Shopify’s $15M Raise Good for Canadian Startups

By Mark Evans in Startups 1 Comment Tags: , , ,

Within the Canadian start-up landscape, Shopify is the belle of the ball.

Having just raised $15-million less a year after taking its first investment round, Shopify now has the financial clout to strengthen its status as one of the leading services for companies looking to quickly and easily establish an e-commerce presence.

It has been a whirlwind for the Ottawa-based company, which was started in 2004 but has moved into high gear in the last couple of years. With 15,000 customers and lots of cash in the bank, the world is Shopify’s oyster.

In many ways, Shopify epitomizes what Canadian start-ups should or could be. Created after co-founder Tobi Lutke launched an online store to sell snowboards, Shopify evolved into a business that had enough traction to attract investment. Then, Shopify was able to grow even more to attract a major financing round that should let it make an aggressive push for market leadership.

Shopify stands in contrast to many Canadian start-ups that:

- Fail to gain enough sales traction, or;

- They are unable to attract enough financing to develop and grow or;

- They sell too early because they are not able to get a big financing round or;

- They are unable to resist the temptation of an offer that is good but not great.

For Shopify to raise $15-million is not only great news for the company but it could be a positive development for the Canadian startup community and maybe the domestic venture capital sector, which is starting to show signs of life again.

Lutke said while Canada has great engineers and a vibrant entrepreneurial ecosystem, the biggest problem is a lack of confidence. “Not a lot of companies do what we just did, and that is why not a lot of companies try it,” he said.

It doesn’t help that Canada’s venture capital industry has crumbled with many of the large fund posting terrible results before closing or going dormant. Lutke said many of the VCs’ woes were caused by partners who had strong backgrounds in telecommunications as opposed to having start-up experience.

With more attractive investment laws and the recognition there are many attractive opportunities, more U.S. investors are coming north of the border. Lutke said Shopify’s profile has seen it become seen as a “connector”, and that they get daily e-mails from U.S. investors looking for introductions to Canadian start-ups.

In the scheme of things, Shopify raising $15-million could have a valuable ripple affect for Canadian start-ups. The fact it took on a big investment rather than selling out is the kind of thing that will hopefully embolden Canadian entrepreneurs who can see a home-grown example of a company boldly going for it.

The Importance of “Yes, I Get It” for Start-Ups

By Mark Evans in Startups 2 Comments Tags: , ,

When talking to entrepreneurs, it can be difficult to wade through the bullishness and excitement that goes with starting a new business. Every start-up is going to conquer the world, blow away the competition and then sell itself for millions of dollars.

But if you push aside the entrepreneurial enthusiasm, a startup’s success prospects depend on a compelling idea and, as important, the ability to quickly get potential users to say “Yes, I get it”. This means being crystal clear what the service or product does, and the value propositions/benefits being delivered.

Of course, it is easier said than done to make “I get it” happen because there are lots of different things that need to happen. The product/service needs to fill a need or convince users it meets a need they didn’t know they had. Getting users on board has to be user-friendly and efficient. And the product/service has to delight. (Here’s a post I did on how startup need to focus on delighting users.)

The problem facing many startup entrepreneurs is they create something that doesn’t solve a problem or a need, it isn’t compelling enough or there’s already lots of competition, and/or it’s more of a feature than a standalone product. Mark MacLeod did a really good blog recently on just because a startup is easy to create doesn’t mean it should be created.

Another important consideration for a startup looking to achieve “I get it” is making sure the product/service isn’t too complicated or dependent on a number of things that have to happen to make it work. I worked with a startup recently with an interesting service but there were too many moving parts that made it complex as opposed to simple and delightful.

After doing some in-market research, they realized the service’s prospects weren’t good so they pivoted with a service that was simple, compelling and, hopefully, delightful. The upside is the new approach leveraged much of the work development work that had already been done.

Perhaps the best example of “I get it” is Dropbox, which has a simple value proposition that solves a straightforward need or problem that lets you save and share files online. Of course, there is a lot of technology behind the scenes but Dropbox does a great job of making it service seem accessible and user-friendly. For more on Dropbox’s success, check out this feature story in Forbes magazine.

Another good read is KissMetric’s post on nine metrics to consider to make wise decisions about your startup.

U.S Investors Digging the Canadian Startup Scene

By Mark Evans in Startups 7 Comments Tags: , ,

If you’re looking for validation about the good things happening within the Canadian startup landscape, it might be the growing number of U.S. investors coming north of the border.

The latest “evidence” is the $15-million raised by Ottawa-based Shopify from Bessemer Venture Partners, FirstMark Capital, Felicis Ventures and Georgian Partners. It is a major financing for a company that has become one of the fast-growing e-commerce players, even though it might not have a huge profile outside of its hometown.

Shopify’s financing came on the heels of Wave Accounting raising $5-million from a group that included Charles River Ventures; WattPad raising $3.5-million in a deal led by Union Square Ventures, and Achievers.com pulling in $24.5-million from Sequoia.

The growing involvement of U.S. investors can only be seen as a good thing because there is still a lack of startup capital in Canada. This is particularly necessary for startups looking for raise anything more than $5-million given there are few Canadian VCs able or willing to make this large of an investment.

The other reason more U.S. investors will be looking for deals north of the border is lower valuations. The U.S. startup market is frothy (bubble-like?) so Canadian start-ups may be more affordable and, at the same time, provide solid investment opportunities.

The only cloud I can see on the horizon is the health of the global economy, which doesn’t seem to be having an impact on startups raising money.

For more, StartupNorth has a round-up of the U.S. deals.

 

 

Startup Boom vs. Economic Bomb

By Mark Evans in Startups No Comments Tags: , , ,

Update: Ottawa-based Shopify announced today it has raised $15-million in series B funding from Bessemer, FirstMark, Felicis, and Georgian. 

There is fascinating and potentially troubling dichotomy happening within the Canadian and U.S. startup landscape these days.

On one hand, there has been a flurry of small, medium and large startup investments. DropBox and Twitter have raised major rounds, while Tumblr, which has no real business model yet, score itself $85-million. North of the border, we’ve seen a deals unveiled on a regular basis – GoInstant, Paymentus, Wave Account, Achievers.com, SavHome, gShift, Guardly, etc.

It’s encouraging to see so many startups getting financed but, at the same time, it is difficult not to be somewhat uneasy about the uncertain economic climate, particularly the possibility that we’re heading into another recession.

On one, it is a positive to see companies getting the financing to develop an idea or business, and the capital will take them through an economic downturn. That said, a recession will impact spending so it could impair the ability of these startups to make revenue.

As much as it is an exciting startup marketplace, it is difficult not to see dark clouds on the horizon that could ruin the party.

Fred Wilson has had some sobering food for thought in a blog post called “What We Are Seeing” for Business Insider. While he sees the high number of startups raising money as a good thing, he said inbound leads are coming from everywhere:

“It is not just coming from entrepreneurs. It is coming from angels, seed investors, VCs, lawyers, accountants, friends, aunts, uncles, you name it. I’m waiting for the guy who sits at the front desk in our building to pass me a business plan on my way into the office.”

This statement reminds me of living in Hong Kong during the early-1990s during a tremendous stock market boom. In hindsight, you know the market was about to crash when the first thing taxi drivers wanted to talk about was investment idea.

For startups able to raise capital, I would advise to operate as smartly as efficiently as they can while still being focused on seizing the opportunity in front of them. Times may get rough economically but if a startup can manage its cash and resources in the right way, it has a good shot of coming the other side of an economic downturn while some competitors fail to make it.

For any startup with money on the table, I’d take it as long as the terms were acceptable because it will give you ammunition to grow and, if need be, survive.

Four Positives to RIM’s Possible Demise

By Mark Evans in Wireless 1 Comment Tags: , ,

As an enthusiastic supporter of Canada’s high-tech community, I’m hoping RIM can somehow find a way to revive its flagging fortunes.

But the terrible debut of the PlayBook, the modest reception to the BlackBerry 9900, and the recent and frustrating global network outage has not only put RIM on its heels but causing some industry watchers such as GigaOM to envision an even darker future.

As much as it would be hard to believe RIM and the BlackBerry could crumble before our eyes, it wasn’t that long ago that Nortel was king of the telecom world before it went stumbling and fumbling into bankruptcy protection and an embarrassing asset sale.

So what if RIM disappeared? Would there be anything good to come out of it? Here are some reasons that accentuate the positive.

1. It would free up a lot of people within RIM, who have gained valuable experience and, in many cases, a lot of financial security over the past 10 years. These people could work for other companies that need talented people, as well as finance startups that would benefit from having smart and strategic money.

2. It would allow the Kitchener-Waterloo technology hub to not be dependent on a giant company. Now, I know my friends in K-W will contend there is already a large and thriving community but my take is it could be even more diversified. It’s like when a giant tree falls in the forest. All of a sudden, the sunlight is allowed to pour in, which lets existing companies thrive and new companies to sprout up.

3. Given RIM went from start-up to world-class company, it would hopefully be a huge reminder that supporting Canada’s start-up community is essential to the health of Canada’s high-tech community and our overall economic prosperity. There tends to be a lot of talk about creating jobs and nurturing the New Economy but Canada needs more walk in terms of financial support.

4. Jim Balsillie and Mike Lazaridis would be free to pursue other entrepreneurial and philanthropic pursuits. Over the past 15 years, they have done an amazing job building a world-class company. Along the way, they have also done some impressive non-RIM projects such as creating and funding the Perimeter Institute for Theoretical Physics (Lazaridis) and the  Centre for International Governance Innovation (Balsillie).

If they were liberated from RIM, they could focus their time and efforts on things such as supporting start-ups, providing mentorship, and influencing policy and economic changes. Heck, Balsillie might even be finally get himself a NHL franchise.

Don’t get me wrong, I’m a huge RIM supporter but you have to be realistic and pragmatic. Having covered the rise and fall of Nortel, nothing in the technology world surprises me. It’s a fickle, volatile and ever-changing landscape in which anything could happen, and often does. While RIM’s demise may seem extreme, it is possible so it’s a good exercise to consider the silver lining.

Links:
- The iPhone 4S sells out at U.S. carriers (Bloomberg)
- Can Teenagers Save RIM (Mark Evans Tech)
- BlackBerry Brand Bruised But Not Beaten (CBC)

No VC Cash for You, Startup Founders

By Mark Evans in Social Media, Startups 3 Comments Tags: , ,

For startup entrepreneurs, one of the ultimate goals is getting acquired for a boat load of cash. The bigger the purchase, the bigger the success, irregardless of how large the business or how many customers it might have.

Part of the getting bought is finally reaping the rewards for hard work, the long hours and the modest salaries. It’s the way of the world; you work hard, you’re successful, you get to be rich.

But….things seem to changing or, at least, the rules of engagement are changing.

A growing number of entrepreneurs – DropBox, GroupOn, Airbnb – are being allowed to sell their pre-sale/pre-IPO shares as part of a private financing. And we’re talking mega-bucks as opposed to pay the mortgage money.

This is a bad development because it handsomely rewards entrepreneurs for getting the job mostly done but not all the way done. It is great for the entrepreneur but probably not as good for the startup because you have to believe the motivation and fear that drives entrepreneurs could easily disappear once they have lots of cash.

The other danger is if entrepreneurs are rewarded while employees don’t get to share the wealth Case in point is the fiasco that surrounded Airbnb’s $21-million reward to the company’s founders, which ignored employees until the proverbial shit hit the fan.

As well, you have to wonder about the approach being taken by investors. By letting founders cash out in a major way, how does it impact the way these founders are going treat the new investment? After all, the founders have their cash so if the business doesn’t go as well, it’s not going to matter as much, if at all.

Don’t get me wrong, there are situations in which letting founders cash out some of their equity during a financing makes sense. If a founder, for example, had a $500,000 mortgage hanging over his head and a partner bugging them about their financial security, it might make sense to give the founder one less thing to worry about so he/she can focus on growing the business.

That said, we’re talking about relatively small amounts of money as opposed to millions of dollars that would ensure they would never have to work another day, which is tempting if you do have a startup to operate.

It is difficult to tell why VCs have embraced the idea of giving founders significant amounts of money before an exit but it is a troubling trend.

Links:

SFGate: Early payouts to startup execs a troubling trend

Related Posts Plugin for WordPress, Blogger...
1 2 3 4