StartupNorth

  • Hot Shit List 2013

    Copyright Muppet Studios

    It’s the time of the year where we either make you a hero or we make you hate me a little more. As stated in the previous comments, this could very well be The List of People That David Crow Wants to Be Associated With (but I think I established that is a different list). Either way, the commenter is correct, the list is something and it is highly suspect and by no means complete. If you don’t like the list, leave a comment. If you think I left genuinely left someone off, leave a comment (ps suggesting yourself, either demonstrates your overly inflated ego or you might not realize that your suggestion by itself if a reason to be left of the list). I’m open to being corrected and having the list added to.

    Past issues of the list include 2011 and 2012.

    For 2013, the list is divided between those we expect to break out (Breaking Glass). And those that are taking it to the next level (Going Big). Basically, you will be hearing from or about these people over the next 12 months. So everyone get in a circle, it’s time for the 2013 instalment of the Hot Shit List.

    Hot Sh!t List 2013

    Breaking Glass

    Going Big

    The icons are courtesy of Anil Zaimi, though I haven’t spent the necessary time to make this work with our stylesheet and theme in WordPress.

  • A Startup for All Seasons

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    Is it me, or does it feel like there are 2 distinct seasons of activity in the startup community?

    • Post Christmas Pre-Summer (aka golf season) Holiday
    • Post First of School and Pre American Thanksgiving

    Whether it is reality or bad cliche, it feels like there are 3-4 months of the year where nothing gets done. But no more!

    Thanks to events like Startup Festival and Grow Conf, the summer season for Canadian startups is getting stronger and more important. There are localized opportunities to connect with investors, strategic partners, and potential customers at events like the aforementioned Startup Festival and Grow Conf plus Jolt Demo Fest, Atlantic Venture Forum, Metabridge and others. (You could go to CVCA in Banff, and golf with the Canadian VC landscape, that might up your chances of raising funding).

    Things for Startups To Do

    1. Apply to pitch at StartupFest. Startups get access to press, investors, and a chance at a $50k investment prize from the organizing committee.
      Deadline: Friday, May 10, 2013 5pm EDT.
    2. Apply to be one of the 45 Canadian startups at the Metabridge retreat. You’ll get access to investors, advisors and a great cultural event.
      Deadline: Friday, May 10, 2013 5pm PDT.
    3. Apply to throwdown at the Smackdown at GrowConf. Winners will get access to press and investors. Plus more Debbie Landa.
      Deadline: Tuesday, August 13, 2013

    There are a lot of opportunities for Canadian startups to get access to both local and foreign capital, corporate development folks and press by participating in these events. Take a bit of time, and figure out which ones you benefit from attending. Plus it’s a great excuse to get out of the office and hustle.

     

  • Vanity Celebrations

    [Editor’s Note: This is a guest post by Brydon Gilliss  founded the shared office space ThreeFortyNine in Guelph where he plays with Startupify.Me, Ontario Startup Train and 20 Skaters. A serial entrepreneur and fervent community builder, he’s also busy organizing a train-full of founders for this summer’s International Startup Festival.]

    The moments we choose to celebrate say a lot about what we consider important. They’re a proxy for the metrics we value, because we’re signalling to others by their very celebration. And yet, I’ve always been of the belief that startups tend to celebrate the wrong things.

    If that’s true, what signals are we sending? We celebrate product launches, government grant acceptance, fundraising, winning pitch contests, and so on. Too often, these are the vanity metrics of our startup ecosystem.

    Of course, some of these events are worthy of celebration. A grant lets us live to fight another day; a winning pitch might drive sales or help us to hire a key employee. But they would be way down on my list, personally, if my goal was to build a real business. Let’s stop concentrating on celebrating events like taking on debt or winning what is often little more than a beauty contest—and focus instead on what we should celebrate but rarely do.

    At ThreeFortyNine, we celebrate the achievements that matter to the business model. Consider, for example, the first time you sell something to a complete stranger. That’s worth celebrating because it’s the first sign your business might have legs of its own. In our Founder’s Club events, we celebrate selling our first train tickets to strangers; Foldigo celebrated its first-ever sale to a stranger. Our plan is to build up this list and move it into our monthly socials.

    We’re building our Startupify.Me program around the concept that talented developers stepping into startup life need options. Incubators, accelerators and government grant programs funnel them into a single, traditional path thereby discouraging experimentation. We want our cohort to have the option to create a lifestyle business or a even a small, local business—if they choose. Of course, any of them can still try and swing for the fences, but they have all options in front of them.

    “We didn’t get to where we are today thanks to policy makers – but thanks to the appetite for risks and errors of a certain class of people we need to encourage, protect, and respect” – Nassim Taleb

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    Only in recent years have books like Lean Analytics begun to draw out the real risks of obsessing over feel-good data that does little for the business—so-called “vanity metrics”. There’s a very real danger if a young entrepreneur believes that success comes in the form of taking on debt, winning a pitch contest and launching a product. Those may be required for some businesses but they shouldn’t be misconstrued as success.

    Part of the challenge here is the proliferation of what I call success turnstiles in our ecosystem. These are entities whose prime motivation is to funnel as many businesses as possible through their turnstile. It’s a pure numbers game for them as they chase their success metrics. These entities tend to be government funded and these success metrics are defined by bureaucrats and can be tracked up the organizational hierarchy to a speech-writer’s desk.

    We need to lead real conversations about what success is because it comes in many shapes and forms. Advocates of this more mindful form of celebration include Jason Cohen imploring founders to get 150 customers instead of 1000 fans and Rob Walling helping startups to start, and stay, small.

    Here’s an initial list of milestones and accomplishments worth celebrating to get you started.

    • Performed 30 interviews with real potential users.
    • First customer acquired.
    • First customer acquired and you have no idea where they came from.
    • Covering your monthly personal costs.
    • Identifying the first product feature a potential customer will pay cash for.

    Which vanity metrics need to stop being celebrated? What do we need to celebrate more?

  • Hardware and Startups

    [Editor’s Note: This is a guest post by Gideon Hayden LinkedIn , associate at OMERS Ventures and previously founder of Tradyo. Full disclosure: I work with Gideon at OMERS Venture and I have tracked his progress at Tradyo with his partner Eran Henig over the past few years.]

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    “You know, one of the things that really hurt Apple was after I left John Sculley got a very serious disease. It’s the disease of thinking that a really great idea is 90% of the work. And if you just tell all these other people “here’s this great idea,” then of course they can go off and make it happen.

    And the problem with that is that there’s just a tremendous amount of craftsmanship in between a great idea and a great product. And as you evolve that great idea, it changes and grows. It never comes out like it starts because you learn a lot more as you get into the subtleties of it. And you also find there are tremendous tradeoffs that you have to make. There are just certain things you can’t make electrons do. There are certain things you can’t make plastic do. Or glass do. Or factories do. Or robots do….

    And it’s that process that is the magic.” – Steve Jobs quote as quoted by Travis Jeffery of 37 Signals

    The lifecycle of consumer hardware startups is undergoing a rapid transformation (see Chris Dixon’s Hardware Startups). Consider the well known Pebble Smartwatch; the first example of a company that perhaps unintentionally used crowdfunding to demonstrate demand for their concept long before they had the ability to produce it at scale. The $10.7M raised significantly decreased the upfront risk for the company, allowed them to avoid dilution by avoiding traditional financing methods, and decreased their inventory risk due to this ability to accurately forecast demand before production.

    This change in the stage of demand generation represents a new paradigm for hardware startups. Whereas before they likely had to build and scale manufacturing prior to generating demand for their product, they can now accurately forecast this simply by gauging reactions to a proof of concept video.

    However, the purpose of this post is not to highlight all the good stuff surrounding this method of funding for hardware startups; I think those are largely well known and accepted. Instead, I’d like to address what other impacts this change has on the lifecycle and trajectory of a company.

    Exploring the Impacts

    Firstly, with large surges of excitement and accompanying pre-orders surrounding these campaigns, a company has to jump from a conceptual and iterative stage to become an operational company thereby skipping a lot of crucial steps in between. Perhaps one of the most important steps they must skip is the pricing strategy for each unit. Without sufficient vision into QA, returns, defective products and COGS, they can’t accurately work these costs into the price of the product. Furthermore, if we look solely at the numbers, the outlook for the company is bleak as they’ve already locked into a certain price with their pre-orders, as well as a specific timeline, and this can end up costing the company huge amounts of money down the road.

    See below to visualize this change:

    Old World:

    Team → Concept → Seed → Prototype → Financing → Design/Manufacture/QA → Iteration → Pricing of product → Pre orders → Distribute

    New World:

    Team → Concept → Seed → Prototype → Pricing of product /Timeline commitment → Video launch → Pre orders → Financing (maybe) → Design/manufacture/QA → Distribute → Iteration

    In the new world, companies price their product very early on, and jump from video launch to production. This places them on a trajectory that perhaps they aren’t ready for.

    Let’s consider other impacts of this change:

    • Risk is transferred from the company to the consumer
      • In the old world, consumers saw a pre-order to launch time of 2-3 weeks. In this model it changes to around 9 months to 1 year.
      • The increase in time from demand generation to product in market is far longer in the new world. No Kickstarter hardware campaign has brought their product to market in less than 9 months from the close of their pre-orders – meaning consumers have to wait far longer than they’re use to for the product.
      • The 9 months to 1 year is long in terms of time from pre-order to time of distribution, but actually very short when we put this in the context of the stage of the company and the typical time between conception of a product to larger scale distribution.
      • Effectively what this means is the risk is transferred from the company to the consumer. In the old world, companies would have to take shots in the dark and validate their concept after an upfront investment in manufacturing. Today even if the product is a flop consumers will have to pay.
    • Less appetite from consumers for second chances
      • Whereas in the past consumers may have given hardware products second chances (see Jawbone UP V1 vs. V2), by the time these products are in the consumers hands there may be less interest and far less enthusiasm to give the product a second chance.
      • The amount of time from showing intent to gratifying their demand is so long in this case, that they may have even written it off even by the time they receive it. All this means is you better strike some resonance with the consumer on this first push.
    • Feedback Cycle Lengthened
      • The cycle between launch and iterations to the product is far harder to manage in this model. By the time you’ve scaled operations feedback is just beginning to roll in – and you may lack the resources to implement the needed changes to the product.
      • Perhaps the more important feedback cycle in the new world has become the software iteration cycle that sits on top of the hardware. Often this takes a backseat as scaling manufacturing is a massive task unto itself, but in today’s world, this is where the real value stems from.
    • Shipping incomplete products
      • As mentioned, much of the value stems from the SDK attached to the hardware and providing the infrastructure to allow developers to build applications on top of the platform.
      • With an underestimation of the time required to scale manufacturing, SDK’s often take a back seat and the products ship with limited functionality – far more limited than demonstrated in the concept videos.
      • Furthermore by accelerating the demand, companies often miss out on the experimentation/iterative phase of prototype development. They commit to a timeline and have to choose a solution before they may be ready.
      • With the demand to scale operations so quickly, the QA process inevitably takes a hit as well and can result in higher costs down the road.
    • Discovery and experimentation phase cut
      • In the new world, the video launch occurs before scaling of production happens. This process can teach a company a tremendous amount, but because they have often committed to a timeline and promised a certain product, they’ve locked themselves into something that is great conceptually, but may not be feasible in reality.
      • This discovery and experimentation phase is shortened greatly, and as Steve Jobs mentioned, this is the process that is magic.
    • Inaccurate Timelines
      • 84% of kickstarter/pre-order projects will miss their deadlines.
    • Threat From Incumbents to Pick Off Technology
      • Proven demand with an inability to act allows bigger competitors to jump in and launch competitive products really quickly – seeing this now with Apple/Sony and Pebble

    One of the classic problems that lead to startup’s demise that we hear of all the time is pre-scaling. Companies start building out the core features of their business without truly knowing what they are. As they increase their burn rate to high levels, their margin for error becomes extremely low by the time they reach market. If that initial product doesn’t hit a nice trajectory, they’d better find it fast because the cash in the bank will only last them so long before they have to raise again, and if they haven’t proven anything by that time, it likely won’t be an attractive prospect for investors resulting in a down round, or worse.

    This is not to say that this new process is a negative shock to the ecosystem, quite the opposite actually. I think crowdfunding and proof of concept similar to that of concept cars spurs innovation and creativity, and encourages new entrants to shoot for the stars; something we always need more of.

    However, the risks of the new world have not yet been explored in depth, nor have they actualized as many of the relevant companies are still very young. Many processes like QA and iterative industrial design inevitably decrease in quality and leads to lower quality products shipped, higher cost of returns, and inaccurate pricing of the product; a dangerous game to play.

    Crowdfunding and pre-orders is definitely a good thing, but perhaps we need to recognize where along the lifecycle of a company this process exists, and what exactly it proves. It does not mean the company is successful, but merely represents one proof point out of many needed along the journey to building a great company.

  • Making the business case

    I have spent a lot of time in Halifax in the past year. I have been out for HPX Digital and for 2 workshops with Toon Nagtegaal (LinkedIn). It has allowed me the privilege of hanging out with Atlantic Canadian entrepreneurs. I’m going to try to spend additional time in Moncton, Saint John, Charlottetown and hopefully St. John’s (but a road trip like that will require additional planning and spousal support).

    My next 2 trip are very different. The first is another workshop with Toon. The second is to attend Atlantic Venture Forum (still working on travel plans).

    We are looking for startups that are “at the point where you have to push your business or business idea to the next level”.

    The Workshop

    Subset of PhaseMap by Toon Nagetaal

    The workshops with Toon are interesting. You can read Peter Moreira’s piece on the workshops. The workshop is a Thursday to Sunday ordeal. It’s called an Investor Readiness Workshop. The goal is to put companies through an artificially intense meat grinder and focus on building a stronger investment presentation. The goal is to walk through your business plan, your assumptions, and your traction. Toon provides his guidance from his experience funding companies in Europe and North America. I provide my experiences as an entrepreneur and what I’ve learned living for a short period of time on the other side of the table.

    The goal is to provide Atlantic Canadian founders practical advice about refining their business plan. It revolves around Toon’s PhaseMap methodology and software tools.

    The PhaseMap methodology helps define and articulate a business case around 4 questions:

    • Do customers need and want my product? = Value Proposition
    • Is there a market, big enough and ready to pay now? = Market
    • Do customers wan to buy from me? = Positioning
    • Can I deliver? = Execution

    Why?

    • Learn how focusing on your customers pain is the key to defining your value proposition, market and position. Practical real world, in the trenches advice about raising financing from both sides of the table
    • To provide the team with methods and tools they can use to learn more about customers and product/market fit.
    • Provide individual feedback to startup teams throughout the session, both to guide the iteration and strengthening of their startups and to provide strong group learning

    Who?

    Ideally, founders either written a business plan, started the investment circuit, and/or generated a few business models or a Lean Canvas or two. The target audience is companies that are actively raising investment capital. The focus is on how to make the case for your business. How good is your business case and how well you are able to present it? These are the crucial factors founders will learn in how to convince others of the quality of your plans.

    How much?

    Update: I’ve been informed that if companies are willing to cover their own travel expenses, the good folks at ACOA are willing to make exceptions for companies from across Canada.

    The workshop is sponsored by ACOA. If you are a founder based in Nova Scotia, Newfoundland, PEI or New Brunswick you are eligible for ACOA sponsorship. The ACOA team has informed me that the workshop is open to any Canadian startup willing to cover their own travel expenses to the region. The fees are divided between the founders and ACOA. Fees for founders are $750 for up to 2 founders to attend. This covers hotel and food costs. The remaining fees are covered by ACOA.

    When?

    The next workshop is June 6-9, 2013 in Halifax.

    Attend

    It’s a fun, intense weekend that is designed to help startups and founders.

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  • DemoCamp Halifax 3 – David Crow edition

    logoGreat news. Democamp is going back to its roots (it is happening at a bar this time) and Milan has lined up David Crow to speak. He will be in town because he is working with The Next Phase on some stuff so it seemed like a great time to put him to work.

    David is the co-founder of StartupNorth, founder of DemoCamp, co-founder of Nakama (ask him about this one… a wee bit ahead of its time), co-founder of Influitive and is currently in residence at OMERS Ventures. He has a better pulse on the Canadian Venture and Startup community than anyone else. He’s also a father to two of the sweetest little girls you will ever meet.

    This Democamp is going to be kept small and 100% focused on great demos from high potential startups. It will be a lot of fun. Think of it less as a conference and more like a chance to hang out with some friends. We are calling it Mini because we are getting rid of the frills but I promise the startups and their demos will be as BIG as ever.

    The event is free for Entrepreneurs and Students. We could use a few sponsors to cover costs, so please get in touch with Milan if you can help out. These sponsorships are a great value because they are just meant to keep the event out of the red.

    You can register on Eventbrite.

  • Bay Street & Natural Resources – FinTech in Toronto

    TL;DR

    Toronto is a center of gravity for financial services. There aren’t a lot of financial technology startups in Toronto. There is a new Toronto FinTech Meetup. FIrst meeting is Wednesday, April 10, 2013 at the MaRS Commons (Suite 230, 101 College St.) hosted by Blair Livingston of Quantify Labs.

    Bay Street and Natural Resources

    [Editor’s Note: This is a guest post by Blair Livingston LinkedIn , founder of Quantify Labs. Full disclosure: I’m an investor in Quantify Labs. Blair and I share a view that given the technology and talent available on Bay Street there should be a strong financial tech and startup community in Toronto. It is sad that my typing “toronto fintech” into Google results in a Montreal conference as the first result. ]

    Google Search for Toronto FinTech

    Great cities prosper and thrive, in part, because of their proximity to valuable resources. Arguably, the nearby resources were likely the main reason the city or village was situated in that location to begin with. However, it’s not enough to simply be near resources – gold still has to be mined – and we need to put those resources to work. Indeed, Canada is a country rich in resources; we have diamonds, gold, lumber, oil, gas and everything in-between. Canada’s strong economy is fuelled in part by this abundance of resources.

    However, over the last hundred years (or so) new types of resources have emerged – communities, technologies, groups, industries and people. Many of these resources don’t take the familiar form of something tangible and malleable, and for that reason can go unnoticed for a long time.

    One Hub to Rule Them All

    When we talk about finance, we invariably talk about New York City. We talk about Wall Street, the 1%, and a concentration of capital, services, people and technology that makes NYC one of the financial industry capitals (if not THE capital). It is the density of entrepreneurs, emerging companies and people that are one of NYC’s greatest resources. Consider the effects on start-ups built to service financial companies – this industry has supported, nurtured and allowed some of the biggest financial technology companies in the world to grow and flourish in its ecosystem.

    Bloomberg LP, with estimated yearly top line revenues of $10 billion, was started in New York. The city is host to a number of trading venues, back office technology providers, data aggregators and other interesting and innovative companies built on the resource of this community concentration. They even have an accelerator dedicated solely to financial services technology (appropriately named the FinTech Innovation Lab).

    In New York, FinTech flourishes by connecting the community and building an ecosystem that leverage existing resources. Financial institutions play a role in supporting the new ecosystem by acting as customers, acquirers of startups and hiring talent that develops in each of the early stage companies. Demonstrated by the support, both financial and at very high management levels, that FinTech Innovation Lab receives. It’s no wonder a large portion of all leading financial technology, especially institutional tech, is coming out of New York.

    Where is FinTech in Toronto?

    Toronto has a booming financial industry. Our banks are in excellent shape. The combined market capitalization of Canada’s six leading banks is more than $323 billion. And with that kind of market capitalization comes new problems, new opportunities and potentially new tech. The difficulty lies in the regulation, legislation, risk standards and software/hardware requirements. This poses challenges for developers and entrepreneurs in selling to financial services firms. It doesn’t matter if the solution is aimed at the retail (bank branches or individuals), corporate (the mother ship) or institutional (sales & trading, investment banking). Selling to financial institutions is not an easy process. It requires assistance in process, guidance (legal, technical, financial), support, experience and a depth of knowledge that is greater than just hustling.

    It is because of the complexity in the go-to-market and technical requirements, why very little innovation happens in financial services technology (aka fintech). It’s like the shadow cast on a wall – it looks menacing, like a panther or some dangerous beast – but in reality it’s only a little kitten. If you understand how to deal with the issues, and properly approach them, they aren’t all that scary (and a little help never hurts).

    But, with little innovation comes massive opportunity – there is so much opportunity in financial technology that it’s hard to decide where to begin.
    What Toronto needs is to start taking advantage of these resources – a thriving financial services industry. It’s already happening in pockets around the city, but it’s about time we started getting aligned to make a consolidated push together. I have had the opportunity of meeting with/hearing about/noticing some interesting financial tech companies in the city, who include:

    • D+H (payment/lending solutions)
    • Market IQ (data/social sentiment analysis)
    • FINMAVEN (data/social sentiment analysis)
    • eDYNAMICS (salesforce integration and consulting/cloud computing)
    • OANDA (FX trading platform)
    • Quantify Labs (institutional content/CRM platform)

    Who else should be on this list? Who are the startups, developers, investors and entrepreneurs that are interested in FinTech in Toronto? If the community is the framework, let’s get the community going. Let’s share stories and guidance on selling, building and launching financial technology. Let’s offer insight and experience into usage and problems. Let’s discuss. Let’s take advantage of one of this city’s most abundant resources. That’s what we want to do, and if you have any interest in financial technology, I would encourage you to sign up for the Toronto Fintech Meetup. We’re having our first ever meeting next Wednesday, April 10th, at the MaRS Commons, just a ‘get to know you’ – no speakers, no schedule, just an introduction to the financial tech community in Toronto.

    When I started in finance ask a desk analyst, I was repeatedly told – “it’s too bad, the low hanging fruit is gone” – well I took a walk out of that orchard, down the lane, and stumbled into another called Financial Technology. The fruit just isn’t low hanging, it’s on the ground – we just need a few more people to come help us pick it up.

     

  • Being a Hustler is Not Enough

    Editor’s note: This is a guest post by Kevin Swan LinkedIn . Kevin has cut his chops doing product management at Nexopia.com before becoming it’s CEO. He moved to the dark side with Cardinal Venture Partners and is now a Principal at iNovia Capital.   Thankfully he is an MBA dropout and that’s why we like him. This post was originally published on April 2, 2013.

    Often the startup community attaches itself to buzzwords. We all know them. Growth hacker, lean, gamification, pivot, MVP, viral, ninja, disruptive, etc. I, and you, have been guilty of using them. These terms are not bad by nature and most have real meaning behind them. However, often they start becoming ubiquitous terms that lose their meaning and are sensualized by those using them. I have a new one to add to the list – Hustler.

    U can't knock da HUSTLEWe all know the Hustler. Relentless in connecting with people, customers, partners, investors, etc. Always at every event, following up on every lead and never taking no for an answer. You give them a lead and they turn it into ten new opportunities for their business. They will iterate through their MVP (whoops, I just used a buzzword) 20 times to reach product-market fit if they have to. They never give up and their tenacity is off the charts.

    Like most buzzwords, they start off with good intentions. There is nothing wrong with the Hustler. In fact, I wouldn’t want to invest in, or work with, anyone that doesn’t hustle! But, being a Hustler is not necessarily going to lead to success on its own. In fact, it can have the counter effect of resulting in a very inefficient way of building a company.

    The entrepreneurs that I have come to truly respect and admire have a characteristic that hustle can’t replace. The only problem is I don’t yet have a buzzword to describe so I will just use this:

    savvy /?sav?/ : having or showing perception, comprehension, or shrewdness especially in practical matters

    The best entrepreneurs have an amazing ability to navigate a startup through all the ups and downs, risks and opportunities and challenges it encounters. They are never caught off-guard by a development and always have a plan B. They can spot opportunities and paths to take that most can’t. Having an engineering background I often think about making things efficient. Savvy entrepreneurs are just that – efficient. Where a pure hustler is running around trying ten different approaches to a problem the savvy entrepreneur has a calculated plan that nails it in the first couple attempts. The savvy entrepreneur uses their time, relationships and public appearances very stringently. They don’t take a ‘throw it at the wall and see what sticks’ approach. They are thinking three steps ahead all the time. They know the next steps they have to take and aggressively push forward.

    In my experiences these entrepreneurs are not that common. If the low costs, low barriers to entry and ability to iterate quickly have had one negative effect it is the belief that a successful startup can be the result of a bunch of experiments and hustle. Sure this works sometimes, the startup world is built on outliers. But, these are just that – outliers. The majority of successful companies are built by savvy entrepreneurs who know their domains, have an unfair advantage and are always three steps ahead of everyone else.

  • Dog Yogurt or Why angel invest in Toronto

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    [Editor’s Note: This is a guest post by Chris Maeda LinkedIn . Full disclosure, Chris as he mentions in the article, was an investor in Influitive, a company I co-founded. Chris is the CEO of Brick Street Software and an active angel investor. He’s looking for deal flow and we will be hosting a series of Founders & Funders in Toronto, Halifax, Vancouver and a few other cities to connect those that start high tech, high potential growth companies with those that fund them. Subscribe to Founders & Funder$ notification list for updates. If you’re looking to connect with Chris, my advice, is to reach out to him on AngelList, but hey, it worked for me and I’m a sucker for patterns.]

    I’ve been an angel investor in Toronto since 2011.  Towards the end of the dot.com days, I traded my SOMA loft for a New Hampshire cottage, partly as a by-product of some public company M&A transactions.  I began investing with a New Hampshire angel group in the mid-aughts.  I like living in NH, but the deal flow you see there is quirky.  There weren’t very many software deals, and New Hampshire has a lot of trees and cows, so the angel group ended up looking at non-software deals, like online wood pellet distributors and dog yogurt manufacturers.  When I was hearing the dog yogurt pitch, I had a what-the-hell-am-I-doing-here moment of clarity and quit the angel group.

    Then two things happened.  First, my company, Brick Street Software, decided to set up a customer support center in Toronto so I started coming to Toronto for business on a regular basis.  Second, Influitive was advertising a round on AngelList.  I met the Influitive founders (Mark Organ and David Crow) and, after verifying that they were not planning to enter the dairy products business [Ed. Note: I have a dairy allergy so I’m kind of anti-dairy], I invested in their pre-venture rounds and joined their board.  I recently invested in a second Toronto company and am working on a third.  I’m starting to see patterns for why Toronto is great place to invest.

    1. Activity, talent pool, and competition:
      As I tell my American friends, Toronto is the New York and Los Angeles of Canada.  So almost everything that happens, happens in Toronto.  I’m sure I just ticked off a bunch of people outside of the GTA, but this is reality when viewed from the US.  The software talent pool is pretty good; there are lots of startups but everyone complains about a shortage of capital.  So this forces Canadian entrepreneurs to have a bootstrap mentality and means that valuations are not outrageous.  The seed funding bubble has come to Canada but its not as gassy as the US.
    2. Lots of public money and assistance:
      the US does not have SR&ED credits, IRAP grants, refundable HST, or the network of publicly-funded innovation centers that you find in Ontario.  A Toronto company that I’ve invested in has probably raised as much money in grants as it has from investors.  This means the Canadian government is reducing my dilution and (hopefully) goosing my investment returns.  Thanks, guys.
    3. Corporate customers are nearby:
      Many of the large corporate buyers are headquartered in Toronto.  I rode along on a sales call to a large Canadian company.  I usually have to get on an airplane for something like this; in Toronto I can take a cab.   I can even take transit if I’m not in a hurry.
    4. Better for international business:
      There are a number of little things that make Canada a good place for an international business hub.  For a variety of reasons, Canadian employees are less expensive than Americans, and the NAFTA treaty makes it easy for Canadian companies to expand into the US with minimal US headcount.  You can have bank accounts in foreign currencies (e.g. US Dollars and Euros). Finally, and perhaps most importantly, the Canadian market is so small that startups have to plan for international expansion from day 1.

  • The scarcest resource: successful companies

    CC-BY-20 Some rights reserved by Michael Scheltgen
    Attribution Some rights reserved by Michael Scheltgen

    I feel like I keep having the same two conversations: either about “the lack of venture funding in Canada” or “how we build a better startup ecosystem”.

    Often the conversations happen, one right after the other. The lack of venture funding is about how Canadian VCs don’t get their business because they can’t raise money. And that VCs in Silicon Valley are funding companies in the same space as theirs. Therefore Canadian VCs are conservative and because others in a similar space are getting funding in Silicon Valley/New York/Boston, they are able to raise money there too. This is proof that the ecosystem in Canada is weak. And further evidence that even with the new $400MM in funding for venture funds, that because of the conservatism in VC the ecosystem will continue to remain weaker than the ecosystems elsewhere.

    <sigh type=”le” />

    I am reminded of the comment that I wrote on Mark Evans blog.

    “I have a weird role, because I work for a VC now, but I have always believed that it is by building better founders that we will save ourselves.

    A healthy ecosystem is one where you are building successful companies. These companies make money. They have growing customer bases and revenues. Because if you aren’t building successful companies you can’t do the other things.

    Successful companies are run by successful people/founders.

    Successful companies hire people and put them in roles enabling them to succeed.

    Successful companies need lawyers, accountants, agencies, design firms, etc.

    And successful companies eventually realize they could grow faster if they didn’t have to amass the profits from operations to do bigger, bolder, crazier things that allow them to be more successful.

    This is where investment comes in. The opportunity to grow more successful.

    It’s not about giving money to starving entrepreneurs because we have an entrepreneur shortage. We have a successful company shortage. We have an abundance of entrepreneurs. The question is how as an entrepreneur I do the things to demonstrate I understand the risks related to building a successful company. And at different points through out my corporate development, there might be a reason to raise money to go for something bigger.

    There are a ton of resources to learn what successful companies at different stages look like. Check out http://StartupNorth.ca I’ve tried along with @jevon @jonasbrandon to share my opinion, as an unsuccessful entrepeneur, what I’ve seen the successful entrepeneurs and companies do.

    You need to build something that is worthy of investment. Go bigger. Go further. Demonstrate that you can build a successful company. And mitigate the risks of growth. But only when you demonstrated you know what a successful path is, should you think about raising money to grow.

    The risks change at different stages of investing. It’s riskier the earlier you go, i.e., the are more risks and each risk might be unknown. But overall it’s about building a successful company.” – David Crow

    Successful companies…

    “If we want more entrepreneurs, how about we teach them to be, you know, entrepreneurial: self-reliant, innovative, customer-focused, not a bunch of browners trotting off to Ottawa for a pat on the head?” – Andrew Coyne, March 21, 2013 in National Post

    I am still boggled at the number of entrepreneurs that tell me that “Canadian VCs just don’t get what we’re working on”.  It’s your responsibility to clearly and effectively communicate why your company is successful given the current stage of corporate development. And if you think that it is easier to communicate this to foreign investors, then you should front the $600 and buy a plane ticket, and head to Boston, NYC or Silicon Valley and go through the exercise there. Raising money is hard. I think it gets harder the further away from the money you are, and the earlier in corporate development.

    Being a successful company takes more than just saying “we’re the next Facebook”. You need to understand your stage of corporate development and the risks in getting your business to the next stage. Event better if you can communicate this effectively (eloquently) to people that might want to make an investment. But just saying “we’re the Facebook of <x>” doesn’t mean the company is fundable.

    We have a successful company shortage

    Successful companies are the scarcest resource in the ecosystem.

    What’s common when we talk about one Microsoft, one Yahoo, one eBay, one Amazon, one Google, one Facebook, one Twitter is that there is “one”. It’s the prowess to build great products, great teams, great marketing, happy customers that make for lasting companies. It’s is not the opinion that makes these companies great. It’s market cap, revenues, platform penetration, customers, users, etc.

    Here is a game: How many billion dollar Canadian technology companies can you name without saying RIM or Nortel?

    “It is the increasingly important responsibility (of management) to create the capital that alone can finance tomorrow’s jobs. In a modern economy the main source of capital formation is business profits.” Peter F. Drucker, 1968 (from Drucker in Practice)

    Traction, in all it’s shapes and sizes, is very hard to argue with. There are strong treatises ranging from Dave McClure’s AARRR: Pirate Metrics for Startups to Ben Yoskovitz & Alistair Croll’s recently released Lean Analytics. But it is hard to argue with companies demonstrating traction, assuming that you are knocking down the right milestones to raise a round. But this is all key to understanding, for many companies you don’t raise money because you can raise money, you raise money so you can go faster, go bigger, go further than what you would on profits alone. (Not sure what metrics you should be presenting, check out Ben & Alistair’s metrics for different types of companies at different stages of corporate development).

    Lean Analytics at Different Stages by Alistair Croll and Ben Yoskovitz

    (Image originally published by Eric Ries on Startup Lessons Learned).

    So rather than focusing on whether or not the people involved have the skills, experience or track record to be in the positions they are in. It’s better as entrepreneurs that we focus our energies on knocking it out of the park. Stop focusing on the politics of the ecosystem and start trying to demonstrate real success metrics for your company. Ultimately, it’s not a beauty contest  nor is it about favouritism or cronyism or nepotism. It’s about demonstrating that you can build something successful.

    You want to build a stronger ecosystem

    If you want to make Toronto and Canada a stronger ecosystem, the go build something successful. Don’t worry about the pundits, the bloggers, the opinions. Worry about your existing customers, your potential customers, your market, your competitors, your employees, your bottom line, etc.

    Since I already said it: You need to build something that is worthy of investment. Go bigger. Go further. Demonstrate that you can build a successful company. And mitigate the risks of growth. But only when you demonstrated you know what a successful path is, should you think about raising money to grow.