StartupNorth

  • It's about to get a little crazy out there . . .

    Ok, here’s the thing. The “is this another bubble?” conversation has been going on for a while, and everyone was able to agree that there hasn’t been a bust imminent so far. It might have been dragged out by the sluggish economy, it might have been a function of a lot of effort going in to building actual technology and less going in to building companies, I don’t know.

    But it is clear now that a change has taken place. I no longer talk to breathless and frustrated entrepreneurs who can’t find anyone to do their deal, instead I am hearing from frustrated and excited VCs who are trying to get in to the next hot deal. Personally, I LOVE it. Some really great deals are going to get done that SHOULD get done, but might not have just a few years ago.

    Fred wilson put the stake in the ground today and his post will go down in history as the first one to truly call the bubble.

    Things are going to get wild very soon. This is a great time to be raising capital as a startup. A lot of fundamentals are now either stable or rapidly moving up. From economic indicators (and their relation to the Web) to the creation of new funds. From consumer to enterprise. Things are good, all good. Get out there and build build build!

    NOBODY MOVE

    This is where we can easily start to make mistakes as a community. I have written about our need to think differently about the Canadian startup ecosystem and that feels more important than ever now.

    The first DemoCamps, which were started at the lowest point of the trough between the last bubble and today, were focused on finding the most innovative, interesting and valuable ideas/companies and there was very little focus on anything other than a few fundamentals. Who would pay for this? Why is it valuable? Will you be able to scale it?

    Let’s keep asking those questions and lets make sure we build STRONG startups in the next 5 years. Valuations will rise and the volume of startups will continue to increase, but I believe we can do it in a healthy and sustainable way.

    LPs need to focus on backing funds that can create value in their portfolio, not just the ones that can get them the sexiest deals (at the highest valuations no doubt).

    VCs need to avoid acting like every deal is the deal of a lifetime. We are JUST getting to a place where we can create startups in some quantity here in Canada. Overfeeding the newborns will just mean there is less for the kids who come later.

    Startups need to remember that valuation isn’t everything. A VC who understands your business, your customers and who can stick with you for longer than a few years is going to be critical. Don’t just jump at the first goofball who gives you the valuation you want. They’ll be coming out of the woodwork.

    Chances that anyone will listen to this? Zero.

  • John Ruffolo joins OMERS to manage new Venture Capital arm

    Some great news for Ontario, and the national startup community, today. We are hearing from multiple sources that John Ruffolo will be joining OMERS as Senior Vice President of Knowledge Investing. He will start in the position on January 3rd 2011.

    This position, which is focused on managing direct Venture Capital investments, has been the subject of speculation since OMERS announced that they planned to take a similar direct investment model with Venture Capital as they have with Private Equity deals, which has been a successful model for them so far. Pension and other labour sponsored funds like OMERS have historically taken Limited Partner positions in third-party funds (the VC funds you know and love already) and this hands-on approach is unique in Canada.

    John Ruffolo was previously a Managing Partner at Deloitte’s Toronto office and he conducted the survey of Canadian VC GPs that we wrote about earlier.

    John’s reputation is positive and his knowledge of both the past and current startup and Venture Capital environment in Canada is unique. It is great to see things moving ahead in the development of a new capital source for startups in Canada.

  • Has KIK finally arrived?

    I have been using kik pretty much since it launched last April. It was particularly useful for me because I was spending most of my week in the US at that time and kik allowed me to TXT back home while avoiding Rogers/Fido/Telus/Bell’s atrocious $1/message TXT roaming fees.

    The kik app was always very solid and rarely crashed, but there were often delivery problems, even on kik-to-kik messaging. It also seemed to eat up a lot of battery on the IPhone and Blackberry. Those problems seem to be in the past however and it doesn’t seem to affect my battery life anymore.

    kik seems to have finally taken off. So much so that they are signing up an average of 3 users per second and the team is struggling just to keep their servers online. They have published a few graphs showing their signup volume and it is impressive. The sudden drop resulted from kik having to take their servers offline and their app out of the app store.

    As it stands, kik is Blackberry Messenger, but it works on Blackberry, IPhone and Android. I have tried it on all platforms, and they all seem to be equally good.

    There are a handful of other multi-device messengers, such as whatsapp, and it is hard to figure out exactly what the kik business model might be in the end. They originally talked about some sort of music streaming/sales business, but it is hard to tell if that is still the plan, and frankly I am not sure that my private messaging and music worlds should be mixed up like that.

    Whatever model kik does eventually settle on, it is probably worthwhile for them to focus on continuing the growth they are now achieving.

    Kik came out of Velocity at The University of Waterloo, which we have covered in the past.

  • Coffee, Co-working and Crash Pads in Toronto

    Editors Note: This is the first post by Andrew Peek at Jet Cooper. I love the concept of shared spaces for the collisions of ideas. Albert and I talked about this back at Bubbleshare. I know that it is part of the ethos at the Kontagent offices in SF. And I know it’s part of the culture at Extreme Ventures, where I’m camping while starting up. It reminds me of the “Responsible use of Shared Resources” philosophy from SCS at CMU, basically you’re responsible for not ruining it for everyone else don’t abuse the privilege. The open door policy is a great way to allow for new collisions whether that’s new ideas, new employees, or just new connections. @davidcrow

    Chalks

    If you are an entrepreneur in Toronto, you are probably familiar with the various coffee shops, co-working spaces and wi-fi zones available to you as pseudo-offices. You might even have a pattern of Foursquare check-ins that run like clockwork throughout the week.Steven Johnson refers to spaces like these (noting England’s transition from pubs to coffee houses) as environments where ideas can have sex. At Jet Cooper, we like that.

    While it takes a serious commitment to invent and scale something the size of a CSI (Centre for Social Innovation), it isn’t all that hard to contribute something – even if it’s just a few desks – to the people who might be one good conversation away from a big idea. It’s for that reason that we’ve kept a handful of desks available in our office since day one. Even now, as we plan for our next office furniture re-arrangement, we try to keep in mind the people we haven’t met yet.

    Thinking back on it, it has been a wonderful way of attracting a lot of bright people, which on it’s own is a great way to expose any team to a city’s creative pulse. And realistically, all it cost was a few extra desks and chairs.

    There are no restrictions on who can drop in. You don’t need to be a client, or a partner, or even have a twitter handle. Just stop by and maybe let us know your coming so we can put a beer on your desk.

    Consider this a ringing endorsement for this kind of simple contribution. If you have an office, open the door. The correlation between environments and innovation isn’t a secret and as per usual, more good is gooder.

  • What do Canada's VCs really think?

    If you were to ask Canadian VCs, which Deloitte did this past April, what they think about Canadian entrepreneurs and startups, and the VC business in Canada in general, you might not get the warm and positive response that you expected.

    Based on these responses, Canadian Venture Capitalists think less of their entrepreneurial countrymen than their counterparts in Brazil, China, France, Germany, India, Israel, the UK and the United States. There is, based on this survey, a larger divide between entrepreneurs and VCs in Canada than there is anywhere else in the world.

    • Only 36% of Canadian VCs believe that an “improving entrepreneurial environment” is one of the factors that make Canada  a good place for Venture Capital. That is in contrast to 60-88% of VCs in countries such as Brazil (59%) , China (82%), France (67%), Germany (72%), India (88%) and the UK (59%).
    • When asked which factors contributed to creating a “non-favourable climate for venture capital”, Canadian VCs were again quick to blame entrepreneurs. 47% of VCs said that they believe a “lack of entrepreneurial talent to build a new company” is one of the problems with their industry. Only German VCs were more contrite – 72% of them said lack of talent was a problem. Other countries had far more benevolent VCs: Brazil (5%), China (42%), France (22%), India (15%), Israel (0%), UK (33%), US (6%).
    • Another answer to the question “factors contributed to creating a “non-favourable climate for venture capital”” that generated a big response from Canadian VCs was the idea that “reduced entrepreneurial activity” was a big factor. 28% of Canadian VCs said that they believe there is a lack of activity in Canada, that is in contrast to Brazil (3%), China (10%), France (11%) , Germany (39%), India (0%), Israel (10%), UK 14% and USA (5%).

    Is it possible that Canada is an exception to the rule in the rest of the world? How can it be that Venture Capital class investors in every other type of economy (emerging through to advanced) have a more positive opinion of entrepreneurs in their home countries?

    I decided to put the question to some of the VCs I respect the most in Canada. The folks who I believe are doing good things and who really get it. In these conversations there were a few major themes. Overall, the outlook seems pretty positive, while remaining realistic about our past performance. Nobody would agree with the consensus from the Deloitte report. Some of the responses:

    1. “It’s bullshit”. Nobody was ready to argue that the current attitude toward Canadian Entrepreneurs is justified.  The consensus was that it is the result of a lot of fund managers who got a rough ride and they don’t want to take responsibility for it.
    2. “It’s still early in Canada”. With a few exceptions, Venture Capital in Canada didn’t start until as late as 1995, and when it started it went off with a boom. A lot of money was raised by GPs who were not necessarily experienced operators (an old complaint). There are two common conclusions from this: We need new GPs who are experienced operators and We need to back the old GPs because they have finally learned their lesson
    3. “We are finally seeing a crop of 2nd-timers”. “Reward failure” is a popular refrain. The idea that entrepreneurs need to learn from doing is well established, but we haven’t seen the cycle of entrepreneurs here in Canada that we could really use. This was something that practically everyone expressed no matter how positive they were. This is a fundamental change in the entrepreneurial landscape in Canada.
    4. “The talent is here”. Canada has good product related talent. We need to focus on keeping that talent here and to build our capabilities in international marketing and channel development. “It really needs some work” is hard to argue with, but is it an industry breaker? No.
      The recent growth of seed funds in Canada is also helping to address many of these concerns. These funds are accelerating the pace of learning for new entrepreneurs so quickly that many are becoming high-quality second-timers within a few years and a very small amount of capital. This brings them back to the table with their hunger and some talent.

    Let’s move on

    This “blame the entrepreneur” attitude is now worn out. Whatever truth there is to it is in the past. Canadians are as, or more, connected to the internet than any other country and Canadian entrepreneurs no longer sit around learning from other Canadians, they are learning from a global A-list.

    In the end this is all to say: It isn’t as simple as pointing a finger and laying blame. Nobody is squarely blaming the VCs of the last 10 years for our problems, and it is similarly wrong to throw dirt back at Canada’s entrepreneurs.

    The lifetime of Venture Capital in Canada has been short and it could be argued that practically every economy must go through a “churn” phase where the asset class underperforms before a handful of factors come together in order to create a healthy industry. With some new funds starting to close and a mix of new and old blood actively trying to do the right thing, we might just have a shot at this.

    I leave you with some thoughts from Howard Gwin that I think show a fair balance of both blame and optimism for everyone involved and it contains some antidote for what’s going on. Read it in its entirety here.

    Where do we start?

    I am a “double down” kind of person.  Anybody who has worked with me has heard me yap about 80/20/80.  I think we need an 80/20/80 attitude in the Canadian tech marketplace.  We need to focus 80% of our energy on the 20% of companies that have an 80% chance of succeeding.  Set much higher bars across all of our ecosystem from mentors, to angels, to incubators, to VCs, to board members, to anyone providing advice to our community.  A few more thoughts:

    * Mentors must bring value or stay out of the game.  If founders are not coachable, move on to the next opportunity.  If VCs do not bring value beyond money, do not engage with them.  If incubators are coaching, set much higher bars for the outputs your companies produce or shut down.

    * Funding “good companies” does not work.  We need more $ in potentially great companies. Whether we are funding pre-revenue companies with seed $ or growth equity, the bar must be higher.  At a minimum, here are some high-level standards to measure potential of success independent of stage:

    • Big frigging market – no debate.
    • Massively differentiated value proposition that’s not  we are smarter, nicer, cheaper, faster etc.
    • Significant competitive barriers to entry.
    • Tailwind versus headwind – the market is out looking for a solution.  “Market makers” make good road kill.
    • Excellent team that’s open to coaching.

    If there is ambiguity over the above, the ecosystem needs to either address it or move on.

    * Post-seed VCs must spend more on less.  Work the models so companies can get through the troughs — or don’t fund them.  Available capital in Canada for venture is not enough, so we must spend our capital on the best and brightest or nothing will change.

    Founders, do not fall in love with your product or your people.  Before you talk to anyone about funding get experienced people to rip your strategy and pitch apart.   You only get a few chances to get it done so make sure they count. Network like there’s no tomorrow.  Gather people around you who have proven “big league” execution skills.  Talk to everybody who can spread the message and bring value.  Get yourself down to the Valley. Cold-call and get connected to anyone who can make your business move faster and smarter.  If you don’t your competitor will.

  • Lunch with Howard Lindzon on Nov 4, 2010

    Howard LindzonOur friend Howard Lindzon is back in Toronto on November 4, 2010. He’s having lunch with entrepreneurs.

    Who: Howard Lindzon
    When: November 4, 10:45am to 1:00pm
    Where: POD 250 in the Podium Building, 350 Victoria St at Ryerson University

    This is an open brown bag lunch. Come hang out with Howard.

    Don’t know who Howard is? Seriously? He’s a rockstar. He’s crazy. And he’s an interesting guy as both an entrepreneur and as an investor. We had him at StartupEmpire back in 2008, he spoke at Mesh in 2009. He’s a native Torontonian who lives in San Diego. He’s just raised a $4MM C round for StockTwits.

    He’s here looking to meet entrepreneurs. He’s going to share his experiences getting acquired by CBS, about raising money, and about building a compelling media outlet for investors (ps I love StockTwits it’s really a great example of what a modern Bloomberg looks like). The part that I love is that as Howard said “they can read about my successes, I’m going to talk about my failures”. This is awesome! I continually do a lot of things wrong, and I can’t wait to hear about the craziness of Howard’s mistakes. Because seriously his successes are awesome and that only means bigger fail and lessons learned.

    Thanks to Karthik (@soravanahalli), SIFE, and William Mougayar (@wmougayar) at Eqentia for helping to make sure we take advantage of having world-class folks like Howard available.

  • Payroll for startups

    Bank Robber

    The joys of starting a company and setting up the basics, you know things like finding a lawyer, getting articles of incorporation, shareholders agreement, business registration, employment agreements and setting up payroll for employees. It turns out that it has been since 2005 since I thought about the logistics of running payroll in Canada in any detail (BTW if some asks if you want to be in charge of running payroll, the answer is “<expletive /> NO”). The great news is that there is a solution for startups in Canada and it’s inexpensive. Well technically it’s free for companies with <5 employees and only $18/month for >6 employees.

    Payment EvolutionThe company is PaymentEvolution. It’s run by my friend Sam Vassa (@samvassa) and they were recently featured in the Financial Post. Despite the web presence that looks like it was last updated a decade ago, this is a new startup that is up and running and able to help Canadian small businesses with payroll.

    Hallelujah, and it’s inexpensive

    This is a great solution for startups. Basically the deal is there are no fees for the service, however, there are electronic banking fees are passed through to you as a user.

    PaymentEvolution provides no cost payroll processing for smalls businesses with 5 or fewer employees. We’re serious – we don’t want payroll processing costs to encumber the growth of great small businesses. We’re small-business friendly and just want to provide a great service that allows these businesses to focus on what they do best. Like all our plans, we don’t charge extra for updates, the number of pay runs, or silly things like standard reports. We also give these firms the flexibility to pay their employees how they want – traditional cheques, direct deposit or even electronic funds transfer (fees may be incurred by the company’s financial institution).

    This is just what startups need to process payroll and it’s cheap to boot.

  • Real Ventures closes

    Real VenturesThis is great news for Canada, well at least Quebec until additional funds close. Real Ventures has launched today. With both JS Cournoyer and Mark MacLeod writing about the close of approximately $40MM of money that must be invested in Quebec. They are actively looking for seed investments in Quebec software, SaaS and Internet deals.

    “We are seed investors in software startups based primarily in Quebec, though we will do deals in other markets. We like to be 1st money in and like to lead. We can do seed rounds in the six figures to get a product in market and can participate in series A follow ons for those companies that are hitting the gas pedal.” – Mark MacLeod

    The great part about Real Ventures is the pedigree. The team is: John Stokes, JS Cournoyer, Mark MacLeod and Austin Hill. These are world class investors, entrepreneurs, executives and people who have had a hand in shaping policy, companies and entrepreneurs over the past few years.

    “For those of you who don’t know, Montreal Startup is a $5M seed fund that was founded by John Stokes, Daniel Drouet, Alan MacIntosh, Austin Hill, and yours truly. Mark MacLeod has since joined the team for Real Ventures. We invested in 15 web, mobile and software companies between February 2008 and March 2010, including Beyond The Rack, Status.net, Whatsnexx, Vanilla Forums,Recoset, mConcierge, Oneeko and SocialGrapes. For the majority of our investments, we were the first money in, acting as the lead investor. We hold board seats in most companies.” – JS Cournoyer

    Real Ventures is the real deal. Any entrepreneur in Quebec looking to raise a seed round should be talking to Real Ventures.

    Congratulations guys, here’s to closing some money that can be deployed in Ontario.

  • Rogers out to woo mobile devs with Catalyst APIs

    This a.m. in Toronto, the folks at everyone’s favourite big red carrier, invited a collection of local developers and partners to give a sneak preview of their new carrier services API called Catalyst.

    At first swoopy-rosy-red blush, Rogers’ Catalyst looks almost oddly familiar to that old software branding of a certain other Markham-based technology heavyweight. Functionality wise however, Catalyst has a lot more in common with the similar multi-carrier initiative called OneAPI (also supported by Rogers btw). The difference with Catalyst is that it signals a split with OneAPI to give dev’s access to supposedly deeper/better but also proprietary integration with Rogers network. for now, these are services like messaging, location and billing. For developers, richer but proprietary api is either good or bad news, depending on your appetite for carrier-specific app development. Rogers and Fido may be Canada’s biggest mobile operator. However, tying your app to their network is obviously no way to reach every Canadian, let alone the world market.

    Those caveats aside, there is good stuff in this API. First up, everything is build on web and “SOAP and restful standards” promising to abstract away historically crufty telco interfaces, dedicated lines and slow/expensive integration certification.

    Functionality wise in this release we get:

    • Messaging: Web-based SMS origination, SMS delivery confirmation, and “instant” shortcode provisioning
    • Location: Server calls at various levels of accuracy vs speed that allows your cloud to geo-locate and track any handset on the network. A scary thought, but the service also comes with built-in opt-in and privacy controls.
    • Billing: the ability to bill up to $100/month to Rogers bills for apps or content. The revenue split is 30% Rogers, 70% developer, no need for CWTA shortcode to start using billing
    • More stuff, apparently coming soon

    So what does it mean for entrepreneurs and tinkerers? Sure you won’t yet take over the whole world with Rogers-only API integration. However I see a few great use cases: as fast/cheap proof of concept sandbox before you invest in scaling your app with many carrier integrations, for enterprise app development, for academic or mobile research projects. Now if only Rogers would also provide subsidized (or at least more flexible) hardware, sim cards and data plans with their developer programs they’d have a real winner. Where are our api’s for Canada’s aspiring hardware hackers I’d like to know? Where are our api’s for helping us do real commerce over mobile not just virtual goods? I may just be biased, maybe we’ll get there in time.

    The big picture here is we are seeing carriers trying to claw their way back into digital content value chain. It remains to be seen how well a single carrier can compete on alerts, location and content billing which, let’s face it, all smartphone platforms nowadays support some pretty decent version of natively. But notionally that’s fine. More choice and competition is good for developers. I’d like to see more big companies opening their kimono’s and offering up interesting APIs. Once they’re in the wild, have at the Rogers Catalyst APIs and let me know what you think.

    Rogers Catalyst Beta is not publicly available just yet, but should be launching in beta form within a week or so at rogerscatalyst.com

  • Social Intranet Summit Vancouver

    One of my favorite startups in the last few years has been ThoughtFarmer. Every few weeks I check in on them and think “Microsoft hasn’t bought them yet?”. ThoughtFarmer’s social intranet is easily the most polished out-of-the-box experiences in the Social Business Software world right now. They have decided to put on a conference in Vancouver, which is coming up very soon. There are a few spots left and we were able to get a discount code that will give you $100 off, even this close to the event.

    Conference speakers include Dion Hinchcliffe, Enterprise 2.0 blogger for ZDNet and Senior Vice President for my old company Dachis Group; Stewart Mader, noted wiki expert ; Andy Jankowski, Director of Intranet Benchmarking Forum (IBF) North America; Bert Sandie, Director of Technical Excellence at EA; and Dan Pontefract, Senior Director and Head of Learning at TELUS.

    You can see the full speaker list on the conference website.

    **Receive a $100 discount using STARTUPNORTH as the promo code**

    Oh, and check out this hilarious video to promote their newest addons for ThoughtFarmer. It is an example of low cost but effective product education and marketing by a bootstrapped startup. Steve Ballmer makes an appearance as well.