StartupNorth

Category: Startups

  • Build It

    There is this idea you keep telling friends about… you know it is promising because a day or two after you mention it, they circle back via email “I’ve been thinking about X and it would be pretty cool, any progress with the website / app?”

    Or perhaps you just found some new tech that seems promising… no justification to implement it at work, but you are itching to take it for a test drive.

    Well sometimes you just have to build it. 

    Put it out in the world. Even a rough prototype. And if it is interesting… it might take on a life of it’s own. Who knows were it might lead… a startup? a new job? fame? fortune? Often enough big things have pretty humble beginnings.

    Still on the fence? Fine, let us sweeten the pot. How about you build something awesome this weekend (anything you want) and we (care of LinkedIn Hackday) give you a new Macbook Air (assuming it is the most awesome thing built at the hackday). I’ll be the judge of awesome (well a few of us)… but I can already tell, what you are going to build is awesome!

    This week LinkedIn Hackday comes to Toronto. It is free. You keep your code. The only rule? Start development Friday (advance planning is fine).

    Register here to build it: http://hackday.linkedin.com/toronto/2013

    LinkedIn Hackday

  • The companies I should have paid more

    Building a startup is hard and managing ops is really hard. Devops are hard and expensive.
    Luckily these days there are some amazing companies making it way easier to build the startup of your dreams. Frankly, I don’t think they are getting paid nearly enough while some are getting paid way too much.

    What apps are a key part of your day-to-day and which could you live without? 

    Screen Shot 2013-01-29 at 1.18.04 PMGitHub – Paid: $50/month. Should be: $500/month
    GitHub is the lifeblood of our dev team. Everything lives in it and it has allowed us to avoid hiring devops for years. You can hack it, glue it and spew it all over the place. All the while it is secure and reliable, almost never letting us down. It has a ton of “good enough” features like Issues and the Wiki and they are “great” because they integrate right in to the most important parts of GitHub.

    I want this company to live a long and healthy life. May they never be acquired and may they reign for all time.

    HipChat – Paid: $2/person/month. Should be: $150/month all-in
    Screen Shot 2013-01-29 at 1.18.44 PMWe have a love/hate relationship with HipChat. We wrote our own robot which connects GitHub in to Hipchat and that is useful for managing a big chunk of our dev process. Hipchat also does a great job of maintaining conversation history, so we can find almost anything we need to in those “what was that thing?” moments.

    Hipchat does however have a horrible Adobe AIR desktop client and one of the worst mobile clients I have ever seen for chat. HipChat on the iPhone has no sense of message status. It tells you “you have a new message!” but then you have to, literally, hunt every chat room and look for a new message. It is also extremely slow to load. We call this “Hipchat anxiety” when we are out of the office. If they can fix these issues then it would be a huge positive for HipChat users. The reason I should have paid HipChat more is because it is clearly useful but they also clearly need the money in order to improve the product.
    download

    Google Apps – Paid: $50/user/year. Should be: $150/user/year
    I cannot overstate how awesome it is to have Email, Calendar and Docs out of the box for every new employee. Rock solid service and the apps are always improving. It saves having to buy a MS Office license for every new hire and it has collaboration/sharing baked in. Google apps I love you and I will never hurt you.

    Skype –  Paid: nothing. Should be: $30/user/year
    Skype has been free for Skype-to-Skype for so long that I think Governments would be ousted if they tried to charge for the basic service, but wow we used a lot of Skype calls in the early days. Skype video chat is still the best, even if Google Hangouts are getting better, and it’s very reliable.

    Trello – Paid: I don’t think we do. Should be: Something more than $0

    Trello polarizes. Some love it, some hate it. We clearly love it because we use it to prioritize anything and everything. We should be paying something.

     

    Things we paid too much for:

    Some apps are just too expensive for startups and really aren’t worth even doing the free trial.

    My cellphone. Paid: $60 to $600/month. Should be: $60/month.

    A cellphone bill strikes fear in to a startup’s heart. You make a few trips out of the country and you are greeted with a gigantic roaming bill when you get back. You aren’t the bankers and the lawyers that the phone company is targetting with these crazy roaming rates but you still have to run your business and you need to be able to communicate while you are on the road. I wish I could have just paid a consistent amount that would have let me plan for cellphone expenses.

    Box.com. Paid $15/user/month (and tricked in to a 1-year contract). Should be: $10/user/month with no contract.
    Box does this thing where when you sign up for a paid plan they have you click a box that says “I agree to the terms of service”. When you go and look at that terms of service it commits you to a 1-year contract. It really is absurd. Other contract-based SaaS providers are much more transparent about contracts. Dropbox was a cheap alternative that we used even though we were paying for Box.

    Webex/Gotomeeting. Paid: didn’t. Should be: cheap.
    Even if you are a co-browsing startup you need screensharing occasionally believe it or not. We avoided using it mostly but when we did need it there were much better and cheaper options than Webex or Goto.

     

  • Mission Accomplished – StartupVisa Canada

    CC-BY-SA-20 Some rights reserved by Marion Doss
    AttributionShare Alike Some rights reserved by Marion Doss

    Remember back in 2011 when I was xenophobic and wasn’t supporting Startup Visa? To the credit fo the incredible StartupVisa Canada Initiativea team, which I was lucky enough to join and support, the Federal Government is launching a new class of immigration visa with the participation of CVCA and NACO. Check out Christine Dobby’s summary from the press conference (it’s where all my statistics and data are from). Go read Boris Wertz’s story about Summify founders and the impetus for Startup Visa Canada.

    “We believe startups to be the driving force behind job creation and prosperity,” says executive director Richard Rémillard. “We need to be pro-active in attracting foreign entrepreneurs.”

    The new visa is replacing the old “entrepreneur class” visa, which required the applicant/immigrant to hire one person for one year. In 2011, the federal government issued approximately 700 of the old entrepreneur class visa. The government is making 2,750 visas, issued to immigrants based on selection and funding by venture capital investors. Immigrants receive immediate permanent resident status. Looks like a pilot program with a 5 year lifespan, with the opportunity to make permanent depending on uptake.

    Thinking by Zach Aysan (zachaysan)) on 500px.com
    Thinking by Zach Aysan

    My issues back in 2011 and previously, were not with the intent of the program. But in the proposed implementation details. One of the biggest assets, in my not so humble opinion, is the population diversity, with 46% of Toronto’s pouplation being foreign born. It is the creative tension between differing viewpoints that makes Canada an amazing place. The implementation of startup visa makes Canada an even more attractive place to recruit foreign born scientists, engineers and now entrepreneurs. I love it!

  • The first rule of real estate

    Before you read this, go read Mark MacLeod’s post on Who not to take money from…. It’s not related to this post, but a great post for entrepreneurs to read when talking about investors.

    RT @Cmdr_Hadfield Chris Hadfield 19 Jan With a long tradition of hockey on the shore of Lake Ontario, introducing Toronto - Go Leafs Go! @MapleLeafs pic.twitter.com/iZdN2yZb

    If geography doesn’t matter, than why do plane tickets cost so much?

    “When it comes to raising funds, I just don’t think the geography matters that much. Good solid product that solves an actual pain can find it’s way to investors any where in the world thanks to the internet.” – Adeel vanthaliwala

    I read a lot of comments like Adeel’s. And I agree that geography might not be the most meaningful filter, it still impacts startups in raising capital. It is far easier to raise money from a broader range of sources today, than it was 10 years ago. Changes to Canadian Tax Act (Section 116) have helped open the border to outside capital. There has also been a rise of new Canadian funds that have all closed in the past 2-3 years including: OMERS Ventures, Relay Ventures, Rho Canada, BDC Venture Capital, Real Ventures, Version One Ventures, Golden Venture Partners, Tandem Expansion Fund , Georgian Partners, etc. I worry that comments don’t take into consideration the complexity and challenges of raising capital. The impact of geography on raising capital has been reduced, but geography does still affect startups raising money.

    Fugetaboutit!

    The best advice on geography is from Brad Feld in 2007:

    1. Don’t worry about it
    2. Be realistic about the available resources
    3. Find the local entrepreneurial ecosystem – now!
    4. Don’t try to get investors to do unnatural acts
    5. Don’t play the “we can be virtual” game

    From the point of the investor, geography probably doesn’t matter that much. Unless of course there is a limitation in the partnership agreement that limits the geography where the capital can be invested. There are other more practical concerns about having remote startups including legal and or taxation concerns (see Section 116). Or the ability for a startup to leverage personal/professional networks for hiring, business development, etc. And none of this describes the challenges of having to spend 6 hours flying each direction to attend a board meeting. But beyond that, proximity is not a requirement from the investor side. Good startups can be located anywhere.

    “Local brewers = geography matters. As macrobrew VCs are increasingly spending time in multiple geographies (separate from their HQs) there is real potential to differentiate along knowing that you can actually sit down and see your VC face to face. For some that’s important, but for some that’s a negative. Just as some people here in Boston prefer drinking Cambridge Brewing Company ale; others could care less it was brewed locally.” – David Beisel

    I like David Beisel’s   model of the VC industry starting to become more similar to the beer industry. There are larger funds, local funds, specialized funds, and individual partners. They all matter differently to entrepreneurs depending on the company, stage of development, location, etc. Understanding the available resources and your ability to access them are key.

    Traction trumps geography

    Non Linear Growth

    There is going to be the inevitable argument about companies raising money from foreign VCs. The great news is since the changes to the Tax Act and the fall of Section 116, we have a lot of examples:

    Not to belabour the point, it is possible to raise capital from foreign investors in Canada. But the level of traction demonstrated by most of these companies was very high. For example:

    “Since HootSuite’s Series A financing, we’ve grown from 200,000 users to almost 2.5 million! We’re proud of our progress and are looking forward to the future with more success on the roadmap.” – Andy Au, Hootsuite

    According to my calculation that’s a 431,690% CAGR of the registered users between when they announced their Series A and Series B financing. Go big or stay home. Traction and growth trump geography. Paying customers, a scaleable business. Being able to demonstrate that for every dollar that goes into the business you understand how many (more) dollars come out. You need to be able to demonstrate appropriate milestones to mitigate risk.

    Avoiding Unnatural Acts

    “Don’t try to get investors to do unnatural acts: Assuming you are looking for capital, focus your energy on two categories: (1) local investors – either angel or VCs and (2) VCs that are interested in the specific business you are creating. In category #2, “software” is not a specific business – you need to be a lot more granular than that. Your chance of #2 is enhanced by a relationship / investment with someone in category #1, so make sure you focus enough energy on that early on.” – Brad Feld

    The secret here is that social proof that VCs are doing deals north of the border is not enough on its own. You need to focus your efforts, and assuming that you’re doing everything you can to hit accretive milestones you still need or want to try to avoid doing unnatural things. A local investor is not required, but it can be a signalling risk about the team, market, product, or other, i.e., what am I missing if local investors are cold? (There are situations where you can imagine an entrepreneur choosing to avoid local investors, particularly if they have had a deal go sour in the past, but usually the entrepreneur discloses this very early).

    What to do about location?

    1. Fugetaboutit!
    2. Start nailing concrete milestones that demonstrate traction and mitigate the risk associated with your business.
    3. Get connected to your local community. Look for events like Founders & Funders, Elevator Tour or GrowTalks to have initiate low risk conversations with both local investors and entrepreneurs that have raised capital.
    4. Do your research! Use AngelList, Google, Bing, LinkedIn, portfolio pages, etc.  to find partners following and investing in companies in your very specific vertical.
    5. Figure out who locally is investing locally and figure out how to get a warm introduction and find 30 minutes to meet.
    6. Listen, ask questions, try to figure out what is missing, what is the biggest risk factor and how you might mitigate the risk.
    7. Rinse and repeat with non-local investors aka get your ass on a plane and keep hustlin’ (go re-read Mark Suster’s Never ask a Busy Person to Lunch).

  • The White North – It’s Great for Seed-Stage Startups

    CC-BY-20 Some rights reserved by meddygarnet
    Attribution Some rights reserved by meddygarnet

    Sit down with any Canadian entrepreneur and you’ll often hear similar grievances about the Canadian startup community. The consensus seems to be, “It’s getting significantly better, but we’re risk-averse, funding is hard to come by, and the US is a bigger market.” We are a a startup that decided to move from Silicon Valley (as part of the Y Combinator Summer 2012 cohort) to Toronto. We’ve seen a wider  range of startups and startup hubs than most. We’ve been able to compare and contrast the communities, and have a lot of faith in the Canadian startup scene as a whole. We want to share why.

    As Canadians, it’s easy to look South and feel overwhelmed. The United States is ten times bigger in terms of economy and population. It’s difficult to fault an ambitious entrepreneur for wanting to move South and capture a significant chunk of a significant market. Likewise, no maturing startup can avoid the US as a potential market…

    The question for us was: what are the pros and cons of being a seed-stage startup in Toronto, or Canada as a whole?

    Why Toronto? And Why Now?

    Seed-stage startups rejoice — the Toronto/Waterloo community is a great place for seed-stage startups. Before I begin listing the benefits, I do want to iterate that it’s all one big place [Ed.: Can’t disagree here, when you fly in to SFO or SJC, it’s still the Bay area]. At times, it seems unfortunate to me that Toronto and Waterloo are treated as two separate entities in which a startup would operate. Sure, driving down Highway 401 isn’t the most enjoyable experience, but your startup will face bigger challenges than congestion during rush hour.

    1. Talent Pools

    The universities spanning the Greater Toronto Area and surrounding cities boast over 200,000 undergraduate students, many of which are studying engineering, computer science, or other technical fields. The Universities of Waterloo and Toronto both boast high quality math, computer science, and engineering departments, many of which are regularly hounded by big and small companies for potential recruits.

    Hiring was a key factor for us when choosing our base of operations. Being able to pick from so many students, let alone professionals and developers working for large corporations, helped make this an easy choice. Better still, few startups actively approach this population — most of the keen, startup-oriented folks end up traveling to San Francisco to look for jobs. By bringing the opportunity to their doorsteps, we made the sometimes frightening decision of jumping into a startup significantly easier. Our recruits get all the joys of working for a Silicon Valley-funded startup without the hassle of immigration, relocation, and saying “goodbye” to towns they know and love.

    2. Excited Customers

    Few people realize that Toronto was the first city in North America to surpass 1 million Facebook users. Move over New York, and see you later, San Francisco! Not only are Canadians notoriously friendly (collecting feedback on your product will be easy!), they are also hungry and interested in innovative products. Others have argued that Canadian cities are good grounds for experimentation as well, citing the fact that we tend to focus on stable techological trends and avoid fads that might only survive in more stereotypically tech-crazy startup hubs.

    While I wouldn’t go so far as to cite this as a reason for basing your startup in Toronto, it means that you don’t risk finding a product-market fit by being based here. Combined with our own strong network and following here, it was a safe bet for us to settle down and start experimenting with an initial set of corporate customers or pilots.

    3. Low Cost of Operations

    Compare your average salary, apartment rental, and parking spot in Toronto to those of US startup hubs like Silicon Valley or New York, and you’ll see a noticeable difference in pricing. The Toronto/Waterloo area enjoys a significantly lower cost of living than many other hubs, which often means that your own expenditures will be significantly lower — if you’ve already raised angel or seed funding, this essentially boils down to a longer runway for your company.

    Pair the low cost of living with Canada’s many government-supported startup programs, and your cost of developing a product can be 40% of what it would cost in the US. Better still, basing your operations in Toronto/Waterloo mean you have a 90-minute flight to major American cities, which could easily become your next point of contact or expansion for your products. All the benefits of a large global city, and few of the costs!

    4. A Changing Startup Landscape

    Startup entrepreneurs are often goaded by their investors to ride waves of industrial changes and take advantage of major societal shifts. A quick look at AngelList valuations by city and startup hub shows startups in Toronto/Waterloo are holding their own, on a global scale. Our own seed-stage round had investors from both sides of the border, and many regularly told us they see Canada as a great opportunity to expand their market reach outside Silicon Valley (or the US as a whole).

    As more Canadian companies have fantastic and successful exists — think Radian6, Eloqua, or BufferBox — we’ll see more investor interest in our region. If you’re an entrepeneur keen on surfing an investor wave, getting ready for what interest might come to Toronto is a great place to start.

    Planning Ahead

    As with any discussion on the benefits of a major and complex decision such as base of operations, one should not forget what they do give up by being based here. It’s important to plan ahead, and any startup choosing a base of operations in Toronto, particularly when planning to expand to the US, should plan around this.

    1. Don’t forget your friends down South

    It’s easy to limit yourself to your geography. Remember that expanding into a city or market in the US means you first need to develop a network there. Are you planning to raise a VC round in three months? Planning to expand from Toronto to the New York City market in six? Start building those networks now. It is amazing (or gloriously terrifying!) how important serendipity is to the success of some startups. Ensure you have a network in these cities, even if the connections are only digital.

    In our case, we keep in touch by attending conferences on a regular basis, maintaining e-mail contact with the companies and VCs we admire, and constantly ask ourselves if it’s time for an in-person visit.

    2. Use Global Benchmarks

    One of the most important things a startup can do is to do is benchmark itself against its industry, or other startups. Know what valuations your competitors are getting, and what sorts of employees they are hiring. Most importantly, ensure you’re using global benchmarks. While being the best “Canadian” startup is nice, remember that to truly achieve global scale, you’re competing against the best startups in the US, China, Israel, and everywhere else. It’s easy to become complacent by forgetting about these massive centers of innovation.

    Indeed, one of the biggest benefits of our being in the Y Combinator program has been seeing how our batchmates work, move quickly, and succeed at nearly any cost. Seeing this hunger and drive has left us with no excuse for avoiding success. We use our network of VCs, friends around the world, and startups we admire as a way to regularly benchmark ourselves and ensure we’re progressing at a decent pace. Case in point: the Big Data industry is growing over 40% every year — and we aim to outperform it.

    3. Pay It Forward

    And please, remember to pay it forward. If you choose to grow, develop, and succeed in these fine, frigid cities of ours, ensure you give back to the communities. As Brad Feld so eloquently wrote in “Startup Communities”, the only way to make a startup hub successful and grow is through having entrepreneurs leading the community, to have them involved for the long run, and to be inclusive.

    Sometimes that’s easier said than done, as evidenced by Zak Homuth’s view on Toronto startups in the Startup Genome: “We have all been somewhere else, worked somewhere else, and got money somewhere else.” Success breeds success, and it is important that for those of us who grow and succeed through the benefits of our community also give back to it.

    To us, building a successful community is as rewarding as building a successful startup. We aim to ensure that every single person passing through or working with Canopy Labs will leave with better career prospects, more ambition, and the necessary training to succeed in whatever they do. Not only does this make it easier to hire great, talented individuals, it also ensures we’re constantly developing as a team.

    Conclusion

    While the Toronto startup community is getting more attention in recent times, there is still a great deal of work to be done. Toronto is a fantastic place for startups and Canopy Labs is a case in point. We’re a six person startup with a significant runway and exciting customers, and all of this is enabled by our being in Toronto. At the same time, we’ve got a global mindset: we benchmark ourselves against all players in our industry, and are constantly building and growing our networks in new cities and countries.

    We’re proudly Canadian, comfortably Toronto-based, and our office is on Richmond / Spadina in the heart of Toronto’s startup hub. We’re excited and happy to be here, and feel we’re growing faster here than we could hope to grow anywhere else. Drop by any time!

  • GROWtalks in Toronto Feb 21

    GROWtalks

    Debbie Landa, Clare Ryan and the Dealmaker Media team are part of the reason that I love GROWConf and GROWtalks. They put on amazing events by putting entrepreneurs first, foremost, and front and centre. They are bringing GROWtalks to Toronto (Feb 21) and Montreal (Feb 19). And we have a discount code at the end of the post.

    “A hands-on playbook for creating startup success”

    I like learning by example. It’s a mixture of seeing what worked for someone else, and then trying the appropriate tactics customized for my situation. The challenge is trying to do with more efficiently than 9 or 10 coffee meetings. GROWtalks brings together the best entrepreneurs, who are killing it, and has them present what is working for them. THis is what GROWtalks is, an event for entrepreneurs with entrepreneurs sharing their strategy, tactics, metrics and successes, even the failures. (Full disclosure: I am MCing the GROWtalks event, however, I am not being compensated for this, but I do get the opportunity to participate and learn).

    Check out photos from the 2012 GROWtalks event in Vancouver:

    It’s rare we get this many awesome startup founders all talking about the hard part of their business. I know that all of these folks will be around throughout the day, they’ll be hanging out, answering questions. It’s going to be a fantastic day. Check out the line up:

    I might be biased. My employer is an investor in some of the presenters. My cofounder is one of the presenters. But I’m honestly stoked about the speakers. I’m really looking forward to hearing Beltzner, Rutter, Fitton and Morrill. The mix of product, early customer acquisition and understanding lifetime value are converations I have with almost every founder. I’m very curious to hear the opinons, experiences and thoughts of this group.

    Part of my MCing was to request StartupNorth logo tattoos for all the speakers (we’ll see if that happens), and a discount code. Register before Februrary 1, 2013 and get 10% off (use promotional code: startupnorth). It reduces the ticket price from $195 to $175.50.

    GROWtalks Toronto

    February 21, 2013, 10am-4pm

    Size: 200-300 people
    Speakers: 9 Industry leaders
    Time: 10am-4pm
    Website: www.growtalks.com
    Toronto: http://www.growtalks.com/events/toronto/

    GROWtalks is a one day conference focused on how to create simple, actionable metrics, and use them to make better product and marketing decisions for startup success. Industry experts will share actionable advice to startup teams on how to improve design, product and customer development, acquisition, retention, and more.

    Topics Covered:

    • Customer Development
    • UX/UI Design
    • Growth Hacking
    • Customer Retention
    • Fundraising
    • Customer Engagement
    • Product Development

  • Fundraising, Valuation and Accretive Milestones

    CC-BY-ND Some rights reserved by HappyTramp87
    AttributionNo Derivative Works Some rights reserved by HappyTramp87

    I keep having a similar conversation with early stage entrepreneurs about fundraising and valuation. “Do you think a $1.5MM valuation is good?” “How much should I be raising?’ Well, it depends.

    I’m finding more and more, the conversation about valuation is one that resembles not being able to see the forest because of the trees. Early stage entrepreneurs tend to fixate on valuation and assume product is the biggest risk at the seed stage thus defining product launch metrics as key metrics. Often, valuation and risk mitigation are tied together. And the milestones or traction metrics required to mitigate risk can help establish valuation. 

    Valuation

    Fortunately, valuation is a topic that others have covered. Nivi and Naval, on VentureHacks, have provided incredible insight into early stage fundraising over the past 5 or 6 years. The advice is often summarized, “as much as possible is especially wise for founders who aren’t experienced at developing and executing operating plans”. The translation means that founders see rounds of seed stage companies raising $4.2MM at what must be a huge valuation.

     “‘As much as possible while keeping your dilution under 20%, preferably under 15%, and, even better, under 10%.’ ” – Nivi

    You can make some basic assumptions about the valuation. Most seed stage companies should be looking keep dilution in the 15-20% range. The specifics will be determined in fundraising but you can start to do some back of the napkin estimates:

    You start to see a range for how much a company will raise at what valuation. The numbers aren’t set in stone but they provide a framework for estimating the amount valuation. As Nivi points out the difference between a seed round and “a Series A which might have 30%-55% dilution. (20%-40% of the dilution goes to investors and 10%-15% goes to the option pool)”. The more you raise early, the more dilution you can expect. The goal becomes managing the different risks associated with startup. You also see why raising debt early, which allows companies and entrepreneurs to delay valuation until certain accretive milestones, is attractive.

    “The worst thing a seed-stage company can do is raise too little money and only reach part way to a milestone.” – Chris Dixon

    So given the back of the napkin dilution terms, what are the milestones that you will need to hit in order to raise the next round.

    Raising the next round

    So you’ve raised a round, how much should you raise at the next round?

    I like the rule of thumb that Chris Dixon uses. “I would say a successful Series A is one where good VCs invest at a pre-money that is at least twice the post-money of the seed round.” The expectation is that companies are roughly going to double their valuation at each raise. This isn’t to say that a 2x increase in value is your target, it’s the minimum, the floor. The art of raising a round it to raise enough money to get to a significant milestone, and not too much money taking too much dilution too soon. So how do you define the milestones. The milestones

    “partly determined by market conditions and partly by the nature of your startup. Knowing market conditions means knowing which VCs are currently aggressively investing, at what valuations, in what sectors, and how various milestones are being perceived.” – Chris Dixon

    So part of the market conditions, i.e., raising money in Canada is different than raising money than in Silicon Valley, New York , Tel Aviv. You are measured against your peers, and this might be defined by geography of the company or the VC. Being connected with other companies, advisors and investors can help provide insight in to the fundraising environment. The second part is determined by the nature of your startup, but generally expressed as measures of traction. We’ve talked a lot about getting traction and what traction looks like to a VC.

    “The biggest mistake founders make is thinking that building a product by itself will be perceived as an accretive milestone. Building a product is only accretive in cases where there is significant technical risk – e.g. you are building a new search engine or semiconductor.” Chris Dixon

    Entrepreneurs tend to focus on the product early. This is usually because the product is something that entrepreneurs can directly affect. But the product risk, is may not be the  biggest risk that entrepreneurs need to mitigate early. The trick is figuring out which risk you need to eliminate to satisfy potential investors. And you can try to figure this out yourself, but I like to see entrepreneurs engage investors and other founders to get their opinion. The discussion usually is a combination of what other startups are seeing in the market place as milestones from investors (yay, market place data). Then you can work backwards the necessary resources and burn rate to reach those milestones.

    Thoughts?

    Additional Reading

  • Beyond Toronto: State of Halton Tech Scene

    Editor’s Note: This is a guest post from Rick Stomphorst who is a co-founder of Silicon Halton . Halton Region is in the West end, it includes Burlington, Oakville, and Milton.Population is >500,000 people. I would have called it a bedroom community, but there is a strong set of tech companies like Ivara and Awareness Inc. We focus on Toronto, Waterloo, Montreal, Vancouver and Halifax but there are strong communities around Canada that have emerging tech startup communities.

    Five years ago the state of the tech community in Halton was “virtually non-existent”. Polite conversations about tech startups would have met by shoulder shrugs, glossy eyes and guessimates of the number of startups in the low single digits (if not zero itself).

    Asking those same questions today, and you’ll get a wildly different answer.

    Number of Tech Companies in Halton RegionWe have been committed to connecting high-tech entrepreneurs, companies and enthusiast. Two major vehicles for connecting the community are Silicon Halton (full disclosure: I am a cofounder of Silicon Halton) and HalTech. Silicon Halton was launched in 2009 by 2 people with 2 events. In 2012, it has grown to almost 800 members and 80 events. Silicon Halton is a grassroots hi-tech community of people who make a living, make meaning, and make things happen in technology in Halton Region. HalTech is an Ontario Network of Excellence Regional Innovation Centre providing education, advisory services and industry-academia collaboration programs and hosted an additional 35 events for entrepreneurs in 2012.

    The primary focus of the events been education, building local connections and increasing exposure to local companies. At the Silicon Halton’s monthly meetups, one activity is to “get to know your members” where two entrepreneurs introduce their company. These two intros per month have translated into 24 tech companies connections per year enabling collaboration, shared resources, recruiting and other local opportunities. Additional events have been added to the calendar including DemoNights and PitchNight. Feedback from participants it that the ability to connect with other entrepreneurs and professionals has helped accelerate local companies and local ecosystem. Other Halton region events include contests like Pythons Pit.

    The early stage nature of the community has included a focus on shared resources and co-working. The goal being to help connect early stage companies to the broader ecosystem and reduce the risks often associated with commercial leases and real estate during the initial startup phases. The discussion around co-working spaces including 2 at concept stage and a member created app, SpaceSurfers, for finding and sharing workspaces.

    Halton has a strong educational resource with  “the Harvard of animation schools”[1], Sheridan College, in Oakville. Sheridan has a strong history of great applied research in digital media, health and advanced manufacturing. It’s a great local talent pool that is easy for entrepreneurs to access through events like BIZTECH Career Fair or through campus the job posting service. [Ed. – I’m intrigues by the Bachelor of Interaction Design and the Bachelor of Game Design in providing students with design oriented skills].

    Incomplete List of Halton Tech Companies & Startups

    Halton companies and entrepreneurs have easy access to the activities in Peel (RIC Centre) and Hamilton (Innovation Factory & Software Hamilton) regions.

    If you are in Halton Region consider joining Silicon Halton and get connected to other locals interested in high growth, high tech companies. Silicon Halton provides a platform for Halton tech companies and to enable a stronger ICT and Digital Media cluster in Halton Region.

    Footnotes

    1. “As Sheridan’s animation department continued to grow, it produced hundreds of animators into Canadian and international studios, at one point in 1996 being called “the Harvard of animation schools” on “a worldwide basis” by animator Michael Hirsh.” on Wikipedia

  • Hiring your first sales rep: 10 tips and common mistakes

    CC-BY-NC-ND-20 Some rights reserved by redwolfb14
    AttributionNoncommercialNo Derivative Works Some rights reserved by redwolfb14

    How many times have you been at an event and met someone who gave you the pitch “I have this great idea, I just need someone to build it for me” or some variation of that?

    This has become such a cliche in startup circles that it’s almost cringe-worthy. If all someone has is an idea then they’ve basically got nothing. As the old Edison quote goes “genius is one percent inspiration and ninety-nine percent perspiration.”

    That being said, the other side of this pitch doesn’t get a ton of attention even though the problem is just as common.

    There are lots of startups that build pretty solid products but never end up getting traction because they don’t figure out the sales and marketing side of things.

    You don’t see a lot of technical founders searching for business development help, mostly because many engineers don’t even know they have a problem. They spend a year in their basement building the most amazing solution to a problem nobody has. When they do finally surface they discover that 6 of the 10 assumptions they made were wrong, and usually give up soon thereafter.

    I’m an engineer, and I’ve seen this problem come up first hand. One of the most basic ways to avoid it is to start focusing early on customer validation. What that means in the most basic terms is to not write a single line of code before you talk to a few dozen customers who tell you unequivocally that they will buy the thing you’re thinking of building.

    As you talk to customers tweak the pitch until you have 9 out of 10 potential customers telling you that they will pay money for what you’re planning to build (hint: 8 of them are lying.) This is your first step towards developing a sales process.

    You (or your co-founder) need to learn to sell. Frankly, it’s not that hard and it’s mostly about persistence when it comes to getting a few pilot customers – they’re going to be early adopters, they won’t expect a polished sales pitch. It’s essential that this basic sales and marketing expertise lie within the core team. Which brings me to the first tip about hiring your first sales reps:

    1. Learn how to sell and develop a basic process.

    The most common mistake technical startup founders seem to make is to try and cop out on the sales part of the business. They feel they don’t know how to sell and are worried that people won’t take them seriously because they don’t have grey hair. So they hire an experienced sales guy (a friend of a friend,) give him ownership of all sales and just sit back and wait for the deals to flow in. It seems like such a plausible idea (it’s exactly what I did with Top Hat Monocle) and yet I’ve never once seen it work out. You need to learn to sell. It’s actually a skill very similar to raising money, so it’s something you’ll need to do anyway. Learn to sell just well enough to close the first few customers and develop a basic process that you can plug someone into.

    2. Find reps who have experience with the same deal size and sales cycle as your product.

    If your product costs $200 per month and has a 1-2 week sales cycle, don’t hire some with enterprise experience who’s used to closing three $500k deals a year, it won’t work out. A match on deal size and sales cycle is probably the best predictor of whether the rep will be a good fit.

    3. Experience within your industry is useful but not essential if your product isn’t too complex.

    Focus on item 2 above. Unless you’re selling a very complex product with a long (6 month+) sales cycle, don’t worry about industry experience.

    4. If it’s a technical sale, tech savvy matters.

    Don’t hire someone who barely knows how to use a computer to sell a software product. Frankly in general you should only hire people with basic technical literacy because otherwise you will be explaining to them how to use the CRM and your webinar software 5 times a day.

    5. Sales reps are great bullshitters – ignore their words.

    Only look at verifiable track record to assess the rep. This means getting a printed record of their quota attainment at every sales job they’ve had, then verifying that record with their supervisor. Anyone who hasn’t consistently blown away their quota at every job is a risk.

    6. Place minimal value on prior contacts and rolodex.

    The rolodex runs out after about two weeks. After that it’s all about prospecting and hard work. Don’t ever overlook a lack of experience or cultural fit because you feel the rep has a rolodex of clients they claim they’ll bring with them (they’re probably exaggerating anyway, see #5 above.)

    7. With personality, focus on work ethic and motivation.

    Sales is repetitive hard work. When hiring reps look for work ethic and drive. Look for people who need to earn a certain amount of money to maintain their lifestyle due to financial obligations – a big mortgage is the best motivator to hit quota.

    8. Over time start to specialize your sales team.

    Lead generation and research. Appointment setting. Follow ups and closing. Each is a separate role. You should segment by task and eventually by customer size or market. It may not even take that long for it to make sense to do this – we started specializing at Top Hat Monocle when we had just 3 reps.

    9. Sales reps will maximize their paycheque above all else.

    At least the good ones will. You need to ensure your compensation plan incentivizes sales and has relatively short term rewards. This typically means at least 50% of overall earnings should be from commission and there should be a monthly performance based commission payout. Don’t try to hire people on 100% commission, because you will likely only attract flakes who waste your time and never deliver.

    10. Metric everything. Obsessively.

    How many calls per day does each rep make. How many emails. What is the conversion rate on email responses. How many meetings does each rep go on per day. How many inbound leads are being generated. What is the time from inbound lead to follow-up. How many foliow-ups does each rep do per day. What is the mean time between follow ups. Everything. Metric everything.

  • Less boardrooms, more dinner tables.

    People have become really good at pitching. The art has turned in to a bit of a science and if you do ever find yourself in front of a room of people it is par for the course for you to “nail it”. The pitch, it seems, is dead media.

    It’s time to stop obsessing with your pitch and start building relationships.

    If you are going to raise financing for your new product then you need to learn what it means to build relationships.

    tumblr_ldfuxecoUp1qbbu2w

    We started Founders and Funders on the basis that you would never want to accept investment from someone you couldn’t eat a meal with. What better way to find out than to eat a meal with them? It works incredibly well.

    You need to find ways to end up at more dinner tables and in less boardrooms.

    Also: Eat with your mouth closed ya filthy animal.

    Funny story. When I was raising an angel round for my latest company I met a fairly prominent investor for lunch. I ordered a $15 sandwich combo. He got two doubles of Grey Goose, the Rib Eye, and a glass of wine. Then dessert! The shithead then stuck me with the bill! I kid you not. He then got in his car and drove off, I contemplated calling in the DUI. The hell if I was going to let him invest in my company. It was worth the $120 it took to figure it out.

    I tell every entrepreneur that story, and I name names!

    Then there was the time I met with Steve Anderson at a crowded bar. You should consider an invitation to meet an investor at a bar or restaurant a golden ticket. Steve came in, he was starving. I was a bit nervous so I didn’t eat much but we shared some appetizers. He was cool as shit and I knew I wanted him in my round before that meeting was over. Having a coffee and being forced to sit in a corner of a busy bar helps you get almost every “is this guy/girl legit? can I talk to him/her without needing to watch myself?” sort of stuff out of the way.

    I met another investor at a Yogurt shop (he gave a fake name and told them my name was Mike). Another one in a Tiki bar and another in a co-working space.

    Get out of the boardroom. Loosen up. Your pitch sucks but your product is cool, and you are even cooler.