly what I was working on.

    After another couple of minutes of questions, I explained and tweaked my value proposition. He finally understood what I was working, but exclaimed that I definitely need to work on my non-technical elevator pitch. Naively, I responded I’ll never need to pitch to non-technical people.

    Now, I know that a non-technical pitch is critical. You may end up with non-technical investors like doctors, who will want to brag to their friends what they are investing in. You don’t want to put your doctor in a situation where they can’t explain exactly what you’re product does, killing viral potential. This is sometimes the case, because the investor is more in love with the team than the product.

    After this, he explained an incubator from London was putting a session together in New York. The incubator was called Seedcamp. I’ve never heard of them before, I looked at them online, saw they had invested in a several companies and were considered a European Incubator. They definitely didn’t have any credentials like Y-Combinator or Techstars. In fact, the only acquisition that I saw, to date had beenMobclix.

    I decided to apply to Seedcamp anyway since it New York was literally a 2 hour flight away (I had never visited New York, gave me an excuse). Plus it was at Google’s office in New York. Our product, Compilr, was definitely potentially a product to someday be acquired by a company like Google, Microsoft, Salesforce, Facebook, and the list goes on. Any visibility I could get at this stage was definitely worth it.

    Compilr was accepted to present in New York to the Seedcamp list of mentors. We presented at Google’s office in front of 100 mentors or so. Presenting in front of 100 people was definitely not on my bucket list, but I got through it. It actually has helped in a lot ways. I’m definitely not worried presenting in front of 100s of people as much as I thought.

    The day after, Compilr was invited to pitch to some of Seedcamp’s core investors. The room had maybe 15 people but I was more nervous than the day before. In all honesty, I thought I blew it because I was being asked a ton of questions. I answered them all, but Carlos, one of the main guys from Seedcamp had asked a question and I got sidetracked with an answer, when someone basically said “Well, ok thanks for your time, we’ll be in touch.” I still feel like a total d-bag because I didn’t answer his question…

    At this stage I became defensive in my mind, even though I hadn’t received a yes or no to their investment. In reality, I didn’t care if I received Seedcamp’s investment or not. Personally, I was funding the company out of my own pocket, almost $150,000 a year, their small investment would only really marginally accelerate my company. I was hoping to get visibility in front of the right potential acquirers.

    A few weeks later, I was in total shock when Seedcamp told me they were willing toinvest in Compilr. Even though, I personally felt like I blew the follow up meeting in New York. When I told several of my advisors, most of them were eager for me to take the funds. While some opposed to the idea, stating the same facts I alluded to earlier, onlyone successful exit, etc…

    Our team decided to go ahead and take small investment from Seedcamp to use towards accelerating our business. Our end goal was that Seedcamp would present our company to potential acquirers like Facebook, Google to hopefully stimulate an exit, producing a positive ROI for them.

  • Incubators, Accelerators, and Cyclotrons

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    They are lining up like storm troopers.

    It looks like a new crop of accelerators, incubators or, as I prefer, cyclotrons have started opening in Toronto. We’ve been talking on and off about Incubators, Accelerators and Ignition since early in 2009.

    Here is my list of incubators/accelerators/cyclotrons:

    And this is on top of the existing coworking, shared real estate, available to entrepreneurs in Toronto.
    There are lots of opportunity for entrepreneurs to find a mix of real estate, services, and cash for equity in their businesses. My advice is make sure you aren getting more than real estate with benefits. Maybe next we need to provide entrepreneurs a framework for making critical decisions about startup things including incubators 😉
    Who did I miss?

  • Trying to understand incubator math

    Editor’s note: This is a guest post by Jesse Rodgers who is currently the Director of Student Innovation at the University of Waterloo responsible for the VeloCity Residence & he is also the cofounder of TribeHR. Jesse specializes in product design, web application development and emerging web technologies in higher education. He has been a key member of the Waterloo startup community hosting StartupCampWaterloo and other events to bring together and engage local entrepreneurs. Follow him on Twitter @jrodgers or WhoYouCallingAJesse.com.

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    Incubators are not a new addition to the financing and support for startups and entrepreneurs. On the surface, incubators and accelerators seem like a low cost way for VCs and government support organizations to cluster entrepreneurs and determine the top-notch talent out the accepted cohort. The opportunity to investing in real estate and services that enable companies where the winners are chosen by the merits of the businesses being built. It feels like a straight-forward, relatively safe bet to ensure a crop of companies that are set to require additional growth capital where part of the products and personalities have been derisked through process.

    However, its not as simple as putting small amounts of investment into a high potential company. An incubator is a business and it’s sole purpose should be to make money.

    What are the basics of an incubator?

    The basic variables in setting up an incubator business are:

    • Cost of the expertise, facilities, services and other overhead
    • Amount of $ to be invested/deployed
    • Number of startups
    • Equity being given in exchange for cash
    • Return on the total investment

    There are cost of operations: real estate, connectivity, marketing, programs and services for the entrepreneurs, and the salaries of the individuals to find the startups, provide the services and build successes. These costs are often covered by governments, in exchange for the impact in job creation and taxation base. We’ve seen a rise in incubators that are funded on an investment thesis, where an individual or a set of “limited partners” provide the initial investment in exchange for an investment in the companies being incubated.

    How much do incubators cost?

    The goal is to efficiently deploy capital to produce successful investments. I’m going to explore how incubators make money by making a few assumptions based on the incubator/accelerator models we’ve seen in Toronto, Montreal, Palo Alto and New York.

    Basic assumptions:

    • Capital Investments: 10 startups x 20k = 200k invested with an assumed ‘post-money valuation’ of $2.2MM
      • This means you now own 9.1% in 10 startups each with a post-money valuation of $220k
    • Support Costs: 10 startups x $10k = $100k
      • This is the cost of real estate, furniture, telecommunications, internet connectivity, etc.

    Alright, we’re planning to deploy $200k and it need to provide approximately $100k in services just to provide the basics for the startups. We’ve spent $300k for the first cohort and and that is before you pay any salaries, host an event, etc.

    Additional costs:

    • People:
      • $100k per year salary for one person to rule them all. Call them executive director or dean or something.
      • Assuming you’re not doing this to deploy your own capital, the person or people in charge probably need to collect a salary to pay their mortgages, food, etc.
    • Events – Following the model set forth by YCombinator or TechStars we have 2 main types of events. Mentoring events where the cohort is exposed to the mentors and other industry luminaries to help them make connections and learn from the experience of others. The other event is a Demo Day, designed to bring outside investors and press together to drive investment and attention in the current cohort, plus attract the next cohort of startups.
      • Mentoring event: $1k for food costs with 25 founders
      • Demo Day: approximately $5k
      • Assumption: 10 mentoring events plus a demo day per cohort adds $40k.

    The estimated costs are approximately $340,000/cohort. Assuming 2 cohorts/year plus the staffing salary costs, an incubator is looking at $780,000 that includes 40 investments and a total of $4.4MM post-money valuation. If we assume that I’m a little off on the total capital outlay, and we build in a 30% margin of error this brings the annual budget to appromimately $1MM/year to operate.

    How do incubators make money?

    Incubators make money when the startups they take an equity stake in get big and successful. The best exits for an incubator come when one of their startups is acquired. Why acquired? Because the path to getting acquired path is shorter than the path to going public which would also allow the incubator to divest of their investment.

    Let’s do the math. If your running an incubator hoping to get respectable returns on the $1,000,000 you’ve laid out above, let’s say it’s not the mythical 10 bagger but a more conservative 3x, the incubator needs one of the companies to exit at near $30,000,000. It can be one at $30MM or any combination smaller than that totalling $30MM. This needs to happen before any dilution and follow-on funding for your cadre of companies. You have to assuming that they can make it to acquisition on the $10,000 and services you’ve provided. For more on incubator math, check out there’s an incubator bubble and it will pop.

    The bad news is that it isn’t as simple as that. Startups are not just something that exist in a vacum. There are a lot of unknown variables that can make or break an incubator.

    • percentage of startups that fail (or turn into zombies) in the first two years after investment
    • time frame return is expected
    • how many startups currently produce that kind of return annually
    • total number of startups that receive investment in any given year
    • total number of acquisitions in any given year
    • avg. number of years a startup takes to get to acquisition (because they aren’t going public)
    • avg. price a startup sells for (I bet those talent acquisitions drag the average way down)
    • what do VC’s currently spend on their deal pipeline?

    It is the unknowns that are where the gamble exists. You can tweak the numbers all you would like but assume startups have a no better fail rate then any small business. The common thinking on that is 25% of businesses fail in the first year, 70% in the  first five years? If just more than half of those companies are alive in one year you are doing well. If one out of those 20 is acquired in 5 years and you get 3x return do you succeed? Do you have to run the incubator for the 5 years at $1MM/year to be able to play the odds?

    Maybe this is why so many incubators focus on office space, it’s easy to show LPs what they are getting for their $5MM for 5 year investment, plus an impressive number of “new” startups that have been touched by the program (often without an exit, you know the way incubators make money).

    What am I missing?

    Editor’s note: This is a guest post by Jesse Rodgers who is currently the Director of Student Innovation at the University of Waterloo responsible for the VeloCity Residence & he is also the cofounder of TribeHR. Jesse specializes in product design, web application development and emerging web technologies in higher education. He has been a key member of the Waterloo startup community hosting StartupCampWaterloo and other events to bring together and engage local entrepreneurs. Follow him on Twitter @jrodgers or WhoYouCallingAJesse.com.

  • Teaching Software Engineering and Startups at UofT


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    About 5 years ago I was asked to teach a 4th year undergrad software engineering course at the University of Toronto. The course had been previously cancelled due to low enrollment; in an era dubbed the “Software Gold Rush” a cancelled course indicated something was wrong…

    Software engineering is difficult to teach
    Students are expected to learn how to avoid mistakes they never made. A great divide results from the instructor talking about concepts suitable for a mature organization when students are all about working their ass off and getting things done the night before. We borrowed several lessons from startups, having been personally involved with two startups over a dozen years. The way startups work are much closer to students ways of doing things. Since launch, course enrolment has tripled and two Y Combinator applications have been submitted based on class projects. Here is what we have learned so far:

    1. Use a startup software process
    Students are all about getting things done the night before; similar to how startups work. Teaching a heavyweight process feels foreign because students haven’t made the mistakes to understand reasons for the overhead!

    2. Change the project every year
    There is nothing more of a turnoff than a make-work project with antiquated technology. Instructors that use the same project over and over are sleepwalking. A new project each year puts the instructor and students on equal footing, solving problems together. Make the class goal to have someone apply to Y Combinator. Discuss the non-technical issues of software such has how people are going to use the product, how are you going to sell it, what is the competition like, what is the business plan. One big class project brings issues into the classroom better resembling the real world. This also allows non-trivial projects to be developed and students to test-out roles (e.g. project management) that would not otherwise exist.

    3. Allow controlled crashes
    Let the students make mistakes. For example, let them avoid source control. A student who looses code because of clobbered checkins will be a lesson learned for the entire class. However, when crashes occur, it is the instructor’s responsibility to manage and fix it. After the mistakes have been made, teach them about process. Keep things light and give them references for their future travels. During lectures on process, tie them into the mistakes that were made. Make process real.

    4. Demo early and often
    Create a culture where the principal deliverable is working software rather than documentation. Use early demos to correct mistakes and give guidance rather than having them worry about their grades.

    5. Instructors should code
    The instructor-student relationship changes dramatically if the instructor contributes code. Everyone becomes a peer instantly. This improve communication and follows the startup philosophy that even managers should write code.

    Next steps
    The course has been well received by the students at UofT. I have much more regular contract with students from this class than the other courses I have taught at UofT and UofW. I am interested in hearing from anyone who is interested in providing continuity to the students; a partner that would provide input on the project at the beginning, stay involved with it during the course, and offer a path forward for interested students ready to commit to a startup.

  • GrowLab & FounderFuel Launch

    The Blues Brothers Car
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    Jake: Here’s the plan: we put the band back together, do some gigs, earn some bread, bang! We’ll have 5,000 bucks in no time.

    Seems like I’ve been talking a lot about incubators, accelerators, catalysts, spark plugs, igniters and other programs designed to engage, educate and enable early-stage, emerging technology entrepreneurs. In the past 7 days, we’ve now seen the launch of new incubator/accelerator programs in both Vancouver and Montreal. The are 2 new programs both focused on bringing together the best talent, access to mentors, capital and networks beyond what many founders are capable of doing on their own. (Full disclosure: I am a mentor for FounderFuel).

    Vancouver » GrowLab

    GrowLabGrowLab has risen out of the ashes of BootupLabs. It includes a spectacular founding team that includes a group of people many of whom I call a friend, and even more importantly they are a group I deeply respect. The group includes:

    The deadline to apply to the GrowLab program is June 15, 2011. Accepted startups and founders spend 3 months in Vancouver and 1 month in San Francisco with an intense mentorship program. The program also includes office space in both cities plus up to $25,000 in seed funding.

    Montreal » FounderFuel

    FounderFuelThe FounderFuel is a new accelerator program with support from the team who started Montreal Startup and Real Ventures. It is a accelerator program that has been seeded with Cdn$2MM and has put together a great mentorship group that includes 85 entrepreneurs, executives, VCs, angels (and me). Ian Jeffery is the General Manager and the Partner at Real Ventures responsible for making FounderFuel work. I first encountered Ian as a competitor to his startup TinyPictures (I was running product at Ambient Vector/Nakama back in 2006). Ian successfully raised a big chunk of money and then proceeded to execute and eventually sell Radar to Shutterfly. I agreed to be a mentor just to personally ensure I get access to the team of mentors. It is ridiculous! The list includes >84 phenomenal leaders, executives, investors, entrepreneurs and people from Montreal and around the world. A sample of the awesome mentors (sorry for every I am leaving out):

    The deadline to apply to FounderFuel is July 1, 2011. Instead of a 4 month program, the FounderFuel program is “12 intense weeks”. It is also a cohort based program that provides $10,000/startup + $5,000/founder in exchange for 6% equity. The program provide access to mentors, office space in Notman House, and access to a culture and ecosystem that has bred success in the past.

    One Observation

    My one observation about both of these programs is that Debbie Landa was the only female listed. It is a really difficult and sad state. There are great number of female tech founders and leaders in Canada. I am disappointed not to see:

    These programs need to do better on encouraging diversity and actively seeking out different viewpoints. The good news is that it is easily rectified.

    Consider Applying

    The deadlines for GrowLab and FounderFuel are approaching quickly. If you are interested in what hopefully is a world-class incubator/accelerator program you should definitely give careful consideration to these.