StartupNorth

  • The things an entrepreneur will never tell you

    We always glorify the struggle of the entrepreneur. Late nights, poor diet and little contact with friends. It’s cliche because it is real but we gloss over just how big of a toll it really takes.

    Last week I was having a drink with a recently exited entrepreneur. His last exit was a biggie at $700m+. It seemed to be amazingly well executed from the outside but as we dug in to his story over a few hours I was amazed at how much I could relate to all the ups and downs and how tenuous his hold on success was the entire time.

    Here are my top things that a young (first to fifth time) entrepreneur never tells you when they are in the thick of it, and they are the things you will never understand until you are there. Not everyone deals with each of these things, but the more I talk about it openly the more strongly I feel that it is the norm, not the exception.

    The focus is debilitating

    “He/She is focused!”, “Man, they are hustling!” — you see an someone in action, executing rapidly and firing on all cylinders. You feel like you go to sleep and when you wake up the entrepreneur has already taken it to the next level. How do they do it?

    When you start operating and you can feel the business working you get overtaken by a myopic focus that drives you from one thing to the next. You can see everything in the path in front of you: Obstacles, opportunities and a sense of momentum. To maintain such intense focus though you have to take your focus off other things, and everyone has to choose. Health, friends, family, hobbies. Nobody de-prioritizes any of these things but the problem is you don’t realize which decisions you have made until they are well behind you.

    Entrepreneurs can end up wracked with guilt and wishing they had done things differently.

    The focus is what gives you the highest highs, but drags you in to the lowest lows. Every win seems gigantic and every loss feels equally consequential and that is because of that myopic focus– you only see a few things in front of you and it takes a lot of maturity to be able to focus on the longer term.

     

    The lows are real

    No matter how many highs you get, most entrepreneurs feel some incredibly low times. Almost universally we put on a very positive public face and you would rarely know, but the more time you spend with fellow entrepreneurs after they have left their latest startup, they are more open about talking about those dark days.

    For some of us it makes it feel impossible to get out of bed, sometimes you just can’t bear another meeting. Some founders get angry and lash out, others just hit the bottle way harder than they want you to know.

    These dark periods can last an afternoon or they can last a week. They are only multiplied by the unshakeable focus I talked about above. The focus narrows even more and an obsession with certain metrics or ways out of the trough can develop.

    A manic nature develops and you start to seek the next high. You come out of the low with a focus on something that you know will give you the high you need and you drive towards it harder than most normal people would.

     

    You feel alone and you are alone

    I think a big reason founders move to San Francisco or the Bay Area is because you can at least find hundreds of thousands of like minded people. You feel just a little less alone while you are single handedly taking on the world.

    You learn quickly that you can’t take your problems home because one day you are up and one day you are down, or you might be both on the same day. It doesn’t feel fair to put that on your partner, and if you did they would eventually get tired of it after years of constant ups and downs.

    You toughen up and you bottle it up. You are afraid to really talk about things because you can’t afford to open the bottle– it might knock off your focus and set your company back. That’s a no-no.

    The best investors in the world know that entrepreneurs have this loneliness and they take time to give you a safe space to vent. Almost nobody else can give you this safe space and it takes a lot of work on both sides to develop a level of trust that allows it.

     

    Failure isn’t an option

    Failure is OK. We all know that. It’s a powerful learning tool and it is a required piece of the long term success of an entrepreneur.

    Holy shit it is scary though.

    You are paying salaries, the people you are paying have families and they rely on you. Your investors backed you for a lot of reasons, but you feel like you have to deliver for them.

    Your customers are relying on you.

    You WANT to succeed this time, you don’t want to have to go through another cycle looking for a success.

    It feels overwhelming and it weighs on you. We try to relax and blow off steam, but the feeling that it’s all on you doesn’t go away.

     

    Nobody tells you it is going to be easy, but I think a few of us are surprised by just how much of a toll building a startup can take. Maybe it is hard because it was just never meant to be easy? Who knows.

    Keep at it.

  • Aim for your next valuation

    CC-BY-ND-20 Some rights reserved by Alex Schwab
    AttributionNo Derivative Works Some rights reserved by Alex Schwab

    “Ain’t no need to watch where I’m goin’; just need to know where I’ve been.” Mater in Pixar’s Cars

    This is wrong. But it is the behaviour that a lot of founders execute on after raising money.

    I’ve been thinking a lot about Venture Math, Valuation and Accretive Milestones and whiners. I was struck at how many entrepreneurs seem to be working towards the post-money valuation of their last round of financing. I think this is wrong. You should aim high. Higher than the post-money of your last round. You should be acting like the pre-money for your next round. That is the only way you will drive the necessary milestones for the next raise.

    Skip Level

    Let’s make a few assumptions.

    You are raising $1MM on a $4MM pre-money valuation. This gives you a post-money valuation of $5MM. If you subscribe to 2x valuation as the floor for the next round. This means that you need to start behaving like your company is worth at a minimum $10mm. That’s right, a minimum of 2x your post valuation. You should be targeting >2.5x, so in our example you need to start acting like a company that is valued at $12.5MM.

    Your behaviour and decisions need to reflect milestones necessary to raise your next round of capital. Not the round you just closed.

    “The art of raising a round it to raise enough money to get to a significant milestone, and not too much money taking too much dilution too soon. So how do you define the milestones.” – David Crow

    This is incredibly difficult. Because the balance is crucial to the long term success of the company, getting it wrong and you’ve raised too much money you will be diluted, but you might have enough money to change direction and try again. If you aren’t behaving like the end point has changed, the company will be executing on goals that are too small to raise the next round.

    Don’t aim for the Net Present Value milestones. You’ve already raised money to achieve those. Start setting milestones for your future value. And start delivering against those.

  • If You Have More Than Three Priorities, You Have No Priorities

    CC-BY-NC-20 Some rights reserved by hockadilly
    AttributionNoncommercial Some rights reserved by hockadilly

    One of my favorite sayings (with apologies to Jim Collins, author of From Good to Great) is: “If you have more than three priorities, you have no priorities.” I literally use this to run my business life – every year, my team and I agree on three high-level strategic priorities for the business. Each of my direct reports then come up with three priorities that ladder up to those business goals, each of their reports define their three goals, and then the teams work together to define three aligned performance goals for each quarter (this approach is also known as “cascading strategy“). I love this approach because it’s simple and  because by focusing on just three things, we’re able to move some pretty big rocks in the right direction.

    Fine, great – but how can this help you prioritize? By taking the same approach, Every. Single. Day. First thing every morning, ask yourself the question: what are the three things you MUST do today? I write them down, and I prefer it when they are specifically aligned to our annual strategic goals (for example, are my three “to do’s” helping me generate revenue, increase awareness of SMG, or growing our capabilities in a specific area?). Then I do those three things, no matter what, no matter how long it takes to cross them off the list – ensuring that I don’t let the urgent get in the way of the important.

    I’m really interested in time management and effective prioritization (“working smarter vs. longer“) – I’d love to hear about your tactics in the comments; I’m also planning to explore other systems and approaches in upcoming posts. Let me know what you’d like to hear about!

  • Don’t blame the system

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

    Mark Evans has started an interesting conversation around my tweet (part 1 aim for success, part 2 the VCs respond).

    I posted my comments about building a culture of better informed founders and early employees. But then I realized that maybe all of my comments are aimed at misbehaving children. When the real intent should be to correct the parents. That’s right I just called most startups and their founders, misbehaving children. But the culture is broken. It is broken with technologists and designers looking for handouts.  It is broken with every Tom, Dick and Sally calling themselves an entrepreneur because they think since they’ve had a “great idea” someone should give them money so they work on it because they are the next Zuckerberg.

    This is ass backwards. And it’s part of the problem.

    Something for Nothing

    You don’t get something for nothing. There is no such thing as a free lunch. There are very few people that might invest in you to work on your dreams. Your parents. Your spouse. If you are lucky, your children. It is the belief that “I should get funded because I’m a good person” or “I went to university” or “I worked for a startup” or “I built a prototype” or “I have a pitch deck”. It is thinking like this that is absurd.

    “The reason most founders think there is not enough capital is that they get rejected when they go looking for it. And one of the main reasons they get rejected is that their opportunity does not fit what VCs are looking for” – Mark MacLeod (@startupCFO)

    Raising institutional capital is about building a business that matches the expectations and risks necessary to provide returns to the investors. Not every business should raise growth capital. And that is okay. Not every business is fundable at every moment in time. That is okay too. We need to get better at helping educate founders and early employees and others about how to demonstrate their ability to build a successful business and mitigate the risks associated at the different stages of corporate development.

    Abundance and Scarcity

    Are we suffering from a shortage of entrepreneurs? NO! We are suffering from a shortage of amazing companies. There are structural complaints about the system and some have trickle down impact on early stage companies. The limited number of LPs. The difficulty in VCs in raising funds. But even in difficult environments there are winners, look at Mark McQueen’s post about the truth of VC returns. Even during the dark days, there are VCs generating returns and getting a part of the carry.

    The reason that we talk about Rypple, GoInstant, Radian6, Q9 Networks, Dayforce, Kobo, Achievers, Lightspeed, Shopify, because they are successful companies or building successful companies. They are able to raise money or get acquire or operate profitably. They are looking at how to effectively deploy capital to grow intelligently and faster.

    We don’t have a shortage of entrepreneurs of good ideas. We have a shortage of great businesses. Mark’s argument is that even if you invested in the big Canadian deals early, you would still be struggling. This is a hard game. It’s a game, that I am just starting to understand the scale and scope of from a different viewpoint.

    Use the Force or STFU!

    “Life is to be lived, not controlled; and humanity is won by continuing to play in face of certain defeat.” – Ralph Ellison, Invisible Man

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

    I think we need to stop bitching about the systemic things that we can not change as entrepreneurs. It’s not any easier to raise money for a Canadian in the US, unless you have the pedigree, connections, demonstrated traction and mitigated risks necessary. However, if you are able to raise capital in the US, you’ll find that US investors have more capital to deploy, are more aggressive in deploying capital. You will also see that Canadian VCs face a different marketplace and structure, invest in more companies as a percentage of funds under management, and can be successful. These are not things you can change directly. We can lobby, we can vote for MPs and MPPs and political parties that support the structural changes. There are others like the CVCA and NACO that are also lobbying on behalf of their members.

    “Instead of focusing on the things you can’t change, focus on the things you can change.” – Juniper

    So rather than worrying about whether we should follow a Yozma model or a Helsinki model. You should worry about the things that can change. Go read about accretive milestones and getting traction. And figure out how to mitigate the risks associated with your business. Go get customers! Go build a successful business. Because if you build a successful business, they will come.

  • Growing successful companies

    Mark Evans (LinkedIn) wrote a blog post about my tweet. The blog post captures much of my sentiment and frustration around entrepreneurs. I commented about entrepreneurs learning about how to build a successful, high growth emerging technology companies. And there are lots of ways to learn what is considered a successful company. And a great way to learn is to learn from others that have been in the trenches. Debbie Landa (LinkedIn) and her team at Dealmaker Media have done most of the hard work for you.

    GROWtalks

    They have brought together a great event. Attending the event won’t bring you investment. It won’t make you a successful company. But it might increase the odds. They are bringing together an amazing set of entrepreneurs. And they are bringing them to Toronto and Montreal to share their experiences, stories about what worked and didn’t work for their companies.

    Local Events Matter

    You can and should get your ass on plane and head to New York City and San Francisco to attend events. But you don’t always have to. There are advantages to attending these events locally.

    1. Local connections can help you see The First Rule of Real Estate – you can find and connect with local talent. Whether that is for funding, moral support, hiring, etc. There will be people you do not know yet. Easy way to find them out.
    2. Travel costs are less for regional travel. If you live in Ottawa or Montreal or Halifax, you can make it to Toronto or Montreal by plane, train or automobile for a lot less than travelling elsewhere.
    3. Travel time is lessened. You can spend a day.

    This all assumes that the event is providing amazing content that you would travel to consume.

    World Class Content

    The content that Debbie and team have assembled is unbelievable. If you don’t know who these people are, my advice is take a little bit of time and use the GOOG. These are entrepreneurs that have seen the ups and downs, the ins and outs of successful businesses.

    Every single person is worthy of a keynote presentation at a larger conference. This is not a vanity presentation. They are on stage sharing information about their specific expertises in building successful businesses. It’s not Mark Organ talking about random things, which is fun, but Mark Organ talking about leveraging disruptive technology in fund raising. Holy crap! You want to learn how Mark used AngelList, LinkedIn and other tools to raise 2 of the most impressive rounds of capital in Canada…quickly.

    Every single person speaking, every one, will be providing expertise about what they did to build a successful company.  Here is the list of presenters in Toronto:

    You want more details, check out my first post. Do your homework. But this is an amazing opportunity.  The lineup is different in Montreal. It includes 2 of my close friends, but they are 2 of the best people in helping startups become successful. Mark MacLeod and Alistair Croll . Unbelievably kind and intelligent people, who beyond that know WTF it is startups need to do to become successful. They like the others are the best of the best.

    Our Commitment to Successful Companies

    There are initiatives like Startup Visa Canada and the Upside Foundation that we strongly support. And we’re committed to helping provide education to entrepreneurs to help them to build successful companies.

    We’ve committed to provide a limited number of $100 discounts. I am not going to tell you how many. If you are building a successful startup, and you want to hear the tactics and advice of other entrepreneurs that have been massively successful in building their startups, sign up now and save $100 before the discount expires.

    • GrowTalks Montreal – February 19, 2013 – Register use promo code: startupnorth
    • GrowTalks Toronto – February 21, 2013 – Register use promo code: startupnorth

     

  • Build It

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

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

    Well sometimes you just have to build it. 

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

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

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

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

    LinkedIn Hackday

  • The companies I should have paid more

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

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

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

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

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

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

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

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

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

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

     

    Things we paid too much for:

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

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

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

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

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

     

  • Mission Accomplished – StartupVisa Canada

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

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

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

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

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

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

  • The first rule of real estate

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

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

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

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

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

    Fugetaboutit!

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

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

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

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

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

    Traction trumps geography

    Non Linear Growth

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

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

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

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

    Avoiding Unnatural Acts

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

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

    What to do about location?

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

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

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

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

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

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

    Why Toronto? And Why Now?

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

    1. Talent Pools

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

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

    2. Excited Customers

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

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

    3. Low Cost of Operations

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

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

    4. A Changing Startup Landscape

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

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

    Planning Ahead

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

    1. Don’t forget your friends down South

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

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

    2. Use Global Benchmarks

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

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

    3. Pay It Forward

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

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

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

    Conclusion

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

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