StartupNorth

Tag: Startups

  • Meet The Woz

    OCE Discovery 10, May 17-18, 2010

    Ontario Centres of Excellence are hosting their innovation-to-commercialization conference again in Toronto. The OCE Discovery 10 conference is happening May 17-18, 2010 at the Metro Toronto Convention Centre. They have a history of bringing great keynote speakers including Clayton Christiansen, Nassim Nicholas Taleb and Sir Terry Matthews. 2010 is no different, the OCE team is bringing Steve Wozniak to Toronto.

    iWoz signed by Steve WozniakSure we know Steve from the Apple I and Apple II computers. You might even know him from Dancing with the Stars. You probably didn’t know that the Gipper awarded him the National Medal of Technology, the highest honor bestowed America’s leading innovators, in 1986. And Steve Wozniak is still working on new technology. He’s a the chief scientist at Fusion-io working flash-based memory architectures for storage. He’s on a member of the board for member of the board of directors for Jacent, a developer of cost-effective telephony solutions, Danger, Inc., developer of an end-to-end wireless Internet platform, Ripcord Networks and others.

    He’s an engineers engineer and knows a thing or two about tech startups. He’ll be at OCE Discovery from 2:00pm – 3:30pm and this includes a book signing opportunity (Mac nerds rejoice, even more impressive if you have an Apple I or Apple II to get signed).

    “Every engineer—and certainly every engineering student—should read this book. It is about the thrill of invention, the process of making the world a better place, and the purity of entrepreneurship. I, Woz is the personal computer generation’s version of The Soul of a New Machine. It is, in a nutshell, the engineer’s manifesto. I hope that the so-called “innovation experts” and MBAs choke when they read it.” – Guy Kawasaki 

    The rest of the OCE Discovery 10 schedule is packed full of startups, policy makers, innovators, academics. We’ll be hosting a DemoCamp, while not currently as cool as the “Ontario’s Next Top Young Entrepreneur Start-up Pitch” happening on Monday, May 17 which will give grant the winning startup a “non-recourse micro-loan of up to $18,000 ($6,000 per team member) to launch a new start up, have access to advisory services and have the opportunity to network with key mentors and private investors”. It is a great opportunity for local startups to demo their wares and do demand generation with local investors, government agencies and businesses.

    We’ll be doing a bunch of work to clarify what type of startups can maximize the value from presenting and start accepting nominations for demos in the next couple of weeks. What DemoCamp for details.

    • Discovery DemoCamp
      Tuesday, May 18, 2010 3:15pm-4:15pm EDT
      Inspired by Toronto’s Tech community, see showcase technologies presented in 5-minute demos by some of the communities hottest inspiring web, mobile and social media startups.

  • We have maple syrup and beer

    I was reading Anil Dash’s New York City is the Future of the Web post over the weekend, and there is a great list of startups (and funders) based in NYC. The list is pretty impressive starting with the money folks including Union Square Ventures and Fred Wilson to Founders Collective and Chris Dixon. The startups Foursquare, Hunch, Etsy, Kickstarter, and 20×200. I was starting to think that the grass might be greener in NYC. But I was reminded of the great things going on in Canada when I was redirected to the 2009 Canadian New Media Awards finalists.

    cnma-finalists-announced

    There is a great list of companies that are finalists for the CNMA. You can round this list out with the great list of companies announced as part of the CIX Top 20.  There are a lot of great Canadian startups that continue to execute, find customers, and raise their profiles internationally.

    These companies show the breadth of solution and corporate development of the Canadian startups. The startups are spread across the country, but entrepreneurs in Canada are building great things. Feeling good about the state of startups, hoping that Canadian funding scene continues to evolve, and that these companies continue to have the opportunities to change the world.

  • SmartHippo continues plot for world domination

    logo_smarthippo SmartHippo has named the former LendingTeam GM, Lori Collins, CEO. And they are expanding their European footprint through an exclusive license and partnership with Finacialred in Spain. This is definite traction and a step further down the growth path for George and the team in Montreal. A world-class CEO, a expansion into the European marketplace that allows a local entity to do the sales and marketing allowing the team to continue to work on the software platform. Super cool. 

    “As General Manager of the LendingTree Exchange, Collins was responsible for sales, relationship management, and product management for the LendingTree lender network. She was part of the executive team which increased revenues from $7 million to $476 million over seven years.”

    So what is SmartHippo?

    “SmartHippo.com uses the power of community to help consumers find the best mortgage rates and save money. SmartHippo allows any individual to post information and feedback on the rate they received, and to compare rates with other members of the community with similar profiles. Members of SmartHippo can see real rates reported by real consumers, and sort through banks based on feedback posted by other members of the community. “

    SmartHippo is an open, transparent marketplace where consumers help each other find the best financial products. Basically all of the those hidden gotchas, the little things that are often hidden in the fine print, that you only discover after a difficult situation. It’s about providing a platform that consumers can ask questions, share reviews, compare rates and experiences to make make informed financial decisions. SmartHippo is the underlying software platform that allows these conversations to take place.

    Huge day for SmartHippo. And there is an opportunity for local startups (well local to Montreal) to hear from a Valley veteran running a hot Canadian startup. Lori Collins will be delivering the closing keynote at StartupCamp Montreal on October 15. If you are in the Montreal area, the event takes place at the Society for Arts and Technology, 1195 Saint-Laurent boulevard, Montreal [map] from 6pm to 11pm. Make sure you take the opportunity to participate and meet George, Lori and the team.

  • Assetize: Adsense for Twitter

    This is part of a series on Extreme University and the first group of graduates from the Summer 2009 program.

    assetize A Toronto-based startup that first went live in May 2009, Assetize has been focused on helping people turn their accounts into assets. The premise is that, similar to domain names, online accounts like email addresses and Twitter accounts also have some fundamental value because of their usernames or audience reach. However, unlike domain names – which are sold and parked in a multi-billion dollar industry – these values haven’t been realized yet.

    I met Saif and the Assetize team recently when I visited the Extreme University program, where they are one of the startups in the incubation program by Extreme Venture Partners. Assetize is trying to be the AdSense for Twitter. Just as people are able to monetize their websites and blogs through AdSense, Assetize lets users include ads in their Twitter accounts effortlessly, and helps advertisers reach their target audiences. They have built a proprietary technology in-house that analyzes each account’s content to ensure that the ads being served are relevant to followers.

    Quick Analysis

    Management Team

    The management team consists of Saif Ajani, Mike Rhemtulla and Minaz Abdulla. Separately, they have worked with numerous Fortune 500 companies as tech consultants, and have also launched 2 previous startups together. This is a young team that has shown that they can deliver in a short time period. Building a strong set of advisors and continued demonstration of traction will help them go a long way. As a side note, I’ve worked with Minaz in the past (at Ambient Vector), he is an incredibly talented engineer that has demonstrated his ability to produce and ship great code.

    Market

    According to the online marketing research firm, eMarketer, companies are expecded to spend upwards of $32B in online advertising by 2011, with almost $2.9B of it going towards social networks. Although MySpace and Facebook have been the most dominant networks thus far in terms of drawing ad dollars, Twitter is exploring advertising. As people spend more of their “media time” on social sites, agencies and brands are seeking new channels and opportunities to create connections and advertise to audiences. This is a growing space that is ripe for innovation and new opportunities.

    Product

    The goal of the product is to help users increase the value of their social media assets. For Twitter users this is a combination of relevant content, reach and connection. Users can use Assetize to find content to attract, retain and engage their connections. The process to setup the Assetize service for a Twitter account seems very simple and straightforward. Users have a one-step process to register their accounts and provide a list of topics that they tweet about. Assetize provides access to over 100,000 feeds that can be used to find and publish value-added content. The idea is that more and better content attracts a larger base of users and inject ads into the Twitter stream that have a higher response rate. Analytics is provided on links and conversations.

    The company is currently working with advertisers to build out the functionality. The core of the Assetize product is an ad matching engine that analyzes previous posts and matches users to available/relevant ads.  AdSense’s value comes from making its ads targeted to the content on web pages, and the Assetize engine aims for contextual, relevant Twitter ads for each author based on posts and conversations.

    Business Model

    Similar to other online ad networks, Assetize earns a commission basis, and share revenue with Twitter account owners. Since this commission is performance-driven, it’s a good incentive for Assetize and its members to optimize accounts so that advertisers receive good returns on their investments. The business model requires scale to have a large enough capacity of users and a large inventory of ads to continue to ensure relevancy to each party.

    Strategic Relationships

    Assetize is a young company. They are starting to build relationships with advertising agencies to help bring their clients to Twitter. As use of social media continues to grow, particularly among the lucrative 18-24 audience, no doubt many brands will look for easy, familiar steps to test advertising on Twitter. The team is eager to explore these relationships, if you are an advertising/marketing/social media agency looking to explore a relationship, they are actively looking at how to partner and work together.

    Competition

    Izea, the company behind PayPerPost for blogs that has a raised a total of $10M in VC funding, recently launched SponsoredTweets, a service that pays Twitter users to write short posts about its clients’ products. It requires more effort from Twitter users than Assetize’s service. The Twitter advertising ecosystem is continuing to develop and evolve, there is most likely room for a variety of models and engagement strategies.

    Other competitors include Be-a-Magpie, a service based out of Germany and Great Britain, and RevTwt. The coverage they received earlier in the year undoubtedly led to a good user base, but their list of advertisers seems to be lacking. If Assetize is able to overcome these two startups, they’ll need to gain better access to advertisers than its competitors were able to.

    There is always existing social media ad networks. Each of these companies has relationships and inventory, though they are not easily translatable into an effective 140 character campaign. 

    Summary

    It’s a very interesting product. There is an opportunity around defining effectiveness of advertising for social media sites, but early the familiarity of CPM and CPC that is brought Assetize may help drive early adoption with agencies and brands. There are challenges in securing a large audience, a large inventory and strong relationships with agencies. Assetize has an interesting value proposition for users looking to monetize their Twitter “assets”. Great start for an ExtremeU company!

  • Hockey sticks and consultants

    Exponential Growth Curve

    I’m always giving consultants a hard time. It’s not that I dislike consultants. It’s not that I think that consulting is a bad business model. It’s that a consulting model is very difficult to get exponential growth. You know that hockey stick growth curve, well it’s actually an S-curve but early it looks like a hockey stick, that is so important. I’m talking about real numbers, not projections. Revenue. Users. Customers.  (Need help figuring out what you should be tracking? Go read Dave McClure’s AARRR! Startup Metrics for Pirates). And go read Mark MacLeod about why compound growth changing your funding requirement.

    Consulting is a linear growth business. It grows based on:

    • # of consultants billing
    • # of billable hours
    • hourly rate

    Unfortunately, all of these are limiting variables. There are examples of very profitable firms and corporate structures that enable a very profitable model. I’m not discounting the profitability of the Big5 consulting firms. Consulting firms are generally limited to the number of consultants. Corporate culture are defined by the people.

    The number of billable hours is a limiting factor. There are only 8760 hours in a year. You can’t work every hour. You can’t bill every working hour. It’s just not possible. Billable hours are the currency of consulting and legal firms. Many firms require 1700-2300 billable hours/year. Just think about this: 2300 hours/year =  46 billable hours/week + 2 weeks of vacation. If you assume a 80% utilization rate, i.e., 80% of your time is billable and 20% is on overhead/email/meetings/etc.  To achieve 46 billable hours you need to work 57.5 hours per week.

    Hourly rate is generally set by the skill set and the market. Flippa. Rentacoder. 99designs. crowdSPRING. Elance. There are others willing to do it for less.The market determines a consultants hourly rate. 

    So for an independent consultant billing at $200/hour on a 57.5 hour work week at 80% utilization would have revenues of $460,000/year. This is an extremely high rate. Looking at the NASDAQ 100 using Cognizant averages $35,892 versus Apple ($1,014,969), Ebay ($551,049), Microsoft ($663,956) and others. This might be a little extreme. Don’t believe me, Hoovers.com suggests that IT/software consulting has average revenues of $160,000/employee (MarketResearch.com has this closer to $100,000/employee). Realistically the easiest way for a consulting firm to achieve exponential growth is to grow to the number of consultants working. And the risk of exponentially growing the number of consultants is that you kill the culture that attracts many people in the first place.

    “But isn’t the consulting company itself startup? No, not generally. A company has to be more than small and newly founded to be a startup. There are millions of small businesses in America, but only a few thousand are startups. To be a startup, a company has to be a product business, not a service business. By which I mean not that it has to make something physical, but that it has to have one thing it sells to many people, rather than doing custom work for individual clients. Custom work doesn’t scale. To be a startup you need to be the band that sells a million copies of a song, not the band that makes money by playing at individual weddings and bar mitzvahs.” – Paul Graham

    That said, consulting is a great way to take the risk out of a startup. The best consulting projects are the ones where you can build the software you want to sell as a product. This assumes that you have necessary legal agreements where you retain ownership of the intellectual property created during the consulting gig. This is often referred to as “bootstrapping” (read Paul Graham’s Fundraising Survival Guide to understand the tradeoffs).

    There’s nothing wrong with consulting. It’s a perfectly viable career. It’s a perfectly viable business model. But do the math, it doesn’t scale like a product company.

  • Founders versus early employees

    Not everyone can be a founder. We talk about the founders of startups and companies. We focus on the founders. The founders get press coverage. They get invited to speak at events. Sometimes they get rich. But for every founder, there is an early employee that takes near equal risks in joining an early-stage company.

    Steve Blank divides the individuals associated with startups as:

    • Founders
    • Early Employees (Employees # 1-25)
    • Later Employees (Employees # 26-125)

    The majority of his division is about the temperament of the individual as related to risk and dealing with chaos and uncertainty. Not every one can be a founder, i.e., can you imagine trying to start a company with 10,000 people? It’s just unfeasible.

    “Being an early hire at a startup gives an individual the ability to make tremendous impact on an organization as it grows – and both the founders and those hires should know it.” David Beisel

    We need to celebrate the employees at startups. We need to make sure that early employees are compensated, incented and rewarded for their decisions to join startups. Early employees have a huge impact on the growth and culture of a company.

    How do you compensate early employees? Paul Graham provides a model for calculating value. As Naval points out that you still need to pay employees market rates, but with all employees you need to ask yourself “whether she [a new hire] is likely to increase the next round’s share price”. This should force companies to think about building value with each early hire, and not just filling a position.

    Title Range (%)
    CEO 5 – 10
    COO 2 – 5
    VP 1 – 2
    Independent Board Member 1
    Director 0.4 – 1.25
    Lead Engineer 0.5 – 1
    5+ years experience Engineer 0.33 – 0.66
    Manager or Junior Engineer 0.2 – 0.33

    Table 1: Options Grants in Silicon Valley for Series A from VentureHacks

    The numbers from VentureHacks are guidelines. They are rough estimates.Any one have sample option grants in Canada? Are the percentages different? I would assume that they are very similar but given the lower valuations and this may change the salary/options mix.

    Remember the goal is to incent early employees to have an emotional ownership of the product and company they are building. Equally said, potential employees need to understand what they are getting into. Darmesh Shah has a great list of insights for employees joining early stage companies. Early employees are critical for startups, and we need to recognize that not everyone can be a founder.

    I would love to hear your thoughts on being a founder or an early employee.

     

    Additional Resources

  • Pitching fastballs

    “Do you have some time for a coffee or beer to chat about my startup?” – Anonymous entrepreneur

    I’m happy to talk to entrepreneurs, learn about your startup and even help you out if I can. Since I have a bad habit of over committing and taking on too many activities. Let’s see there’s DemoCamp, Founders and Funders, StartupEmpire, my job (yes, I work at Microsoft), and a personal life (think 2 kids under the age of 2). Things are chaotic and busy, I’m starting to ask entrepreneurs to help me. So without more information, the answer to the above question is “maybe, help me understand why we should me”.

    This sounds familiar. It’s similar to the problem faced by investors (made more pronounced with time-constrained applications), and journalists, and customers.

    “If we get 1000 applications and have 10 days to read them, we have to read about 100 a day. That means a YC partner who reads your application will on average have already read 50 that day and have 50 more to go.” – YCombinator How To Apply

    We talk about an Elevator Pitch. Except this isn’t a world where you might have forced my focus of attention by being artificially trapped in an elevator. The goal is like a newspaper headline. It’s to make me read the rest of the story. You need to stand out. You have to be able to simply, clearly convey what your startup is going to do. The YCombinator team do a great job describing what they look for in How To Apply. The initial filtering criteria for a YC application are obviously different than the criteria that journalists use to find stories, and different that what I use when determining to take a meeting or how I can help a startup. But the process is the same.

    “What is your company going to make?" This isn’t the question I care most about, but I look at it first because I need something to hang the application on in my mind.

    The best answers are the most matter of fact. It’s a mistake to use marketing-speak to make your idea sound more exciting. We’re immune to marketing-speak; to us it’s just noise.” – YCombinator How To Apply

    This is about stand out from the pack. And helping the reader/journalist/audience member figure out who you matter to and why. Think of this as demand generation. You’re driving awareness and interest in your company, your team, your solution. The number one key is to be empathetic to the person whose attention and imagination you are trying to capture. Put yourself in the shoes of your intended audience, and help them understand what is special about your company, your product, you.

    “Boil down your elevator pitch to one sentence. Tell us what you sell or do in very concrete language. This sets the context for the rest of your presentation.” – David Rose

    Here’s an attempt to write that opening description for a few local startups.

    • FreshBooks is a QuickBooks killer. It is a web-based accounting system allows small businesses to have accurate, professional estimates, time tracking, and invoicing.  
    • Well.ca is Canada’s online drugstore. Strong sales growth over past 3 years, raised $1.1M from angel investors in July 2009, technology focused with strong customer service.
    • Rypple is a web application that gathers anonymous feedback from anyone. Peter Thiel is an investor. Founders have a strong track record at Workbrain.
    • Dayforce is an rich internet application and web service that allows managers to visualize and plan their employees schedules and the employees to enter their timesheets. Founders have strong track record including Workbrain.
    • Kiiro is a social project management application built on SharePoint. It uses the web and Microsoft Project to improve collaboration between the project managers and the team on larger projects.
    • CoverItLive is web application for live blogging events. Companies, conferences, individuals can connect photos, tweets, live video, and rich media during events.

    This is just the beginning. But that is the point. The goal is to entice the reader to want to know more. Ideally I’d love to see a short description of what you’re building. A clear identification about how you think you’re going to make money. What you think your secret sauce is. And a brief summary of key team members. Sound familiar. It’s very similar to the advice that David Rose provides as a Pitch Coach. The goal is to take basic pitch information and digest it into a smaller, customized components for your audience. It means that entrepreneurs are going to have stop being ego-centric and start thinking about others. You need to understand what is important to the individual that you are trying to reach and to shape your message appropriately.

    For me, I want to understand what your company does/builds; the management team; the market opportunity; the business model; the stage of corporate development (pre-funded, funded, pre-revenue, etc.); why you think I care about this; and what your ask is of me. Is that too much to ask?

    Open challenge to local startups to “pitch” for a meeting in a 140 characters or less in the comments (more realistically less than 420 characters – basically 3 tweets).

    Resources

  • Backbone Magazine’s Top 20 Web 2.0

    Backbone Magazine announced their “PICK 20 round of Canada’s leading Web 2.0 pioneers” that includes 4 companies form our list of web startups to watch, it’s a great list of Canadian technology companies and startups.

    The List

    1. FreshBooks, Toronto
    2. Myca Health, Quebec City
    3. CoveritLive, Toronto
    4. Viigo, Toronto
    5. Radian6, Fredericton
    6. Filemobile, Toronto
    7. BoardSuite, Toronto
    8. NowPublic, Vancouver
    9. Tungle, Montreal
    10. HootSuite, Vancouver
    11. ThoughtFarmer, Vancouver
    12. AfterCAD Online, Vancouver
    13. TeamPages, Vancouver
    14. The Manufacturing Innovation Network, Kitchener
    15. Well.ca, Guelph
    16. Clarity Accounting, Vancouver
    17. Voices.com, London
    18. Taglocity, Vancouver
    19. PollStream, Toronto
    20. Pixton, Vancouver

    The majority of the startups on the PICK20 list are in Vancouver (8) and Toronto (5). It’s a great list of Canadian startups.

  • Friday Night Fights

    Whether you think of the UFC and mixed martial arts (MMA) as bloodsport or entertainment, there’s no denying that it is big business. Sure it’s still a bunch of individuals pounding the hell out of each other, but it’s an interesting brand building exercise capturing the attention and wallets of  18-34 year old men.

    Dana White along with Frank and Lorenzo Fertitta, as Zuffa LLC,  purchased a near bankrupt UFC for $2 million in 2001. By 2006, the UFC grossed more annual pay-per-view revenue than any other ‘”combat sport” promotion, think boxing, mixed martial arts, etc. The 2008 estimated revenue was close to $250 million through a mix of pay-per-view, live event tickets, television deals, advertising, video game promotion deals, and other varied revenue streams. It had become a huge business. Big enough that Mark Cuban has creating HDNet Fights as a promotion and leveraging the HD television outlet to highlight other combat sport promotions.

    Love it or hate it this is big business. It’s no longer “human cockfighting” as it was referred to by Sen. John McCain (R-Az).

    So how do organizations like Zuffa LLC and Oscar De La Hoya’s Golden Boy Promotions make money. And what can software startups learn from these marketing organizations. MMAFrenzy provides “A Look Behind the Curtain: Zuffa’s Finances Come Into Focus” that provides a breakdown of the financial side of a private company. And Portfolio.com provides insight into the wheeling and dealing that is Golden Boy Promotions

    Television Licensing & Promotion

    Television promotion is about “the people who create something worth watching and the audience”. Both Golden Boy and Zuffa have crafted television deals to help them reach fans beyond their strong base. Golden Boy Promotions has a deal with HBO and Zuffa has a deal with SpikeTV to broadcast their shows to cable audiences. For both promotions this allows them to focus on building brand awareness, create superstars and sell their live pay-per-view events. In the case of Zuffa, this has resulted in the creation of new content specifically for their television broadcast partner with the reality television show, The Ultimate Fighter (orignially created for $10M), and a host of other shows out of the archive materials from live events. The networks either sell premium cable subscriptions (HBO) or advertising (SpikeTV) based on their audience reach and demographics. Better content equals more diverse people watching, which allows for a shift in advertising demographics (details on Traditional Television Business Model and Video on Demand). The Ultimate Fighter has become the “most-watched original series on SpikeTV” with over 1.8 million viewers.

    Pay-per-view Revenues

    UFC has 5.1 million pay-per-view (PPV) buys in 2007. The PPV are split with the PPV distributor. The PPV buys number is reported for most major sporting events, Yahoo!Sports has a summary of the 2008 business which the UFC was reporting $237.9 million on 5,315,000 buys (average price of $44.75/purchase). Assuming a 60/40 split between Zuffa and the PPV distributor that generated approximately $142,740,000 in revenue.

    Live Event Ticket Sales

    Average ticket price in 2007 was $250/ticket. For example, UFC 99 attracted 12,800 fans and had a live gate of $1.3 million for an average seat price of $101.56. Different venues and fighter cards have different results, UFC 90 drew 15,359 fans and had a live gate of $2.85 million for an average seat price of  $185.92/ticket. (As a side note, these figures include the seats/tickets that the UFC gives away as part of the promotion. If you assume that 30% of the seats are given away to promotion companies and others the price per seat changes to $145.09 and $265.61 for each event respectively). The interesting part is that these numbers do not include any of the costs associated with running a live event: arena, security, medical staff, athletic commissions, promotion, etc.

    Other Revenue Streams

    The great thing once you have an audience, content and a recognized brand you can look for an infinite number of ways to monetize it. You start to ask questions like how do you find new audiences? How do you increase the average revenue per user (ARPU) of your existing users? What are new channels for reaching the audience? What other partnership and revenue generating opportunities exist?

    Video game rights licensing. Subscription internet video. Wait it seems that was tried and failed. No it looks like another opportunity presented itself with Heavy.com. Apparel deals with TapouT. Once you’ve built an attractive global brand, the world is your oyster. Zuffa has negotiated broadcast distribution rights in Australia.

    What can startups learn?

    1. Build a product that people want to pay you for
      I know this sounds cliché. And is not always as straightforward. Just look at the broadcast licensing and pay-per-view revenues for sports promotion. There are complex relationships between the people that produce the content and the people that watch the content. It involves cable companies, advertisers, intermediaries. But it starts with creating a product that people will use, in this case a product that people will watch/use and pay you for.
    2. Engage and support your loyal fan base
      The goal of the adoption funnel is to move from awareness to loyalty. You need to nurture and support the audience that is passionate about your product/service. Go read Kathy Sierra or Saul Colt to learn about how to inspire your customers to become evangelists. It’s about figuring out how they help their customers “kick butt better than their competitors”. Who are your super stars? What are you doing to help them kick butt?
    3. Don’t be afraid to self promote and create superstars
      You’ve got to love Golden Boy Promotions, the UFC and Saul Colt. They are masters of self promotion. Dana White, who owns 10% of Zuffa, has become an instant celebrity from his appearance on SpikeTV’s The Ultimate Fighter. The non-stop promotion of UFC Pay-Per-View events through the SpikeTV audience (2.8 viewers million for TUF9) help reinforce known revenue streams while building characters and superstars. Do all of the commercials feel like their cross promoting other UFC events? Well there is a reason for that, 75% of the UFC revenue comes from PPV sales. Startusp need to find ways to promote the features and solutions that help solve problems, inspire users and make superheroes. Rinse, lather, repeat. By refining their messaging and telling a better story, startups make it easier for customers to tell their story. Saul Colt (who is a big deal) does a great job promoting his companies (Zoocasa, FreshBooks) the power of community and sharing and asking the audience to promote using the channels that are important to users.
    4. Diversify your revenue streams
      There are many different ways to diversify revenue streams. Look at consulting companies that run training events (educating others about great design). Music television channels that are game companies (isn’t it all about music distribution regardless of channel). Go read Peter Frisella’s 2 awesome posts for a review of the different types of business model (part 1, part 2) to figure out your business model. Have a look at Alex Osterwalder’s Business Model Generation and look at his presentations on SlideShare to learn his Business Model Canvas.

    Building a successful startup is hard work! But after watching combat sports, building a startup sure beats the hell out of getting punch in the head for a living.

  • Built to Exit

    Image by konstriktionIs a company that is built to exit the same as a company that is built to flip? Not in my opinion. Understanding how to build a company that is attractive to a potential acquirer can help entrepreneurs understand how to build product suites, acquire customers and pick technologies.

    Possible Exits

    Entrepreneur.com list five (5) possible exit strategies:

    1. The Modified Nike Maneuver: Just Take It (basically preferred shares that pay a huge dividend)
    2. The Liquidation
    3. Selling to a Friendly Buyer
    4. The Acquisition
    5. The IPO

    For me, #3 and #4 are almost identical. And #2 is not something you should aim for just staring out. Liquidation is something that happens at the end of your business. Whether it is something that happens in bankruptcy or other it is not a useful model when you are trying to grow a business. So if you merge #3 & #4 it leaves you 3 realistic exit strategies. This is not rocket science.

    • Operate profitably
    • Get acquired
    • Go public

    We know what the IPO market for tech companies looks like. That leaves companies with 2 choices. Build a profitable business or get acquired.

    When I talk to startups everyone seems to think that acquisitions are a dime a dozen. That even based in Toronto, Montreal, Ottawa, Waterloo that they are prime acquisition targets for Microsoft, Google, Oracle, Cisco and other Valley companies. Which surprises me! Sure all of these companies have done Canadian acquisitions, they are the exception and they are done for very specific reasons.

    Why acquire a startup?

    Benjamin Kuo talks about the takeaways looking at the acquisition deals done by Google, Microsoft and Yahoo. The other companies that have done a lot of acquisitions include Oracle and Cisco. Summarizing the 2007 Microsoft acquisitions including Multimap (mapping), Global Care Solutions (healthcare), Palarno (enterprise chat), AdECN (advertising network), aQuantive (public traded – advertising tech), TellMe Networks (mobile voice solutions), and Medstory (health search), he concludes:

    Key takeaways from this, at least if you want to be acquired by Microsoft: you really need to expect to be in business for at least seven to 10 years; you need a lot of traction and a product that people have been using for awhile; enterprise software is hot, consumer web services are not; and you need to have a fit to their strategic plans.

    Companies get bought for a variety of reason:

    • technology;
    • customers;
    • people/talent;
    • the scale for monetization offered by a corporate giant.

    It starts to make a very short list for entrepreneurs about what’s important regardless of the type of exit you’re looking for. You need to have technology, customers, the right talent and a path to monetization. Companies are looking for technologies that solve problems with shared customers and that round out their offerings (then there is a the whole question about do we build it or buy it). They are looking for great teams of engineers, sales people, designers, i.e., the talent. And often large public companies bring a scale and access to market and manufacturing that are just not available to startups without huge amounts of cash. 

    Does this all sound familiar? It’s pretty similar to investment criteria. There’s nothing wrong with building defensible technology that solves a problem for customers with a team of rockstars on a common technology platform.