StartupNorth

  • Round13 Capital puts founders first

    Scott Pelton, Bruce Croxon and John Eckert - Round13 Capital

    Round 13 CapitalWhat’s interesting about the Round13 Capital announcement today isn’t the size of the fund – they are targeting $100MM. It isn’t the people who are involved – they are amazing. It isn’t the LPs – they are different. The team, Bruce Croxon, John Eckert and Scott Pelton, are bringing together a group of entrepreneurs to serve as mentors. This is not uncommon in the US with a number of funds like SoftTech VC, Felicis Ventures, Founders Fund and similar to Founder Collective (if you are interested read the Kauffman Foundation’s Do Entrepreneurs Make Good VCs? [PDF]).

    “Venture capital firms with a greater fraction of entrepreneur VCs have better firm performance. The positive relation between entrepreneur VCs and performance is stronger for venture capital firms specializing in high-tech industries and in early-stage investment.”
    — Do Entrepreneurs Make Good VCs – Entrepreneurial Finance and Innovation Conference – The Kauffman Foundation

    The Round13 Capital team has done an amazing job of bring together founders with exits as both LPs in the fund, and more importantly as mentors for their portfolio companies. This is a critical differentiator for Canadian entrepreneurs. Hopefully the Round13 fund will close and they can start funding Canadian entrepreneurs soon.

    Round13 Investors/Founders

    This is great new for Canadian entrepreneurs!

  • Extreme Demo Day

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    Attribution Some rights reserved by szeke

    Extreme Startups has announced the Demo Day for the first cohort of companies. We’ve written about Extreme Startups in the past, we’ve covered some of the cohort including Shoplocket, and we think a number of cohort qualifies as Hot Sh!t (Jeff Lawrence (LinkedIn, @datajeff) of Granify; Michael Curry (LinkedIn, @mikecurry) of Verelo and Andrew Louis (LinkedIn, @hyfen) of ShopLocket).

    Extreme Startups

    Companies presenting at Demo Day are:

    Get a ticket or an invite

    There are no shortage of events for startups in Toronto, ranging from the originator but currently offline DemoCamp to the reinvigorated SproutUpTO. But DemoDay is shaping up to be an exciting event, with a full house, I heard that there were over 400 confirmed attendees with a large number coming in from Montreal, New York, Boston and the Bay area.

    The demos are happening on June 19, 2012 from 1-4pm. There is a post demo social happening starting at 8pm. StartupNorth is proud to be supporting both the demo event and the evening social.

    [gravityform id=”8″ name=”Extreme Startups Demo Day” title=”false”]

  • Crazy train

    On the trip home from a conference last year, it struck me how lonely it was. Yes I talked with people on the train. I had wifi and a phone but I didn’t have anyone who had shared the awesome conference experience I’d just been through, I wanted to keep it going. Returning to my city, I wanted to keep it the momentum rolling there as well.

    I happened to have attended an amazing conference named BitNorth. In the case of the crap conferences, the travel back and forth is even more torturous. BitNorth is unique in that it really attempts to leverage what are typically considered the fringe elements of conferences.

    All this left me wondering if we could make crappy conferences better and great conferences awesome by explicitly building up the fringes. We, at ThreeFortyNine, are taking our first shot at it this July. We’re cheating by starting with an amazing conference with The International Startup Festival in Montreal. We’re getting ourselves our own first class car on a Via train to travel to the conference and back from Toronto, Guelph, or Kitchener-Waterloo. We’re filling the car with founders, funders and startup junkies. For us this experience starts when we hop on the train and it doesn’t end when the conference ends. It won’t even end when we get off the train since you’ll be returning to your city with a group of friends who’ve shared this experience with you. We’ll conspire, plan, meet and keep the momentum going.

    In the case of the best roadtrips of my youth, I can hardly recall what our destination was. It’s the getting there I remember. It’s the getting there that was the starting point of something bigger.

    Join us this July as we bring the Ontario startup scene to Montreal and give them a peek at who we are and what we’re building. Clearly we have limited seats on our train car so when we sell out, we’re sold out for realz.

  • Go big and stay home

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    Wattpad announced today a $17.3MM raise from Khosla Ventures, Golden Venture Partners, Union Square Ventures and Jerry Yang. This is huge.

    “It has been recognized as highly significant due to having two top-tier US funds investing at this level in a Canadian-based consumer internet company.”

    We are seeing Canadian entrepreneurs build companies and demonstrate global traction. The changes to foreign investment related to Section 116 changes in the Tax Act, have allowed Canadian companies to go big and stay home.  The changes to Section 116, coupled with the desire of Canadian entrepreneurs to go big and stay home. Evidenced by Wattpad’s big raise, Wave Accounting’s $12MM series B from Social+Capital, Hootsuite’s $20MM round from OMERS (sure they’re not foreign capital but its a big round), Shopify’s $22MM ($7M series A + $15M series B from Bessemer), Beyond The Rack’s $36MM raise, Fixmo’s $23.4MM Series C from KPCB, Achievers’ $24.5MM Series C from Sequoia, and others. There are startups and there is capital. It’s possible to build a growth company in Canada and raise foreign capital. The game has changed for Canadian VCs, geography limitations can help these funds identify early but it potentially will relegate many to second tier status if they can not enable their startups beyond their geographies.

    The great thing in talking with many of these entrepreneurs is that they want to build successful companies in Canada. Allen Lau, CEO of Wattpad, mentioned that his desire was to grow a large successful company in Toronto. He is not looking to move the company. The same is true of my conversations with Kirk Simpson at Wave Accounting, Tobi at Shopify, Mike at Freshbooks, etc. There are a lot of reasons to want to be way from the tensions and pulls the exist in the Bay Area. Canadian startups have access to great talent. While there is some pull between the different startups, many of these companies aren’t competing with each other for employees or mindshare. Just check out Shopify’s recruiting video and tell me why you wouldn’t choose to work for Harley and Tobi instead of a financial institution or a government organization.

    It’s a great time to be an entrepreneur in Canada. It’s a great time to work for a startup. You should check out the opportunities on the StartupNorth job board.

  • Meaningful metrics for incubators and accelerators

    Editor’s Note: This is cross posted from WhoYouCallingAJesse.com by Jesse Rodgers, who is a cofounder of TribeHR. He has been a key member of the Waterloo startup community hosting StartupCampWaterloo and other events to bring together and engage local entrepreneurs. Follow him on Twitter @jrodgers or WhoYouCallingAJesse.com.

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    Attribution Some rights reserved by Nathan E Photography

    Incubators and accelerators are businesses just like the businesses they intend to help develop as they travel through the startup lifecycle. As with any business, there are indicators that they can measure to give them a better idea of how they are performing besides the big public relations buzz around a company being funded.

    You need to measure these numbers so that when a success happens you can hopefully gain some insights on how to help the other companies better. The problem is that even though the model of an incubator or accelerator is generally known, how to take 10 companies and have 10 successful growth companies come out the other side of the program is not.

    The issue of what metrics to use is an important but complicated problem to solve.

    Set the baseline at the application process (pre-program)

    There are far more applicants than slots offered in an incubator or accelerator program. However, it is at this point that a program is gathering it’s best intelligence. You need a baseline measurement at the start of the program that you can measure every team against. What you should be tracking:

    • Who applied to the program that you didn’taccept (this is your control sample)
      • Track their progress on Angellist, Crunchbase, and/or go back to their web site in 3, 6, 12 months.
      • Keep a ratio of who is still in business and what their status is.
    • Maintain, in a CRM system, information on the applicant founders and their team members.

    Measure the incubator/accelerator clients (in-program)

    At this point there are X number of startups with Y number of founders and maybe Z employees. What you want to measure are things that demonstrate they have improved (or not) and which are things you would expect to see improve as a result of the services provided by any incubator or accelerator:

    • Current customers and revenue per customer (for most that will be 0 at the start) that will work across revenue models: CAC, ARPU, churn rate.
    • Sales funnel – do they have leads? How many? Are they qualified leads? What are they worth?
    • Average user growth in the last month.
    • What mentors or advisors did they meet through the program? What role did they take with the company?

    Run these numbers at the start and at the end of the program. If you are a pure research focused incubator, ignore this section. You have a much longer time to see success – but few are truly research focused.

    Monitor the graduates: Alumni (post-program)

    This is a very important thing an incubator/accelerator can do — build and maintain its alumni connections. These folks not only help at every stage of running future programs but their success lifts the profile of the program, just like how alumni of prestigious business schools make the business schools prestigious.

    There should be reporting milestones at a set interval (probably financial quarter based) where you gain the following insights on the company:

    • Customer growth percentage: CAC, ARPU, and churn rate all expressed as percentage growth.
    • Sales funnel growth expressed as a percentage.
    • Average user growth in the last month.
    • What mentors or advisors are currently active with the company?

    Ideally you should have a position that is equivalent to a close advisor or board observer with the company once it graduates from the program.

    Defining success

    If an incubator or accelerator program is successful, the graphs should be heading up and to the right at a much faster pace than they would have been had startups not entered the program.

    The only baseline data I know of is from the Startup Genome. In their report they explain the stages and the average length of time it takes a company to go through them. For an incubator or accelerator to demonstrate that they work, I would expect a successful company to move through the stages faster than the average. I would also expect them to fail faster than the average.

    Tracking metrics puts a lot more overhead on an accelerator. It is likely more than they budgeted for to start. However, if you want to know if the program is successful it is worth the investment of an admin salary to track and crunch data. This is just a baseline, track more and figure out what the indicators of success are for you.

  • Entrepreneurs can achieve anything

    Editor’s Note: This is a guest post by Chris Arsenault, Managing Partner, iNovia Capital.

    3 hours - trioomph - driving your successWhat would happen if you decided to take action by putting 100% of your focus on achieving your goals, or better yet, start with a specific goal? Is that a scary thought? Well if you haven’t seen the video below of my good friend and great entrepreneur – Francois-Charles Sirois, then you are missing out on the number one most important success factor for any entrepreneur – the willingness to take action.

    I think there are many critical factors that make an entrepreneur become successful: knowledge, creativity, self-confidence, attention to detail, experience, intelligence, patience, perseverance, team building, risk management, customer centricity, connections, timing and luck. But the number one and most important factor is by far, the Willingness to take action. When combining willingness to take action with focus, only then, can one succeed, because every other factor doesn’t have any importance unless action is taken.

    Yes, I’m an optimist. I don’t disregard what isn’t working, how hard it is, how little chance I have in succeeding each time I take on the creation of a new Fund, the backing of a new startup or the planning of a new ambitious project. Instead I focus my attention at looking at the bright side of every situation and I then pull all my energy to make it happen. Positive energy attracts positive energy, and it is also right the other way around. It’s not easy, mostly because too many people tend to, purposely or not, pull you down, discourage you by highlighting every possible reason why it “just won’t work”. It is no different when setting out to build a new VC fund, a local business or an international tech company, it requires the same set of criteria for an entrepreneur to succeed, and when you willingly decide to take action, there actually is nothing stopping you. So when I can share concrete examples of what it means to set your mind to something, I share it with my friends and hope they will share it with there friends, helping getting the message out. So this is the most recent Willingness to take action example I want to share with you:

    In early January, I met Francois-Charles for dinner and he tells me that he wants to learn how to play the guitar. No, he rectified, his dream is not to learn how to play the guitar, it’s actually to learn and play the best guitar solo in history! “Why just learn guitar, when you can do so much more, and I want to do this before summer” he said.

    So the below video, is of Francois-Charles, on his mission tagged: 3 hours a day to succeed. He is playing the guitar solo: Lynyrd Skynyrd’s “Free Bird” with extreme perfection. Driven, focused and enjoying his moment like any successful entrepreneur should be when they take action and achieve their goals.

    I hope some of you will be, not impressed but rather, motivated to go out a take action with the same amount of focus and determination. Or at the least, share this video link with a friend.

    3 hours a day to succeed

    François-Charles Sirois
    President and Chief Executive Officer, Telesystem
    Founder, TRIOOMPH Foundation
    Dream:
    For many years, he wanted to learn how to play a great guitar solo: Lynyrd Skynyrd’s “Free Bird”
    Coach:
    When you’re working toward your dream, it helps to have an experienced mentor to guide you along the way. His “guitar hero” was François Lamoureux.
    The three-hour-a-day rule
    It takes time and hard work to make a dream come true. In his case, he practiced three hours a day, three days a week; two hours a day, two days a week; and one hour a day, two days a week. A minimum of one hour every day is essential to making steady progress.
    Official video: April 27, 2012
    http://www.trioomph.com/0-3h-per-day.html3 hours a day to succeed

    3 heures par jour vers le succès

    François-Charles Sirois
    Président et chef de la direction, Telesystem
    Fondateur, Fondation TRIOOMPH
    Rêve:
    Depuis plusieurs années , il souhaite jouer un des meilleurs solos de guitare ; « Free Bird » de Lynyrd Skynyrd.
    Coach:
    Pour réaliser un rêve, on doit trouver quelqu’un qui s’y connaît pour nous aider. Dans son cas, il a trouvé un super coach; François Lamoureux qui a accepté le défi.
    La règle du 3 heures par jour:
    Pour réaliser un rêve, il faut investir du temps. Pour le sien, il a pratiqué 3 heures par jour, 3 jours par semaine; 2 heures par jour, 2 fois par semaine et 1 heure par jour, 2 fois par semaine. Un minimum d’une heure par jour est essentiel pour s’améliorer et continuer à progresser.
    Vidéo officielle: 27 avril 2012
    http://www.trioomph.com/0-3h-par-jour.html

  • Hot Sh!t List 2012

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    We have been tracking startups and people for a while. In 2011 was the first Hot Sh!t List, but it won’t be the last. There are a number of amazing individuals in the ecosystem like Mark MacLeod (LinkedIn, @startupcfo), Boris Wertz (LinkedIn, @bwertz), Dan Morel (LinkedIn, @dpmorel), Debbie Landa (LinkedIn, @deblanda), Chris Arsenault (LinkedIn, @chrisarsenault), Dan Martell (LinkedIn, @danmartell), Jesse Rodgers (LinkedIn, @jrodgers) and others. Over the past 7 years the community has grown, and connected, and continues to help each other.

    But this list is different.

    It’s not about the people who have raised the most money, or who have the biggest social graphs. It’s about who we expect to talk about over the next 12 months. Be it the ideas, the companies, the impact, etc. My goal was to find a mix of the unsung heroes, the founders, the developers, the doers, the troublemakers and the faces of different companies across Canada that we think are amazing/interesting. What do I mean by “interesting”? Well it depends. But these people are doing the stuff we’ll be talking about over the next 12 months.

    The list is no particular order. But there is no denying it, these folks are the:

    StartupNorth Hot Sh!t 2012 BadgeHot Sh!t List 2012

     

  • Canadian VCs are being cut loose, and that’s a good thing

    Mark MacLeod just wrote a post about Canadian VC that cuts to the chase

    If there are any clouds on the horizon, they relate to the disappearance of the US / Canadian border when it comes to VC. When I first entered the startup World, you had no choice but to raise seed and series A in Canada. Only then could you tap the US funding markets. That’s no longer the case.

    [ . . . ]

    There is a perception (rightly or wrongly) that US investors are better than Canadian ones. And that given the choice, founders would raise in the US. Whether this is true or not is not the point. It’s the perception and with the borders coming down it represents a real risk to Canadian investors.

    Mark did it in the nicest possible way, so a lot of people may not have noticed that he just condemned the entire Canadian VC model. It was something I didn’t even have the guts to do lately, so I was surprised to see Mark call the spade a Spade and get on with the conversation.

    The border is gone and the game has changed. Mark argues that Canadian VCs need to pay up more, build their brands and build their networks. That’s a great start.

    Canadian entrepreneurs have been told for years to step up and build global companies. It was hard and confusing to hear at first, but I think we’ve managed to do it. Whether it is Tobi in Ottawa, Kirk in Toronto, Ryan in Vancouver, Oleg in Toronto, Mike in Toronto, Kenshi Wilkins and Eric in Vancouver, Yona in Montreal, Temo in Montreal etc etc etc [I’ve missed so many here — more to come on David’s Hot Shit List] — I would argue that Canada is producing more world-class entrepreneurs more quickly than ever before.

    We’ve spent the last 10 years being told we weren’t bold enough and need to think bigger. The argument has shifted and our startups now know what it means to be world class and they are doing it.

    It’s time for the Canadian VCs to step up and do the same.

    It doesn’t take nearly as much to get a US based VC to take a look at a Canadian deal anymore. If they have never done a deal in Canada before they usually have a friend who is just a call away who has and it can be demystified pretty quickly. The legal headaches are gone as well.

    If you are a VC in Canada, focused on the Canadian market, then you have far more competition for deals now than you did even a few years ago and the job is more thankless than it has ever been.

    So here’s the challenge for the the new players in Canada. Rho, Celtic, OMERS, iNovia, Relay, Golden, Klass, Wertz, Round13, etc…

    Entrepreneurs are going to start telling a story about under-paying, small thinking and isolated VCs. As US VCs roll off the redeyes in to Vancouver, Edmonton, Toronto, Montreal, Halifax and elsewhere it should be you who is bringing them to town to see great deals which are priced right and which are built to succeed from right here in Canada.

    The challenge is that you, like the entrepreneurs you fund, now have to be world class. That probably means being on a plane more often and pulling the trigger on deals within days, not months.

    Nobody should start a VC fund in Canada today unless they want to work as hard or harder than any startup founder they will fund.  It is no longer a job for ex-bankers and management consulting dropouts. The job is hard, mostly thankless, and more competitive than ever.

    That’s why I love this shakeout we have undergone and the one that is continuing today. VC in Canada had to go through the wringer so that we could end up with a handful of the best and most capable operators who can help springboard Canada further on to the world stage. We aren’t going to do it through myopic provincial funds, big corporate funds or economic development agencies.

    It’s going to happen through hungry hustler GPs who have something to prove and only a little time to do it in.

    Canadian VCs need to be startups themselves, because in the end only Startups can save venture capital in Canada.

  • Find a cofounder

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    When Jevon and Jonas and I first met back in 2006 it was because we shared an interest in early stage, emerging technology companies. We were excited to have found other people in Toronto that were interested in the same things. Startups. Technology. Emerging business models. Funding. It was great. It was early days, it was easy to connect with others to figure out who was interested. And to move things forward. We wrote about the stuff we found interesting, hosted events that we wanted to attend (anyone remember StartupEmpire), and have tried to be tireless promoters of high potential growth technology startups in Canada. We’ve tried to connect engineers and designers. But as the community has grown we’ve done a very good job outside of repeated participation at events in connecting potential cofounders.

    How do you meet a cofounder?

    This is where Founder Dating comes in.

    FounderDating brings together super talented entrepreneurs with different backgrounds and skill sets to start innovative new companies. All too often you know people with similar backgrounds and skills sets to your own.  We help you find co-founders with complimentary skill sets.

    The thing that Founder Dating brings that are crucial:

    • High Quality – everyone is screened for quality and readiness. Applications and members’ identities are confidential (many have jobs still) but a few of the folks who are part of the network are founders or early employees from: Stackmob, Snapfish, Zynga, Gilt and Loggly, just to name a few.
    • Balanced – member base is 50% engineers/50% non-engineers
    As Paul Graham says, “Not having a cofounder is a real problem. A startup is too much for one person to bear.”  It’s true you want someone complimentary in skill sets, but you also want someone who is going to be able to weather the ups and downs with you.

    What Founder Dating is Not

    1. They are not “speed dating for cofounders” – they don’t do speed dating, never have, never will.
    2. You do NOT need an idea to apply.  Just need to be ready to start something or at least work on a meaningful side-project (20ish hrs/week).
    3. This is NOT only for first-time entrepreneurs – a huge % of our members are repeat entrepreneurs
    4. FounderDating is NOT a meetup/event – per the above, we’re an online network and as first introduction to your round and the community you’re invited to an initial event but the power is in the network you become a part of.

    We need to unlock Founder Dating for Toronto. Get on it!

  • Not all founders are created equal

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    I was reading an excerpt from Noah Wasserman’s The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup (Kauffman Foundation Series on Innovation and Entrepreneurship) about Founder Dilemmas: Equity Splits and it struck home. Equity splits and distribution are often the key issues related to power imbalances, perceived injustice and tension amongst cofounders.

    In Noam’s dataset, 73% of founding teams split equity within a month of founding, a striking number given the big uncertainties early in the life of any startup. The majority of those teams set the equity in stone by failing to allow for future adjustments to equity stakes if there are major changes within the team or the startup…

    Setting the early equity split in stone is one of the biggest mistakes founders can make. With their confidence in their startup and themselves, their passion for their work and their mission, and their desire not to harm the fragile dynamic within the nascent founding team, cofounders tend to plan for the best that can happen. They assume that their early, high levels of commitment will last long into the future, rather than waning as the challenges of founding begin to sap their passion for the idea and for each other. They assume that no adverse events will change the composition of the team.They also tend to take a very short-term view of the factors that should affect equity splits.

    Sometimes it just doesn’t work out, and a founder will choose to leave the company or have the choice made for them. The question is how do you create a set of agreements that is fair to all of the cofounders. Often we think that standard employment and shareholder agreements cover much of the difficult situations that we can encounter with cofounders. But as cofounders it starts by really understand what you each are looking for, and then making sure your agreements cover the specifics of your situation.

    10 Critical Cofounder Questions

    1. How should we divide the shares?
    2. How will decisions get made?
    3. What happens if one of us leaves the company?
    4. Can any of us be fired? By whom? For what reasons?
    5. What are our personal goals for the startup?
    6. Will this be the primary activity for each of us?
    7. What part of our plan are we unwilling to change?
    8. What contractual terms will each of us sign with the company?
    9. Will any of us be investing cash in the company? If so, how will this be treated?
    10. What will we pay ourselves? Who gets to change this in the future?

    A couple of things. I think all founders stock should vest. I like it when founders purchase their initial shares with a one-time acceleration clause for a small percentage at purchase (3-5%). I like when founders’ stock reverse vests with a traditional one year cliff. The initial vesting acceleration is because things can change at 6 months and it seems fair to value the capital risk that each founder has taken at purchase. And the one year cliff because it is standard. What I’ve seen a lot is founders that don’t do the small initial accelerated vesting clause.

    The other thing I like to see is an Employment Agreement with Termination clauses, in particular, an acceleration on vesting regarding “Termination by the Corporation without Cause”. I like to see a single trigger acceleration with 6-12 months of stock vesting on termination without cause (I’m not alone). The goal is to be fair and to protect each cofounder and the corporation if things don’t workout.

    What tips do others have for equity splits? acceleration clauses? terms? That as cofounders we should put in our agreements.

    Other Resources