April 2011

There were 20 posts published in April 2011 (this is page 5 of 7).

Seed Funding – Some New Considerations

Seed Funding
AttributionNoncommercialNo Derivative Works Some rights reserved Photo by Pictoscribe

I started writing this post while working on my presentation for Enterprise Toronto‘s Small Business Forum 2010 on raising capital for high growth businesses. I’m by no means an expert at this topic, but there are a lot of basics that entrepreneurs and growth businesses can learn about both the type of capital and when to raise it. But Manu Kumar‘s (LinkedIn) must-read post (and the comments) about his Thoughts on Convertible Debt got me to thinking I would publish my list of resources. And Adeo Ressi‘s (@adeoressi) thoughts on Year of the Startup Default includes implications for entrepreneurs raising a lot of debt, because if Series A funding is more difficult to find than getting traditional bank loans or other sources of capital become more difficult with a large, even capped, debt load. There are a lot implications for entrepreneurs.

The starting point for my now almost 6 month old talk is the fantastic article by Bernard Lunn on Read-Write Web, The Capital-Raising Ladder, which defines the different types of capital that is available to startup companies and founders. The “ladder” concept is key in the article. Entrepreneurs generally have to start at the bottom of the ladder and work their way up each “rung”. Certain entrepreneurs can skip some of the rungs on the ladder particularly if they have had success in the past, i.e., it’s way easier for someone that has built a successful publicly traded company to raise angel or VC money than a student first out of school, but since much of this is a meritocracy it is easy for young entrepreneurs to demonstrate their ability to build successful companies and raise additional capital.

The implications of Manu Kumar’s post and Adeo Ressi’s are about the prevalence of startups raising convertible debt with angel investors because it is en vogue. Nivi (@venturehacks) has provided some of the best advice on founder fundraising at Venture Hacks and some good analysis of the impact and benefits of debt for entrepreneurs in his comments:

“Notes were good technology a few years ago but now there are better technologies like Series Seed that have many of the benefits of debt (speed, simplicity, less negotiation). And debt is pretty complicated when you really look at it. I’m guessing we’ll be back to equity in a couple years, for the better. But Series Seed and other equity docs need to be tested a bit more too.

2. You can work around this in two ways. The company can’t pay back the debt and it converts to equity at maturity. I always include these in debt agreements.” – Babak Nivi comment on Thoughts on Convertible Debt

The goal here is for entrepreneurs to have access to information to make informed decisions. I hadn’t thought about the impact that the potential debt load might have on Influitive’s ability to raise loans vs financing in the future.

I’m interested in the thoughts from Boris Wertz (@bwertz), Roger Chabra (@rogerchabra), Scott Pelton (@spelton), Chris Arsenault (@chrisarsenault), Mark MacLeod (@startupcfo), Craig Netterfield (@cnetterfield), Jordan Banks (@Jordan_Banks), Ben Yoskovitz (@byosko), John Philip Green (@johnphilipgreen) and others.

  • What are the unique implications for Canadian founders in that are unique to the considerations for convertible debt?
  • What are you thoughts on convertible debt notes as an investor?

Resources for Entrepreneurs

Here’s my short-list of resources around the mechanics of raising money and evaluating the documentation.

StartupFestival – Call for Startup Pitches

International Startup Festival - Call for Startups

The team behind Startup Festival (which StartupNorth is a Media Sponsor) has started the call for startups looking to pitch and launch at the festival. They are looking for startups in a variety of verticals, at a variety of stages of corporate development, and looking to raise funding or attention for their companies. It’s a great Canadian event that is guarranteed to have local, national and global investors and press attending.

Apply to Pitch

Top 5 Reasons to Pitch at Startup Festival

  1. You didn’t get accepted to Launch, TechCrunch Disrupt or Demo
  2. You’ll be attending anyway, might as well get some great PR & exposure with attendees and speakers
  3. StartupFestival is a great bridge between North America and Europe. And you’re considering accelerating your access to European markets
  4. You’re actively raising funding and you want to get in front of the best investors and coaches in North America
  5. You’re funnier than Dave McClure and Will Ferrell should produce a webisode for Funny or Die featuring “Your Startup Life” with Claire Daines having a reoccurring guest starring role

Apply to Pitch

The Paradox of Choice

Meagphone

Crowd at AccelerateMTL photo by Chris Arsenault

Photo by © 2011 Chris Arsenault

I love what is going on in Montreal.

It’s nice. It’s concise. It’s clean. There is choice but it’s not overwhelming. It feels like there is a consolidated effort to make Montreal the hub for startups and technology in Quebec. There are other activities and groups but there seems to be a core group of influencers, activities, and events where high tech entrepreneurs can go to find others like them, potential employees, potential investors, etc.

I look at Ontario and I am concerned. We have what should be the building blocks for a great entrepreneurial soup. And we’ve seen some spectacular successes (Bumptop, Sysomos, Pushlife among others). But there is a lot of noise. Efforts divided between regions.

Turning up the volume

Volume goes to 11 by John Watson

Photo by © John Watson

I’m not suggesting a “one ring to rule them all” strategy. There are grassroots efforts, there are provincial government efforts, there are local economic development efforts like:

It leads to the murky waters that are the entrepreneur community and support infrastructure in Ontario. There is no segmentation. There definitely isn’t self-selection. They use similar words to describe their activities: entrepreneurship, startups, technology, media, growth, etc. As entrepreneurs there is a paradox of choice about who to listen to, where to go for advice, support, mentorship and guidance.

We started StartupNorth as a way to document our experiences finding, using, evaluating other startups in Toronto and across Canada. It was a way to connect with others interested in startups, emerging technologies and business models, and to talk about the things in a context specific to Canada.

I realize that the Ontario Ministry of Research and Innovation (MRI) has added to the entities designed to enable entrepreneurs. They are trying to “spread innovation” through out the province via the university commercialization networks.  The  ONE network that has centres in Waterloo, Kingston, Guelph, Halton Region, Durham Region, Hamilton, Toronto, St. Catherines, North Bay, Sudbury, Ottawa, Mississauga, London, Markham and Windsor. The program is separate but deeply tied to the collaboration between business and academia.

  • Waterloo = University of Waterloo + Wilfred Laurier University
  • Kingston = Queen’s University + Royal Military College
  • Guelph = University of Guelph
  • Halton Region = Sheridan Institute of Technology & Applied Learning
  • Durham Region = University of Ontario Institute of Technology
  • Hamilton = McMaster University
  • Toronto = University of Toronto +  Ryerson University + OCAD
  • St. Catherines = Brock University
  • Sault St. Marie = Algoma University
  • North Bay = Nipissing University
  • Sudbury = Laurentian University
  • Ottawa = University of Ottawa + Carleton University
  • Mississauga = University of Toronto Mississauga Campus
  • London = University of Western Ontario
  • Markham = York University + University of Toronto Scarborough Campus
  • Windsor = University of Windsor

It’s interesting that California with an estimated population that is 3.7 times larger [1] than Ontario[2] has less innovation hubs than Ontario (12 in California to 14 in Ontario). (Sure from a per capita GDP calculation, Ontario is higher (Cdn$43,847 vs US$38,956) but it’s probably not entirely a relevant metric unless you’re a politician which I am not).

Photo by postbear eater of worlds - Some rights reserved CC BY-NC-SA 2.0

I’m wondering if rather than satisfising constituents with perceiving innovation benefits for votes, that we need to look toward innovation, education and economic growth programs that benefit citizens. I keep wondering what we are missing because of the existing programs and repackaging of programs for Ontarios entrepreneurs. Look at the job creation from a single venture firm, Union Square Ventures has portfolio companies with over 557 open jobs around the globe (128 are in NYC + Brooklyn). This is job creation. It’s focused on creating new positions, in a variety of rolls, that hopefully will attract new talent to the location.

Everyone loves to hates Toronto

Let’s all hate Toronto. It’s not uncommon for Canadians to dislike Toronto. But I don’t hear the same disdain for Montreal or Vancouver. But maybe that’s because I don’t live with their large gravity well pulling me closer. I choose to live downtown in Toronto because it’s where I want to be. I understand the lifestyle choices that others make to live elsewhere. There are days when the traffic, the people, the crazy, all get to me, but I love the collision of people, cultures, and ideas (go read Richard Florida for more thoughts on the Creative Class).

Are we missing an opportunity to raise the profile of Ontario companies because we don’t want to embrace the fact that Toronto is one of the major technology/media hubs? Are we diluting efforts by spreading the love and effort across 16 regions?