StartupNorth

Category: News

  • Bootup 2.0 – Now with less Boris

    We kept pretty mum about the recent mess at Bootup Labs that culminated with a Techcrunch piece and a “I’m Sorry” post from Danny Robinson, one of Bootup’s founders.

    I was ready to get some nails and start sealing the coffin of Bootup. The whole scenario has been a huge credibility killer for Bootup and I am sure it has been tough on the community in Vancouver.

    Before I started hammering away at those nails however, I decided to reach out to Boris Wertz. Boris Wertz is a bit of a sage and I figured he would have a sense of what was going on. It was then that I found out that Boris W would be joining the board of Bootup and would be helping to back it.

    Danny Robinson posted yesterday that the other Boris, one of the original founders, would be leaving Bootup. I’m not going to speculate on what caused this, but it does seem like everyone at Bootup have committed to doing whatever it takes to get this thing back on the rails.

    So here is my endorsement for the new Bootup. Vancouver needs Bootup as much as Bootup needs Vancouver, and with these recent changes I hope that the Vancouver community can get behind Bootup 2.0 as well. I expect that it will take a while, and Bootup will suffer greatly for it, but time will hopefully heal all wounds.

    Vancouver is truly one of the best cities in the world, and I know that the startup community there will continue to live up to that reputation. It is a unique place, with a unique startup community and set apart in Canada. Vancouver is a lynchpin of change and I hope a city that leads the charge in rebuilding the definition of what it means to be a startup in Canada.

  • Jonas Brandon joins Rogers Ventures

    I am happy to let you all know that Jonas Brandon, a co-founder of StartupNorth, has recently taken a position as Director at Rogers Ventures, who we profiled last year. He will be working with Mike Lee and the team to look at new deals and work with existing Rogers Ventures portfolio companies.

    Jonas is a bit of a natural investor, with a consistently good eye for startups that have a shot at making it, he has always impressed me over the years and is a regular source of good advice. We have held court many evenings at the library.

    Jonas also recently got married to his wonderful girlfriend Ana. That’s a big Q1!

    I had dinner with Mike Lee early this year, and the thing that I am most excited about is the desire at Rogers Ventures to be neither a typical corporate VC fund, or a typical fund at all (my words, not theirs). Having Jonas in this role at Rogers is good news for startups all over Canada and I think it speaks to the foresight of the team at Rogers Ventures.

    Founder Fuel, Extreme Ventures, Bootup Labs, Mantella Ventures, iNovia and now Rogers Ventures. Come on. Let’s get this show on the road. Let’s save venture capital in Canada.

  • More seed funding for Canada – Founder Fuel gets their first commitment

    I first met John Stokes a few years ago when he landed on to the Canadian startup scene and started talking about his new fund Montreal Start-up. In March 2008 they raised a small initial fund which they quickly deployed in to some nice deals in Montreal including Status.net and Whatsnexx.

    John and the team, which includes Austin Hill, announced today that they will be taking commitments from the Quebec Government (through Investissement Quebec) at $50 milion, Solidarity Fund QFL, which is investing $33 million, and by FIER Partners, which plans to invest $17 million.

    The fund still needs to raise over $8million directly from LPs, which Investissement Quebec seems to think will be a snap and done in 4 months, but I am not so sure. I hope I am proven wrong.

    In case any potential LPs are reading this right now, here is my advice: Do this one. Do it because this team is going to do more than just pass the time humming over deals — you will get hustle, an aggressive attitude and a group that understands that Canada needs more hustle and less of the same old.

    John and the team are connected and tuned in to the community. Early stage entrepreneurs trust this team and they are the kind of guys who can get your money in to some great opportunities.

    Congrats and good luck.

  • RedFlagDeals acquired

    RedFlagDeals.com acquired by YPG

    Congratulations to everyone at ClearSky Media & RedFlagDeals!

    The team at RedFlagDeals announced this morning that they have been acquired by the Yellow Pages Group.

    Just as our community has blossomed, so has Canadian ecommerce. It’s my belief that Canadian retailers are ready to take the next step that bridges online shopping and in-store shopping. We want to be involved in that evolution, but it requires us to take a step forward as well. That’s why I’m happy to announce that RedFlagDeals.com has found a partner that understands what we do, what we want to achieve, and can help us do that. RedFlagDeals.com has been purchased by a company that has been working to connect retailers and consumers for over one hundred years: Yellow Pages Group.

    Like us, Yellow Pages Group is focused on helping Canadians make smarter buying decisions every day. YPG has relationships with over 385,000 businesses in Canada. With their reach and resources we’ll be able to share coupons and deals on a scale that would have been impossible in any other situation. Rather than watching ecommerce develop from the sidelines, we will now be able to actively help it evolve while passing on the values that RedFlagDeals.com has always had: respecting consumers and helping them save money while doing it!

    Derek, Ryan, Kaitlyn and the entire team have been participants and strong supporters of the community in Toronto. They have been participating since the very beginning (yes, Derek & Ryan were attendees at the first DemoCamp). They have built a true online media business in Canada, driving traffic, advertising and engagement among their users. comScore has listed them #4 in reach in 2009 for Canadian startups. They are the real deal.

    My prediction is that 2010 is the year of acquisitions in Canada. We’ll start to see a larger number startups across Canada getting acquired by both Canadian and US companies. I hope 2010 will bring more stories like RedFlagDeals.

  • The sky is falling

    “we have a structural problem and this means Canada’s ability to drive innovation will weaken and we will see the overall economy suffer.” – Gregory Smith, President of the CVCA

    The CVCA has released their Q2 2009 Venture Investment data.

    • Venture investment down 42% from 2008. $179M in 2009 compared to $309 at the same point in 2008. This includes a $50M placement from OMERS for PublicMobile, which when removed makes the numbers even worse.
    • Average deal size decreased to $1.9M from $2.9M, this means that Canadian companies have less available resources than US competitors. 

    So it’s bad. Really bad. This is not the first time. It probably won’t be the last time we hear about the troubles of Canadian VCs. Anybody really surprised?

    The VC industry in Canada has been in turmoil for a long period of time. There are regulatory and structural hurdles, which the CVCA is actively lobbying politicians for the support. This includes lobbying for support to SR&ED tax credit programs, offset agreements, incentives for investment, etc. I’m not sure that “establishing a blue chip, limited-life panel comprised of company executives, university presidents and venture capitalists with the express mandate to devise a road map for Canada’s technology industries” will provide the solutions necessary to Canadian entrepreneurs. And while I think that VCs are an important part of the ecosystem to support and nurture entrepreneurs, they are only part of solution. It is the entrepreneurs and startups that will save venture capital in Canada. 

    What does all of this mean?

    • Number of investors will continue to decrease
    • Valuations will continue to decrease
    • Customer uptake will be slower
    • Need to become cash flow positive
    • Acquiring entities will favour profitable companies

    Does this sound familiar? It’s pretty much verbatim out of Sequoia Capital’s R.I.P. Good Times presentation or Ron Conway’s email to his portfolio. This is not new or news to Canadian companies. Raising money has been difficult for a while in Canada. Our investors have preferred later stage investments, in the H1 2009 just over 60% of all of the capital when to later stage deals (Series B and later). We’ve seen a need for companies to be able to demonstrate a product, customers and market potential just to raise early funding.  

    There are Canadian ventures that are growing and successfully operating on revenues. Along with a set of emerging technology ventures that have closed non-traditional funding rounds. Well.ca raised $1.1M from angels. J2Play was acquired by Electronic Arts. It’s possible to raise money, to get acquired, to operate successfully during tough times. You just have to execute better than your competitors.

    So what is an entrepreneur supposed to do?

    1. Read How Startups will save Venture Capital in Canada.
    2. Read R.I.P. Good Times. and Ron Conway’s email to his portfolio.
    3. Stop worrying about the state of Venture Capital in Canada.
    4. Start building real businesses with real customers driving real revenues (if you need to raise money there are other sources of capital).
    5. Look for growth in markets outside of Canada (while this includes the US, it should not be limited to US only growth).
    6. Execute, execute, execute. You’re only as good as your last deal. So find customers, keep them happy, and keep innovating.

  • Incubators, accelerators, and ignition

    I am still curious about startup incubators. Mostly because I think that they do a great job focusing attention and driving buzz around the startup activities in a community. ReadWriteWeb has a great summary of seed fund incubators, including:

    I keep wondering why there isn’t an tech incubator in Toronto. We have a Fashion Incubator, a Food Business Incubator, a Research Centre with Advisory Services for entrepreneurs, 2 great universities with business and engineering schools located downtown with active student entrepreneurship groups: Rotman New Ventures Group and StartMeUpRyerson, entrepreneur focused events like StartupEmpire, Founders & Funders, Dicovery09, TiEQuest, Impact Conference and a few active seed investors (Scott Pelton and Roger Chabra at GrowthWorks, Rick Segal at JLA Ventures/Blackberry Fund, Derek Smyth at Edgestone).

    Maybe we don’t need an incubator. But LaunchBox and DreamIt have been successful in building the local communities in Washington, DC and Philadelphia respectively. And there are local entrepreneurs heading to Y Combinator, there is a need and a desire for the benefits these programs bring for the entrepreneurs and the community.

    All of these programs provide:

    • A cohort
    • Mentorship & Networking
    • Training
    • Funding
    • Timelines
    • Attention

    I wonder if the best Toronto specific program would include a distributed community approach to access the available resources. There is a strong community and a strong series of events that could facilitate a similar program locally. The community of entrepreneurs can find a way to build a similar program informally using many of the existing events and activities.

    A Cohort

    This is easy enough to define, however, potentially difficult to recreate in a distributed manner.

    Y Combinator, LaunchBox, TechStars, Capital Factory all use an application process and timelines to define a cohort of companies. The number of companies is defined by the amount of available resources:

    • Available funding
    • Mentor availability
    • Training spots

    The process should be easy to replicate from the above mentioned incubators. Plus all applicants must present their idea using Ignite format or a demo at a DemoCamp style event. The goal would be to help identify the best prospects, create excitement to find potential funding or at least to fine them the appropriate first mentors.

    Having a shared space helps to begin to build shared experiences. Like grad school, where everyone shares the triumphs and challenges because of the close proximity. It’s not dependent to have a shared office space, but common meetings, shared mailing lists, badges of honour, and shared timelines can help entrepreneurs feel part of something that is bigger. As the program evolves it becomes a shared pedigree, much like an alumni program. You can see this developing from the Y Combinator cohorts, i.e., YC Summer 08, TechStars 08 etc.

    Mentorship and Networking

    There are a great number of individuals engaged in the community with varying levels of success and experience. Many of these folks would make great mentors, they just need to be asked and engaged. Here is my list of folks that need to be involved (in no particular order):

    There are mentors in Toronto. It’s just a matter of finding the right people based on the company and problem space. The question is how to compensate a m

    entor/advisor will need to be addressed at some point. But I think that at this early stage, most mentors should be doing this to help young entrepreneurs. Compensation is something that each of the new school incubators solves with their funding equation. Not always possible during these early stages, most mentors can look to programs like TiE or CYBF which are volunteer driven programs. The goal should be to provide time-limited direction and guidance based on domain expertise. The CYBF program requires that mentors meet with a startup for “ a minimum of 4 hours per month”. This is one lunch a week. It also limits the number of startups that each mentor should engage with.

    Training

    A program should take advantage of the existing training opportunities and create a few new opportunities.

    The active programs that happen in Toronto include:

    • MaRS Entrepreneurship 101 – an approximately 32 week program that runs October to May. Best part all of the previous training videos available on Vimeo.
    • MeshU – business, management, technology and design for entrepreneurs. Some good stuff.
    • StartupEmpire – happened last year, we’ll try to make it happen again
    • Founders Lunch – run by John & Gosia at LearnHub. Great way for entrepreneurs to connect with each other. No funders or others around.
    • Founders & Funders – a monthly opportunity to connect with other founders and the people that fund companies. This will include invitees from Toronto, Montreal, Waterloo, Vancouver, Boston and Silicon Valley.
    • Refresh Events – interesting mix of technology, marketing, entrepreneurship and design training lectures at the Centre for Social Innovation
    • This training coupled with a weekly dinner program with a guest speaker from the local community. The weekly dinners will serve as a coming together point for the cohort, but also as a great introduction to the cohort. There is the question of cost. But obviously it might be limited by the resources and the size of the cohort. There will be lots of pho, dim sum, and pizza.

    Funding

    Every time I try to run the numbers it doesn’t make any sense to run this as a fund. The fund is too small to operate on the fees and the carry. And unfortunately, I don’t know a single individual that is willing to use $10M and try this as an investment thesis. Or a group of angels that need this for dealflow and risk reduction. There are some funds (GrowthWorks, JLA/BlackBerry Fund, ExtremeVP, iNovia Capital, TechCapital) that are doing seed stage funding in Canada. It is extremely difficult to run an early-stage fund of this nature and make the numbers work for operations and to compensate a staff to run it.

    There is an opportunity to create a Farm Team Fund (FTF) that assume a zero IRR and start funding these early stage entrepreneurs. The funding is a big challenge. We need to make sure both the extremely early capital and the follow on capital is available to help these companies sustain until profitability. 

    Timelines

    • Capital Factory = 10 weeks
    • TechStars = 12 weeks (May to August)
    • Y Combinator = ~12 weeks (June – August)
    • Seedcamp = 1 week + 12 weeks
    • LaunchBox = ~12 weeks (May 18 – Aug 5)

    Looks like 3 months is the magic number. That makes the 32 week program (October to May) for MaRS Entrepreneurship 101 program too long. The program needs to be focused on generating successful companies and entrepreneurs quickly.

    Attention

    What are the premier potential  events in Toronto? DemoCamp? Mesh? OCE Discovery? Are any of these events equivalent of Demo or TechCruch50 or Y Combinator Demo Days?  What is the event that attracts press, later stage investors, potential acquirers to find out about these companies? How do we highlight the great startups that are happening?

    This is the one thing missing from the local ecosystem. A killer launch event. Currently if you want real attention, you are probably launching at a US event. In Vancouver, there is LaunchParty which turns out is cofounded by the team running BootupLabs which were part of the BarCampVancouver, DemoCampVancouver and NorthernVoice teams. It’s one moDemoCampToronto is a good starting point, however, it was designed as a monthly gathering for the local entrepreneurial technologists and designers to share what they are working on. It is a good local event for driving attention, attracting and hiring talent and getting that first sanity check.

    What’s next?

    It’s possible for local entrepreneurs to replicate many of the features of the new school venture creation programs. The funding challenges related to a zero IRR can make this a challenge, but Rick and others have stepped up to the plate to bring attention to bear and hopefully solve this for early-stage entrepreneurs. It would be a lot easier to start with an application and funding process, the $6,000-$30,000/founder isn’t a lot of money, but it does help pay the rent and food bill during the 12 week dash.

    Are there a group of young entrepreneurs that want a program? Are you looking for a 12 week startup program in Toronto?

  • More Crowdsourced Capital – Colektivo readies for launch

    ColektivoColektivo is a new debt-financing startup that appears to be attempting to bridge peer-to-peer loans with crowdsourced investing. A sort of Kiva for entreprenurs, bridging the concepts behind startups like CommunityLend and Vencorps. Startups are asked to fill out a loan application, and a group of lenders then decide if they want to make a loan to that startup.

    Colektivo runs the first investment fund on the Internet managed by a group of investors. The investment fund sole purpose is to supply local small and medium enterprises (SMEs) with debt financing. This synergy between SMEs and savers represents a real alternative to banks and traditional investment products. The incomes of interest generated by the loans are redistributed to the savers whereas the principal portion is reinvested in other SMEs. With a minimum investment of 100$, investors are able to buy investment fund units

    My first impression is that Colektivo is taking the worst from both worlds and attempts to bring them together to form an idea that seems full of risk and that promises minimal reward.

    The peer-to-peer loans industry has been under a lot of pressure and has lived under a cloud of uncertainty in almost every jurisdiction so far. Prosper.com was shut down by the US SEC in November 2008, and in Febuary 2008, IOUCentral launched and was then quickly shut down here in Canada. My sense is that they are trying to avoid regulatory hell by managing it as an investment fund, which may or may not work, I am not qualified to say.

    So, take the peer-to-peer model, and then layer on the further uncertainty of the crowd-sourced investment model and I get jittery. I hope they can prove me wrong though.

    I am, however, feeling more and more bullish about Vencorps, which uses crowdsourcing to find good investment opportunities, but which uses its own money to make the actual investments. I have been watching some of the pre-launch contests they have been running, and I do see the potential.

  • MaRS Phase II in the Deadpool

    The MaRS Center is seeing the second phase of development go on hold.

    Phase II, which involved the development of a second tower on the west side of the property, has been cancelled, despite having been ahead of schedule so far. The reason given by Alexandria Real Estate Equities Inc, the American developer behind the project, is that they just couldn’t secure enough leases to make the project move forward.

    I first heard about this a few days ago when an unsubstantiated rumor was posted on Urban Toronto (a great forum that I lurk in). Then when I was up in the area yesterday I noticed that the site was pretty quiet, but still wasn’t sure. That was until I looked at the National Post this morning and it was right there on the front page.

    The MaRS center is a confusing thing for tech entrepreneurs. There are a few startups in there, and it is home to a Celtic House office and RBC Ventures. They also have some really fantastic people working there, such as Peter Evans and Allen Gelberg, who have reached out to the startup community in a big way and who have provided a venue for things like Mesh and the Facbook Developer Garage.

    My sense is that MaRS has a much bigger impact on the medical research and commercialization community, but I am not connected to that community and have no way of knowing.

    MaRS was never a center for the tech community however. Simple economics make it impossible for such a high-cost building to truly have an impact at a community level. There are three old garment factories at Spadian and Queen that have had more of an impact. This isn’t a new phenomenon either, when I was building some of my first startups in Charlottetown, the provincial and federal government spent almost $35million building something called the Atlantic Technology Center.

    In terms of the size of the city and community, the Atlantic Technology Center was even more ambitious than MaRS, and it was even more disconnected from the community. While some of the best startups were moving in to great historic office spaces, government contractors and service firms piled in to the Tech Center. It was high-cost, anti-septic and too ambitious.

    The truth is, if you want to transform the tech community in a place like Toronto or any other city, you don’t need $20million, or $200million. For all the dreams of trying to turn some city in to the “next valley”, the point gets missed every time. You could put Toronto, Montreal, Halifax, Calgary or Vancouver on the world map with almost no money. Put a couple million together and find the right people to deploy it. We need to start loving our cities and the communities that are coming to life in them.

    The problem is that government officials can ascribe value to real estate. We all love to build big things that people can see, touch and talk about. Until those same people can understand the value of a vibrant and productive community, then we will never get the participation that we truly need.

    It is worth pointing out that MaRS has billed itself as a home for academic research and eventual commercialization, not simply a home for the tech community. I believe that the same fundamental principals are in play however, and that the task of building a commercialization engine in this city is not a real estate problem, but a social one.

    I don’t know what this means for MaRS and their efforts in the community, but I hope it is a chance for them to step back and refocus. They have a great team that I believe will still do great things.

  • Microsoft BizSpark – Software and Support for Startups

    Microsoft is launching a new program focused on helping Startups get up and running. The program is called BizSpark and according to Microsoft, the biggest benefits are

  • Software. Receive fast and easy access to current full-featured Microsoft development tools, platform technologies, and production licenses of server products for immediate use in developing and bringing to market innovative and interoperable solutions. There is no upfront cost to enroll.
  • Support. Get connected to Network Partners around the world — incubators, investors, advisors, government agencies and hosters — that are equally involved and vested in software-fueled innovation and entrepreneurship who will provide a wide range of support resources
  • Visibility. Achieve global visibility to an audience of potential investors, clients and partners

    • Basically, you enroll and are given access to a almost all the nessecary server and development software you need. The server licenses are even prouduction grade, so you can deploy (from what I can tell) cheaply. You are getting a high end MSDN subscription and a lot more, all for free.

    My first few startups were Microsoft-based. Believe me, things have changed. We used to have to scrape together $6000, $12000 or $18000 to pay for MSDN subscriptions. That was always incredibly painful. Microsoft eventually announced a program (PowerISV) that brought down the cost, but was still really weak on support. BizSpark eliminates almost all the licensing/software costs involved in being a Microsoft Based startup.

    I am not going to get in to any religious wars here. 90% of the startups I see (at the early stage) these days are Open Source based. The reasons for going Open Source are obvious for many of them, but for others it is not such a simple decision. For those building software focused on businesses, Microsoft brings some very big opportunities to the table, especially with the Azure Services Platform.

    The other thing that tells me that Microsoft is starting to finally “get it” is that they don’t care if you are a 100% Microsoft based startup, or if you are Open Source based and just need to connect to Microsoft tools. The program is open to everyone.

    If you are coming to StartupEmpire, Microsoft is going to be throwing the after-party to celebrate startups and the new BizSpark program. There will be Microsoft execs on hand to answer your questions and to explain the program.

    In case you are wondering, no: this is not a pay-to-play post. Nobody from Microsoft asked me to write it. I believe this program stands on its own.

  • Byte Club launches – Behind the scenes at b5media

    A new web video show has launched. It is called Byte Club and the first episode is a profile of Toronto based b5media.

    Here is the first episode: