StartupNorth

  • Your Facebook app is a disaster, and I was right.

    In the middle of the Facebook App frenzy (was that a whole 4 months ago?!) I wrote “Delusions of Facebook” to try to dissuade as many startups as possible from going down that path. I hate to say it, but man — I was right.

    The fact is, Facebook Applications simply have not become great businesses. The few who have made any revenue are also taking almost all of the available revenue, and it is the startups who focused on things like cross-application advertising that made the most.

    Facebook Applications are an unmitigated disaster from any perspective

    tdtrust1.pngThe most glaring example of this comes straight out of Toronto, the TD Canada Trust “Split the bill” application, which I have to admit seemed like a decent idea to me when I first heard about it. I mean, it seems like the perfect app for the Facebook demographic right? Apparently not. The application, which sports 6 Daily Active Users is a failure. If this were Uncov, I would be saying much meaner things.

    “$plit It” is, in case you are wondering, beaten squarly by the the “Which millionaire should you sleep with?” application, which has 32 times the number of users and presumably has significantly less grand goals. There are examples of underperforming Facebook applications everywhere however, it isn’t just TD Bank that has struggled with the concept.

    The last stand, unstood(tm)

    One argument could be that Facebook Applications might attract fewer active users than a valuable Web Application, but they are more valuable users because Facebook let’s you leverage the “Social Graph” and the network effects of Facebook exposure. While I thought I debunked that idea in my last post, I still hear the argument sometimes.

    Sadly, the numbers don’t seem to add up there either. The best example out there is the Causes Application.

    Cause Users Donations
    Cancer Research 3,005,750 $58,520
    Stop Global Warming 1,681,907 $20,908
    Animal Rights 1,232,162 $19,423
    Against Child Abuse 927,120 $7,685
    Save Darfur 800,674 $12,528

    Read/Write Web recently broke down the numbers for the top-5 Causes applications (Causes lets anyone create and application to support a particular charity). As you can see, even with over 3million users (more than you will ever get signing up for your application by the way), the Causes application still only managed to raise $58,520. If I remember correctly, my elementary school was regularly raising similar amounts of money by selling things like chocolate bars and pens.

    Junk Food for your Business Plan

    Building Facebook Applications is not a business plan, unless you are a web developer who does freelance Facebook application development (now, there is a place you can make money on Facebook Applications). It is the McDonalds equivalent of a business plan. Quick, cheap, greasy and ultimately unfulfilling.

    I am glad that the hype is dying down, but even as FacebookCamp Toronto continues to draw a crowd of easily over 400 (and was a lot of fun, I admit), I worry that there are some bright startup-ready developers out there who still have Delusions of Facebook. Snap out of it, and get on with business.

    Moving On

    It is time for you to take your bright ideas and to put your energy in to things that can give you a return on your investment. I think even Omar saw the light, as he and his team never did venture in to the Facebook Application line of business.

    The web is the most powerful platform we have, and just because someone comes along and says “hey, we made it as easy as a Big Mac” doesn’t mean you need to give them all the upside. Focus on the value you are creating, find a market that wants your product and then start building.

    Eat your vegetables, you will be rewarded greatly.

  • Novell acquires PlateSpin for $205M

    Novel PlateSpin LogoPlateSpin, based in Toronto, has entered into a definitive agreement to be acquired by Novell for $205M. The company, which makes a suite of solutions for the server virtualization market, was founded (for the second time) in 2003. You see, PlateSpin is a restart.

    PlateSpin1 was founded in 2000, raised $1.9M in 2002, and closed up shop in 2003. PlateSpin2 was restarted with new management in 2003, raised $3.5M from Toronto venture funds Covington Capital, Castle Hill Ventures, Skylon Capital, and Four Quarters, and another $7M in 2005 from Insight Venture Partners of New York.

    Word is that PlateSpin2 had trailing revenue of $20M, and that Citrix, Microsoft, and Unisys were all vying for the prize. Congrats to PlateSpin and its backers on the Novell acquisition. We’re chalking this up as a win. While it doesn’t put PlateSpin on the road to VMware glory ($22B, P/S 16.84) it is a solid exit for all involved… especially the funds. I am guessing they cut a nice slice of pie as part of the restart.

  • VeloCity – Incubator 2.0 or something completely new?

    velocity.pngWe have a bit of a thesis here at StartupNorth, and part of that thesis is that the biggest problem with the startup environment here in Canada isn’t that VC’s aren’t investing as much as we might like these days, or that American VCs are scooping up all the good deals (sure, those are all problems too), but we think that the biggest issue is that there is no push that gets an early stage idea from the notepad to the web.

    18-30 year olds just aren’t starting and following through (to failure even) with those great ideas. This in turn kills the number of startups created later on once that group grows up, and with no mass of startups to move things forward, we end up with many of the problems we have today.

    This has nothing to do with not having a Silicon Valley equivalent, and there is no simple solution like “start a Y-Combinator Canada”, instead we are going to need to do a lot of trial-and-error experiments before we start to get an idea of how to really get to the heart of the issue. So, any time I see someone stepping up to try their hand at it, I get excited.

    This coming fall The University of Waterloo will be The Minota Hagey residence in to a “Mobile + Media” incubator that will house 70 UW students who are “UW?s most ambitious, entrepreneurial and tech-savvy” and “will not only live together, but they?ll also work in teams to develop ideas with commercial potential, either as part of their regular coursework or as an extra-curricular initiative.”

    125548590_1c9b44d817_m.jpgThe common areas of the residence will be renovated over the summer to create a large common/presentation space, a boardroom/meeting room and a project room/mobile device lab. The residence will receive technological upgrades to support the work of the students and to enhance the living environment (ie wifi, increased bandwidth, large project screen, audioconferencing, plasma/LCD screens, workstations, high-end programmable lighting…foosball!)

    While I am pretty sure that Plasma TVs and programmable lighting (prime prank-hacking territory!) aren’t exactly critical to getting startups off the ground, this is all starting to sound pretty cool. It is definitely new and cutting edge for Canada.

    So, the idea is to pile 70 keen and smart students in a dorm and to see what sort of partnerships and startups might spring up. Sounds awesome so far. VeloCity is a great concept, and I can’t wait to start hearing about some of the startups that come out of it.

    For every bit of excitement, I do feel an equal amount of trepidation. This is the kind of thing that is easy to get wrong. All you need is for the culture of the place to go off the rails just a little bit and all of a sudden you just have an expensive dorm with a fancy coat of paint. While I am sure that there are a slate of mentors lined up and a full calendar of events, you need people there almost every day to influence the direction of the students.

    This pretty much makes Waterloo the go-to university for students serious about doing a startup (excepting those who just don’t go do university at all). In an ideal world this would available to everyone, but it is only for Waterloo students. If you are a Waterloo student, you can apply here.

    Someone call PizzaPizza and negotiate a special deal, it’s going to be a big year for late night delivery at Minota Hagey.

  • RubyFringe Conference in Toronto

    rubyfringe.pngA lot of startups seem to be building their web apps in Ruby On Rails and have been for a while, so I thought it was worth mentioning that Toronto is home to the least-boring Rails conference so far. RubyFringe. This conference seems to have come together due to sheer frustration with the current Rails developers conferences.

    I have never been to a rails conference, but it isn’t hard to tell from the outside that they are becoming increasingly commercial, boring and profitable all at the same time, and I would guess that serious rails developers aren’t very attracted to that.

    Congrats on getting this going, I hope it is a sellout and that I get invited to a super special VIP party!

  • Press for Startup Launches – 10 tips

    Here is a great post on getting press for your launch.

    I can’t tell you how much of a difference there is between startups who make it easy for you to write about them and startups who make it hard. Sometimes it is like pulling teeth to get information and other startups go as far as writing “sample blog posts” that really frame their key points properly.

    This is all stuff that I had no clue about until I got on the other side of things with StartupNorth. Now I realize how it is really up to the startup to make things go smoothly.

    There seem to be very few mainstream press outlets in Canada who are writing about startups much at all. I think that is why startups blogs in Canada play such a crucial role now, because you won’t be getting much love from the FP or Globe’s business section (even though if they did some analytics, I would guess their readers would be really interested). Instead, you are left with the likes of us.

    Read on for David’s 10 tips
    (more…)

  • GigPark – share reviews with your friends

    logo170.pngGigPark, a Toronto, Ontario startup, has finally come out of private beta and is now live.

    GigPark is a site to review and recommend local service providers amongst your friends and contacts. That means that if you hire a plumber for example, you can review his/her work and it will be shared with other people who you have friended, just like Facebook or any other number of social applications.

    This is in contrast to most current review sites, which give you reviews about service providers that could be written by anyone. With GigPark you can get recommendations directly from your friends, either by viewing service providers that they have reviewed already, or by asking for a specific recommendation. Many review sites such as Amazon.com and Tripadvisor try to build the authority of the reviewer by showing you information about them (such as other reviews they have written, etc), but they remain ripe with fraudsters and hucksters and it is basically impossible to eliminate those people unless you take GigPark’s approach.

    gigpark2.pngGigPark has a very tight focus and it cuts through a lot of the mess of recommending new things to friends with a clean approach that reminds me of FaceBook before they launched FB apps. GigPark has also launched a Facebook app to compliment their service. The app is much more tightly integrated with FaceBook than most apps, which is nice.

    GigPark is taking a very fundamentalist approach to using the social network (or Social Graph as it now seems to be called) in their design of the service. Where it would be easy and lucrative for GigPark to find ways to publicly expose these recommendations, and it would also be profitable to resell the content, Noah and Pema assured me last week that they focus was on creating a safe and trusted space for users, and that might mean giving up some short term opportunities. That includes not selling off the reviews as “content”.
    If they get a significant amount of people signed up and engaged, then this approach is going to pay off by entrenching GigPark as the most effective review site. The use of a social network gets around the significant authority and spam problems that we mentioned in our review of HomeStars. The bet is however, can they build that audience?

    The hitch is that GigPark falls squarely in the YASNS category and getting people to sign up for a new site and then to have them re-create their social network is tough. The pitch is that GigPark has a very defined and obvious value, and the opportunity is huge.

    GigPark is self-funded and is run by Pema Hegan and Noah Godfrey.

    My profile is here, add me!

  • StartupCamp Waterloo 2 – Tuesday February 26th

    startupcamplogo.pngJust a reminder that next week on Tuesday February the 26th is StartupCamp Waterloo. We will announce the next StartupCamp Toronto there and hopefully a few other things as well.

    Austin Hill will be kicking things off and I expect that the pitches will be as much fun as last time. The thing I really liked about StartupCampWaterloo (and what we tried to achieve in Toronto) was how laid back things were and how “green” the pitches were.

    I can’t wait to hang out and meet some more aspiring Waterloo startups.

  • As The Web Turns – The tales of Capazoo

    250px-flag_of_montrealsvg.pngMontreal seems to be the hotbed for controversy in the Web 2.0 world in Canada. Where else could you find someone who will sell you the Brooklyn Bridge and someone else who will supposedly pay you for joining their social networking site? It is the latter, the multi level marketing site called Capazoo.com that is bringing us the latest dirty laundry.

    Capazoo is a social networking site, in this case it is a lot like MySpace, which charges anywhere from $25 to $35 a year for a membership. The big idea is that the more people I get to sign up, the more referral kickbacks I get. We’ve all seen this before in other disguises, in the case of Capazoo, they have attracted their share of B and C-list celebrities.

    I won’t even try to recount the whole story, but it seems to involve some brothers, at least one of which has been convicted of fraud before, a bunch of ex-NHL hockey players, some online porn kings and a bunch of investors who still don’t seem to know what is going on.

    capazoo.pngLa Presse, a French-Daily in Montreal has been digging in to the story (google translate) and it isn’t pretty. The two founders, who are also brothers, are now in court fighting over who has control of the company and they are also sorting out the small matter of who embezzled how much off the top from the investors money (one side is claiming it was a “10% commission on funds raised”).

    There was also the small matter that one of the two guys who were managing the company had decided that pornography should become a big part of the sites content (who knows — they may have made a fortune doing that), then add on the death threats that were going around and it seems you have something worth writing about.

    Heri has been covering this at Montreal Tech Watch and his last post on the subject stirred up quite a cat fight in the comments. You just can’t make this stuff up folks.

    I am not sure what to make of the whole thing. The worst part is that these guys have sucked a lot of investable money out of Montreal and have left a long trail of investors who probably now have a bad taste for web startups. I haven’t written much about Capazoo up until now because I always felt they were a very poor reflection of the entrepreneurs I know in Montreal. It remains one of the most exciting startup cities in Canada and judging by some of the great projects and startups I have been hearing about, it is going to stay that way for a long while.

  • IOU Central – Canada gets its first Peer to Peer Lending Company

    iou_logo.jpgIOU Central, a Montreal based startup, is launching today. They have staked their claim as Canada’s first Peer to Peer lending company. We covered the funding announcement of Toronto based CommunityLend back in December.

    Peer-To-Peer lending has been maturing quickly as a concept on the heels of successful sites like Zopa and Prosper, but Canada has so far had no such providers. Peer to Peer lending is a concept that takes a large group of lenders who are willing to lend out smaller amounts of cash and connects them with borrowers who need access to cash at a rate that is below the standard credit card rates, but they are generally willing to pay a higher rate than if they had to go to a bank. A lender can be anyone with a bit of extra cash that they would like to get decent returns on.

    iouscreen.pngFrom a borrower’s perspective, IOU Central operates much like any other lender, in that a borrower’s initial “rating” is based primarily on their credit score. You can however supplement that score by uploading a number of other documents to do things like prove your income, itemize your monthly expenditures and other things that can bump up your overall score.

    IOU Central groups borrowers into 5 tiers: A, B, C, R, and HR. Borrowers in each tier pay IOU Central a service fee on top of the loan of 1%, 1.5%, 2%, 2.5%, and 3% respectively. Service fees varies because IOU Central expects to have to spend more to recruit lenders interested in higher risk borrowers and expect to face higher operating costs servicing loans to higher risk borrowers.

    IOU Central charges Lenders a Lending Fee, which works out to about 0.5% annualized, calculated based on the amount of outstanding loans you have remaining each month.

    The company was conceived over a year ago and their site has been in development for just under a year. There are currently 7 full time employees and they have raised a round of funding which includes Angels and VCs, but they did not disclose the amount of funding.

    I asked Sam Bendavid, VP of Business Development for IOU Central, what sort of regulatory or legal issues they encountered running up to launch and he indicated that things were quite smooth. IOU Central is registered in Quebec as a lender and they worked closely with their law firm in developing their set of Legal Agreements.

    IOU Central will be focusing most of their initial marketing on potential lenders. This is a smart move as lenders will be far more scarce than borrowers. Perhaps the days of getting a loan from Uncle Vinnie are over, and Canada now has a safe, regulated, and legal place to secure peer to peer loans.

    Update: The Star provided some further coverage a few days later.

  • Where are all you brilliant startups?

    Just a reminder to all of you, any of you, brilliant (and not so brilliant) startups. You can get in touch with us and tell us about your startup.

    We can’t promise that we will profile every startup that comes in, but we can promise that we will try. The number of Canadian startups getting in touch to get profiled has tapered off in the last few weeks and we would love to see more. If you really want to get a head start, fill out this form and let the reviews begin!

    While we do cover a lot of events, post a lot of commentary, organize a few events, and have things like our great series on Angel Investors, we see profiles and big announcements as job #1, and the more help we get from you all the better we can be.