StartupNorth

Category: Startups

  • Friday Night Fights

    Whether you think of the UFC and mixed martial arts (MMA) as bloodsport or entertainment, there’s no denying that it is big business. Sure it’s still a bunch of individuals pounding the hell out of each other, but it’s an interesting brand building exercise capturing the attention and wallets of  18-34 year old men.

    Dana White along with Frank and Lorenzo Fertitta, as Zuffa LLC,  purchased a near bankrupt UFC for $2 million in 2001. By 2006, the UFC grossed more annual pay-per-view revenue than any other ‘”combat sport” promotion, think boxing, mixed martial arts, etc. The 2008 estimated revenue was close to $250 million through a mix of pay-per-view, live event tickets, television deals, advertising, video game promotion deals, and other varied revenue streams. It had become a huge business. Big enough that Mark Cuban has creating HDNet Fights as a promotion and leveraging the HD television outlet to highlight other combat sport promotions.

    Love it or hate it this is big business. It’s no longer “human cockfighting” as it was referred to by Sen. John McCain (R-Az).

    So how do organizations like Zuffa LLC and Oscar De La Hoya’s Golden Boy Promotions make money. And what can software startups learn from these marketing organizations. MMAFrenzy provides “A Look Behind the Curtain: Zuffa’s Finances Come Into Focus” that provides a breakdown of the financial side of a private company. And Portfolio.com provides insight into the wheeling and dealing that is Golden Boy Promotions

    Television Licensing & Promotion

    Television promotion is about “the people who create something worth watching and the audience”. Both Golden Boy and Zuffa have crafted television deals to help them reach fans beyond their strong base. Golden Boy Promotions has a deal with HBO and Zuffa has a deal with SpikeTV to broadcast their shows to cable audiences. For both promotions this allows them to focus on building brand awareness, create superstars and sell their live pay-per-view events. In the case of Zuffa, this has resulted in the creation of new content specifically for their television broadcast partner with the reality television show, The Ultimate Fighter (orignially created for $10M), and a host of other shows out of the archive materials from live events. The networks either sell premium cable subscriptions (HBO) or advertising (SpikeTV) based on their audience reach and demographics. Better content equals more diverse people watching, which allows for a shift in advertising demographics (details on Traditional Television Business Model and Video on Demand). The Ultimate Fighter has become the “most-watched original series on SpikeTV” with over 1.8 million viewers.

    Pay-per-view Revenues

    UFC has 5.1 million pay-per-view (PPV) buys in 2007. The PPV are split with the PPV distributor. The PPV buys number is reported for most major sporting events, Yahoo!Sports has a summary of the 2008 business which the UFC was reporting $237.9 million on 5,315,000 buys (average price of $44.75/purchase). Assuming a 60/40 split between Zuffa and the PPV distributor that generated approximately $142,740,000 in revenue.

    Live Event Ticket Sales

    Average ticket price in 2007 was $250/ticket. For example, UFC 99 attracted 12,800 fans and had a live gate of $1.3 million for an average seat price of $101.56. Different venues and fighter cards have different results, UFC 90 drew 15,359 fans and had a live gate of $2.85 million for an average seat price of  $185.92/ticket. (As a side note, these figures include the seats/tickets that the UFC gives away as part of the promotion. If you assume that 30% of the seats are given away to promotion companies and others the price per seat changes to $145.09 and $265.61 for each event respectively). The interesting part is that these numbers do not include any of the costs associated with running a live event: arena, security, medical staff, athletic commissions, promotion, etc.

    Other Revenue Streams

    The great thing once you have an audience, content and a recognized brand you can look for an infinite number of ways to monetize it. You start to ask questions like how do you find new audiences? How do you increase the average revenue per user (ARPU) of your existing users? What are new channels for reaching the audience? What other partnership and revenue generating opportunities exist?

    Video game rights licensing. Subscription internet video. Wait it seems that was tried and failed. No it looks like another opportunity presented itself with Heavy.com. Apparel deals with TapouT. Once you’ve built an attractive global brand, the world is your oyster. Zuffa has negotiated broadcast distribution rights in Australia.

    What can startups learn?

    1. Build a product that people want to pay you for
      I know this sounds cliché. And is not always as straightforward. Just look at the broadcast licensing and pay-per-view revenues for sports promotion. There are complex relationships between the people that produce the content and the people that watch the content. It involves cable companies, advertisers, intermediaries. But it starts with creating a product that people will use, in this case a product that people will watch/use and pay you for.
    2. Engage and support your loyal fan base
      The goal of the adoption funnel is to move from awareness to loyalty. You need to nurture and support the audience that is passionate about your product/service. Go read Kathy Sierra or Saul Colt to learn about how to inspire your customers to become evangelists. It’s about figuring out how they help their customers “kick butt better than their competitors”. Who are your super stars? What are you doing to help them kick butt?
    3. Don’t be afraid to self promote and create superstars
      You’ve got to love Golden Boy Promotions, the UFC and Saul Colt. They are masters of self promotion. Dana White, who owns 10% of Zuffa, has become an instant celebrity from his appearance on SpikeTV’s The Ultimate Fighter. The non-stop promotion of UFC Pay-Per-View events through the SpikeTV audience (2.8 viewers million for TUF9) help reinforce known revenue streams while building characters and superstars. Do all of the commercials feel like their cross promoting other UFC events? Well there is a reason for that, 75% of the UFC revenue comes from PPV sales. Startusp need to find ways to promote the features and solutions that help solve problems, inspire users and make superheroes. Rinse, lather, repeat. By refining their messaging and telling a better story, startups make it easier for customers to tell their story. Saul Colt (who is a big deal) does a great job promoting his companies (Zoocasa, FreshBooks) the power of community and sharing and asking the audience to promote using the channels that are important to users.
    4. Diversify your revenue streams
      There are many different ways to diversify revenue streams. Look at consulting companies that run training events (educating others about great design). Music television channels that are game companies (isn’t it all about music distribution regardless of channel). Go read Peter Frisella’s 2 awesome posts for a review of the different types of business model (part 1, part 2) to figure out your business model. Have a look at Alex Osterwalder’s Business Model Generation and look at his presentations on SlideShare to learn his Business Model Canvas.

    Building a successful startup is hard work! But after watching combat sports, building a startup sure beats the hell out of getting punch in the head for a living.

  • Built to Exit

    Image by konstriktionIs a company that is built to exit the same as a company that is built to flip? Not in my opinion. Understanding how to build a company that is attractive to a potential acquirer can help entrepreneurs understand how to build product suites, acquire customers and pick technologies.

    Possible Exits

    Entrepreneur.com list five (5) possible exit strategies:

    1. The Modified Nike Maneuver: Just Take It (basically preferred shares that pay a huge dividend)
    2. The Liquidation
    3. Selling to a Friendly Buyer
    4. The Acquisition
    5. The IPO

    For me, #3 and #4 are almost identical. And #2 is not something you should aim for just staring out. Liquidation is something that happens at the end of your business. Whether it is something that happens in bankruptcy or other it is not a useful model when you are trying to grow a business. So if you merge #3 & #4 it leaves you 3 realistic exit strategies. This is not rocket science.

    • Operate profitably
    • Get acquired
    • Go public

    We know what the IPO market for tech companies looks like. That leaves companies with 2 choices. Build a profitable business or get acquired.

    When I talk to startups everyone seems to think that acquisitions are a dime a dozen. That even based in Toronto, Montreal, Ottawa, Waterloo that they are prime acquisition targets for Microsoft, Google, Oracle, Cisco and other Valley companies. Which surprises me! Sure all of these companies have done Canadian acquisitions, they are the exception and they are done for very specific reasons.

    Why acquire a startup?

    Benjamin Kuo talks about the takeaways looking at the acquisition deals done by Google, Microsoft and Yahoo. The other companies that have done a lot of acquisitions include Oracle and Cisco. Summarizing the 2007 Microsoft acquisitions including Multimap (mapping), Global Care Solutions (healthcare), Palarno (enterprise chat), AdECN (advertising network), aQuantive (public traded – advertising tech), TellMe Networks (mobile voice solutions), and Medstory (health search), he concludes:

    Key takeaways from this, at least if you want to be acquired by Microsoft: you really need to expect to be in business for at least seven to 10 years; you need a lot of traction and a product that people have been using for awhile; enterprise software is hot, consumer web services are not; and you need to have a fit to their strategic plans.

    Companies get bought for a variety of reason:

    • technology;
    • customers;
    • people/talent;
    • the scale for monetization offered by a corporate giant.

    It starts to make a very short list for entrepreneurs about what’s important regardless of the type of exit you’re looking for. You need to have technology, customers, the right talent and a path to monetization. Companies are looking for technologies that solve problems with shared customers and that round out their offerings (then there is a the whole question about do we build it or buy it). They are looking for great teams of engineers, sales people, designers, i.e., the talent. And often large public companies bring a scale and access to market and manufacturing that are just not available to startups without huge amounts of cash. 

    Does this all sound familiar? It’s pretty similar to investment criteria. There’s nothing wrong with building defensible technology that solves a problem for customers with a team of rockstars on a common technology platform.

  • GigPark partners with Metro Canada

    gigpark-win-an-eee-pc_1243GigPark has partnered with Metro, Canada’s #1 free daily newspaper, to power local service recommendations. This is exciting news for Gigpark, getting their incredibly compelling service in front of over 1 million Metro readers.

    I have used GigPark quite a bit over the last year to find all sorts of businesses: cross country ski rentals, a barbershop, a mechanic. All have been great recommendations that I can trust because they are from my friends.

    I’ve also recommended over a dozen businesses on GigPark and have received a number of personal thank you notes as a result, business owners really love the new customers GigPark drives. This partnership with Metro will offer business owners an even bigger stage, increasing the value proposition for participating, upgrading, and advertising across the integrated network.

    GigPark has social recommendations nailed. So it is a great deal for Metro, being able to easily drop in the GigPark engine and turn readers into community members and business owners into advertisers. “Integrating GigPark’s unique social tool into the Metro experience makes perfect sense. With this partnership, we’re continuing to redefine the role of traditional newspapers,” said Jodi Brown, Marketing and Interactive Director of Metro Canada.

    This partnership covers both online and print. To accompany the online component, Metro print editions in Toronto, Vancouver, Ottawa, Edmonton, Calgary and Halifax will feature the most recommended businesses in that city on a weekly basis.

    GigPark launches are always fun cause there is a giveaway involved: join the Metro community by July 31 for great recommendations you can trust and a chance to win a 10″ Eee PC.

  • I Love Rewards raises $6.9M Series B

    i-love-rewardsI Love Rewards, based in Toronto, has secured $6.9M in Series B funding from JLA Ventures, Laurence Capital, and GrandBanks Capital to fuel continued growth. This brings the total raised to $11.7M.

    The company, founded by Razor Suleman, offers a web based rewards program used by businesses to motivate their employees. Rewards are tied to performance metrics, everything from sales quotas to reduced absenteeism. Revenue has doubled year over year with keynote customers adopting the solution including: Microsoft, Marriott, ConAgra, and Bell.

    Ryan Moore, General Partner of GrandBanks Capital had this to say: “The I Love Rewards vision of becoming the global leader aligns with our desire to invest in the best growth companies in Canada. I Love Rewards offers a compelling value proposition with its innovative proprietary Software-as-a-Service technology that provides immense value to human resource and sales professionals across North America.”

    GrandBanks Capital’s participation is notable. You might recall that this Boston based fund sent out an open letter soliciting pitches from Canadian startups. It would be fair to say GrandBanks is putting their money where their mouth is, which is great to see!

    Congrats to Razor and the I Love Rewards team.

  • Workbrain Children

    Joey deVilla, Austin Hill, and I (here & here) have written about one of the best indicators of a strong startup community is the number of repeat entrepreneurs and the number of successful follow on/spinout companies. It’s the “Fairchildren” principle that is one of the many complex factors attributed to the rise of Silicon Valley.

    Workbrain agreed to be acquired back in April 2007 for $227M. This was one of the largest software acquisitions in recent history in Toronto, Platespin’s $205M acquisition by Novell being the other. It has been 2 years since the the announcement, and it appears that many of the Workbrain’s ex-founders and senior executives are starting to turn up running the next generation of Toronto startups poised for massive success.

    • dayforce 
      Dayforce is an enterprise solution that enables companes to integrate performance with planning, scheduling and management of their workforce. The company’s management team is a mix of ex-Workbrain leadership (David Ossip, Paul Sandusky, Ozzie Goldschmied, Warren Perlman) and new blood (Bob Brooks & John Orr [Note: Andrew Giblon comments John Orr was previously the VP Industry/Retails Solutions at Workbrain]). The company is building a world-class enterprise application. Dayforce launched on April 16, 2009, roughly 2 years after the Workbrain acquisition. There’s no data about the funding, but one would guess that David Ossip is able to bootstrap.
    • rypple 
      Rypple is a bottom up solution to collaborative performance management. It is a collaborative tool that enables employees and managers to request and give near real-time feedback about their performance. The team is also a mix of ex-Workbrain founders (Daniel Debow, David Stein, Tihomir Bajic, David Priemer) and new talent (George Babu, Ryan Dewsbury, Jay Goldman, and others). Rypple is funded by Peter Theil, EdgeStone Capital, Roger Martin, Seymour Schulich, and others. That’s some heavy valley hitters and some of Canada’s most respected busines individuals.

    These are 2 very prominent Toronto-based startups that are poised to knock it out of the park (again). And it provides further proof, that one of the best training grounds for young entrepreneurs is to work in successful companies. By the way, both Dayforce and Rypple are hiring.

    Are there other Workbrain children?

  • Up-Start Competition 2009

    Update from Tony Redpath at MaRS:

    “An important correction – the actual competition runs from 2:00 PM to 5:00 PM on the 29th, with the class party starting at 5:00 PM and running to 7:00 PM. (12 pitches x 15 minutes = 3 hours, hence the 2 – 5). Anyone can attend to watch the pitches – but they will have to sign an NDA at the door since many entrants will have to disclose confidential ideas in order to make their pitch. The party is wide open however …and the winner of the competition will be announced, a large cheque handed out etc. I will have non-confidential summaries of each pitch available for interested parties, and they can buttonhole any team that interests them. We’ve got a great crop this year.”

    CIBC_Ent101-250px The MaRS Entrepreneurship 101 is coming to a close for the 2009 season. The season ending wrap party, aka Up-Start Competition, is happening on April 29, 2009 from 5:00-7:00pm at MaRS. Twelve (12) companies will be pitching a 10 minute presentation followed by 5 minutes of questions to a panel of three judges. Unfortunately, the judges are not currently listed on the site. However, a quick assumption is that it is probably someone from MaRS Venture Group (Tony Redpath or Peter Evans), a successful past entrepreneur and a local venture investment professional.

    The twelve entrants selected from the executive summary stage each give a 10-minute presentation, with a further five minutes for questions, to a panel of three judges on a day in late April (date to be confirmed). Presentations will be made under cover of a non-disclosure agreement that all audience members will be required to sign. The judges will pick the winner on that day and the first prize of $10K will be awarded. (Note that the prize will be paid out against an approved expenditure program that advances the business upon which the pitch was based.)

    All of the presentations will be judged against the following criteria:

    • Has the summary/presentation clearly articulated the value proposition?
    • Has the summary/presentation demonstrated competitive differentiation/intellectual capital?
    • Has the summary/presentation demonstrated a business model that makes money?
    • Has the summary/presentation demonstrated market awareness?
    • How effective was the overall presentation?
    • Would you invest?

    Should be a great night of pitches from the Entrepreneurship 101 class. See you there.

    What: Up-Start Competition 2009
    The Up-Start Competition is a business pitch competition open to participants enrolled in CIBC Presents Entrepreneurship 101. Individuals, or teams of individuals, have to give a ten minute presentation on an idea for a technology based business that they wish to implement (or, if appropriate, for a business that they have already started). They are expected to apply the concepts that they have learned from the course to their business idea, and to make a compelling case that this will lead to a very successful business.
    When: Wednesday, April 29, 2009 5:00 PM to 7:00 PM
    Where: MaRS

    101 College St
    Toronto, ON   Canada

  • ParkVu launch iTunes to Blackberry app

    i2b - iTunes Library on your BlackBerry Jeff Fedor and Terry Goertz of ParkVu launched i2b service today. The service allows BlackBerry Bold, Curve and Storm users to remotely retrieve their music their iTunes libraries.

    i2b makes some assumptions about user behaviour that allows the application to automatically sync users music to their BlackBerry. The i2b service is limited to 1Gb or 100 files. This requires users (and the applications’ designers) to make a decision about which music to sync by default. The i2b application makes some initial assumptions that Favorite Playlists, 25 most played tracks, and most recent iTunes library additions are the files that should be sync’d out of the box. It’s a great starting point for users and can be configured by users after the fact.

    The service creates a sync’d intermediate store of up to 1Gb or 100 songs in the cloud allowing users to access the sync’d files on their BlackBerry devices.

    Songs on their home computer can be retrieved even when it’s off. Up to 100 tracks (1GB maximum) from the i2b user’s iTunes library will be replicated to the Internet cloud, making them available from their BlackBerry even when their desktop or laptop is turned off. When their computer is on and connected to the Internet, all of their iTunes playlists are available on demand to their BlackBerry. Users can easily set i2b not to receive updates in areas where extra roaming charges would apply. i2b combines a BlackBerry application with a small application for the user’s home computer that works in the background with iTunes to allow users to replicate their playlists on their BlackBerry. i2b maintains any DRM restrictions and preserves the integrity of the user’s iTunes library.

    Hopefully the ParkVu team is able to quickly get i2b into the BlackBerry App World to enable broader distribution for their $2.99/month service. It would be fantastic to see them get similar exposure and distribution as Viigo in the BlackBerry App World’s Featured section.

  • New Ventures BC Competition is now open

    new ventures bc competitionNew Ventures BC is a competition for BC startups that has been running since 2003. The competition is open to new companies that have “not yet secured significant financing from “outside investors” (ie. investors other than friends, family, and company founders)”. The competition costs $100 to enter and is open to B.C.-based privately held companies (full eligibility requirements).

    Registration for the 2009 New Ventures BC Competition is now open! Competition deadline is April 20th, 11:59pm.

    REGISTER NOW

    The new 2009 prize structure includes:

    • $120,000 British Columbia Innovation Council First-prize package
    • $63,000 British Columbia Innovation Council Second-prize package
    • $37,000 British Columbia Innovation Council Third-prize package
    • BC Hydro Sustainability $40,000 prize
    • BC Bioenergy Network $20,000 prize
    • British Columbia Innovation Council Economic Impact $20,000 prize

    If you’re an early-stage entrepreneur with a new technology business idea, join us!

    For details and to register for the competition, visit http://www.newventuresbc.com or call 604-725-5740.

    Competition deadline is April 20th.

    The questions and evaluation criteria are very interesting set of metrics for any startup looking to raise money. The questions are not all encompassing, but they are an extremely complete list of the types of discussion that is required during the initial fund raising. Check out Round 2: Feasability Test and Round 3: Venture Plan of the Contest Rules for details about what your business plan should cover.

    1. Product/Service: Describe your product or service and the nature of the technology.
    2. Technology Development: Describe the development stage of your product/service.
    3. Team: Describe your company’s strengths and weaknesses. List the credentials of your technical and management teams, and if applicable, advisors and board of directors. If you don’t have a team, describe the key positions and critical skill sets that you need to add.
    4. Business Plan Status: What research has been conducted, what remains to be done, and how and when you anticipate doing so. What key sources are included to document and support your plan?

  • MeshU/StartupNorth party – April 6 2009

    We are slowly emerging from our cave, and finally setting a date. On April 6th, MeshU, the startup and developer conference that runs the day before the Mesh Conference, will be having a social. It is a chance to hang out and talk startups.

    There really haven’t been many events in Toronto lately, so this is a chance to start things up again after a successful Democamp last month.

    Here are the details. See you there?

    meshUp
    The beer o’clock at the Drake Hotel brought to you by meshU and StartupNorth

    Time: 6 p.m. to close
    Where: The Lounge & Dining Room
    Drake Hotel, 1150 Queen St. West

    Everyone is welcome. Space is limited. There is no charge for this event.

    Thanks to our hospitality sponsor and host: Drake Hotel

  • Friday Night Byte – Octopz

    This week Byte Club serves up Octopz whose design collaboration platform is changing the way people work.