Are We in Lust With Startups?

Everywhere you turn these days, startups are in the news.

Justin Bieber and Leonardo DiCaprio are into startups.

American Express plans to invest $100-million into startups, while OMERS is investing $180-million in startups at a time when Canadian pension and institutional investors are still leary of startups. And last night, Accelerate TO hosted a large cocktail party to celebrate and promote startups.

As someone who makes a living from serving the marketing and communication needs of startups, the more startups, the better. Every new seed fund launched, every new startup funded and every entrepreneur who decides to make the leap into a startup is a good thing for Canada’s high-tech landscape and my goal to build a startup-fuelled business.

But I do wonder whether we’re too taken with startups. Startups are sexy, glamorous, hip and seemingly within anyone’s grasp given the barriers to entry have dropped so significantly. All you need now is a great idea, some good developers, a healthy dash of design and some angel financing, and you’re good to go. Or so it seems.

In many respects, I think startups are the belle of the ball because they symbolize the idea of independence and self-sustainability at a time of troubling economic volatility, uncertain job prospects and little corporate loyalty.

In contrast, startups are about building something new, making your breaks and being in control of your destiny, even if they do involve lots of risk. Like a lottery ticket, startups hold the promise of an exciting, if unknown, future.

When I bounced the idea of startups here, there and everyone off someone who just launched a startup incubator, he suggested we’re in the midst of a major “paradigm shift” in which small high-tech startups would continue to flourish.

As much as I love being the midst of a fertile, enthusiastic and buoyant market, the pragmatist in me suggests we’re getting carried away. The startup market seems too good, too high and too the sky-is-the-limit. I’m not even talking about the wave of venture capital flowing into startups; I’m just reacting to the prevailing bullishness about startups.

That said, I think there is little downside other than disappointed entrepreneurs and investors. A more important consideration is how a new entrepreneurial culture is being created. There will be successes and failures but that’s how life works. Startups are leading us in a new economic direction that puts the focus on new ideas and entrepreneurial energy.

Kobo: Canada’s Big Startup Success Story

Kobo is an interesting creature. It is one of the world’s leading e-reading platforms but it doesn’t get as much attention for being one of Canada’s most successful start-ups.

Launched by Indigo Books & Music into a competitive market, Kobo has established itself as one of the leading e-reading players. Its success culminated with its $315-million purchase by Rakuten, a Japanese e-c0mmerce company that has been making a series of acquisitions recently.

Kobo’s path is a great example of how Canadian startups can become world-class companies that can attract major amounts of venture capital and compete with the best in the world.

It certainly helped that Kobo had the financial support of Indigo but it Kobo also had to deal with all the obstacles and challenges that every start-up encounters.

Kobo not only navigated its ways through the start-up shoals but it was able to build its business to the point where it attracted a large acquisition offer. This is obviously great news for Indigo and its investors but also the Canadian startup ecosystem, which could see the benefits as Kobo employees look to do their own thing.

The other important thing about Kobo being acquired for a significant price is it shows the upside of not selling out too early. Many Canadian startups get snapped up before they get a chance to gain real momentum. As a result, they leave millions of dollars on the table and, as important, fail to seize the opportunity to become world-class players.

Admittedly, it must be difficult to turn down the money when you’re a start-up entrepreneur but selling too early can be a huge mistake.

So, here’s to Kobo for showing Canadian start-ups what’s possible!

How do Startups Capture the Spotlight?

In working with many startups, one of their key objectives is capturing the attention of customers, bloggers and reporters, partners and investors. The problem is many of them have little idea about how to do it other than writing a press release, and then crossing their fingers that it will somehow catch someone’s attention.

At a basic level, the big challenge is creating stories that resonate with target audiences. For any company, particularly startups with no track records, a good story is crucial because it gives someone a reason to be interested or care. The story could be about the company itself, consumer or industry trends, or how the service/product is unique or meeting a need in a different way.

Truth be told, good storytelling is difficult to do because it means stepping away from simply telling the world what you do and the wonders of your service or product.

So how do startups get the love and attention they desire? Here’s a few tips:

1. Think big. One of the biggest mistakes made by startups is they focus on what they’re doing, which, in the scheme of things, is relatively small. In a very small number of cases, their product or service might be newsworthy but it’s a long shot. Instead, startups need to focus on how they fit into the big picture. How is their product/service part of an overall trend that is capturing the attention of consumers? It means creating a big picture story in which the startup plays a role as opposed to being the star of the show.

2. Leverage your data. For startups that collect data about what their users are doing or what’s happening in their market, data can be a powerful marketing vehicle. A good example is Sysomos (a client), which created mini-reports on social media activity such as the behaviour of Twitter users around the world. These reports contained enough data goodness that bloggers were all over them. As a result, Sysomos got tremendous coverage and lots of attention.

3. Build relationships. “Cold pitching” a story to a reporter or blogger isn’t a formula for success unless you have an amazing story. Instead, startups need to identify their target audiences, and then build relationships over time. It’s an investment that takes time but it creates a more receptive audience that can be leveraged when needed. Building relationships can involve meeting people for coffee, sending them tips or insight about industry developments or news, seeking them out at conferences, or leaving a comment on their blogs.

4. Timing is everything. Too many startups try to capture the spotlight when they have nothing to talk about other than how they have launched a service. It may be interesting news to the startup but it’s “meh” for everyone else. Instead, startups should wait until they have something interesting to talk about. It could be a major industry development that impacts them or their business. In other words, it’s okay to wait until the time is right rather than trying to force it.

5. Success is sexy. Nothing gets people more interested than success stories. For startups, being able to show people what you’re doing is resonate with customers is a compelling story. It could be getting 10,000 users or striking deals with high-profile partners. It demonstrates that what you’re doing is interesting to customers so, in theory, is should be interesting to other people too.

6. Don’t think that hiring a PR is recipe for success. PR agencies can offer  value but it is hard for them to perform miracles if they don’t have a good story to tell. Too many companies hire a PR company, only to discover there is no return on their investment. Startups should start by hiring a PR agency on a contract basis to see how they perform. It’s also important for startups to provide PR agencies with marketing collateral and draft pitches so a lot of money isn’t spent on preparatory “grunt” work.

Encouraging Signs for Canada’s Startup Ecosystem

As a huge proponent and supporter of Canada’s technology and startup communities, I’m always looking for encouraging developments.

This week, there has been two positive announcements: MaRS unveiling MaRS Common, a new workspace for startups, and Extreme Venture Partner pulling the covers off a refreshed Extreme University that will see five teams participate in a 12-week program that will involve workspace, advisors and mentors.

As much as the Canadian startup landscape  is probably more exciting and healthier than it has arguably ever been, it is important to keep in mind that it’s still a fragile and nascent community. This makes it important to have an ecosystem that provides the necessary support to encourage entrepreneurs to embrace startups and, at the same time, provide them with what they need to have a good shot at success.

Many of the key pieces are starting to fall into place. There are more seed investors playing active roles – a group that includes Real Ventures, Golden Venture Partners, Extreme Venture Partners, Mantella Ventures and GrowthWorks. As important, there is a growing community of entrepreneurs who have been there, done that. And you’ve got an increasingly sophisticated group of service and product suppliers that can meet the needs of startups in different ways. The launch of MaRS Common and the updated ExtremeU are more evidence of an evolving and maturing community that will be able to supporting a thriving startup ecosystem.

That said, there are still challenges facing Canadian startups. While getting seed capital is getting easier (relatively speaking!), it is still difficult to find Canadian investors willing to inject major series A capital – we’re talking deals worth more than $5-million. Many startups with strong prospects still have to head south of the border to get the money they need to take their businesses to the next level.

And it will be interesting to see how the global economic conditions impact the Canadian economy and Canadian startups. If people become more concerned about their investments, does it mean they will back away from riskier propositions such as startups?

That said, it is difficult not to be encouraged by the growth of the startup ecosystem. There are lots of good things happening on a variety of fronts.

 

When is the Right Time for a Startup to Sell?

When is the right time for a start-up to be acquired?

It’s an interesting and complex question because, for one, a purchase offer is something many entrepreneurs dream about given getting rewarded for your entrepreneurial efforts is a very good thing.

But deciding when and if to be purchased can be difficult, challenging and heart-wrenching. If you sell too early, you can leave millions of dollars on the table. If you hold off too long, the offers could shrink or disappear. Just ask Friendster, which turned down a lucrative offer from Google before seeing its stronghold on the social networking market disappear.

The “when to sell” question struck me this week in reading about two high-profile companies. GroupOn, which turned down a $6-billion offer from Google last December, will complete its IPO this week. In many respects, it’s an event that has lost its lustre given how the company has stumbled and bumbled with how it does its books, and how the service is no longer a novelty.

As much as everyone likes to celebrate an IPO, it is hard not get the feeling it would have been better if GroupOn had accepted the Google offer.

The other example is DropBox, which apparently turned down a takeover offer from Steve Jobs. Drew Houston, Dropbox’s CEO, believed the company had the potential to become a bigger company, while Jobs thought Dropbox was a ”feature, not a product.”

Did GroupOn make a mistake by not accepting the Google offer? Did Houston blow it by turning down Jobs?

Truth be told, it is hard to tell because there are so many variables in play. The decision to sell or not to sell can come down to things such as a gut feel, the needs of the business, or the interests of your investors. This is why it can be so difficult to take a deal or walk away.

Financing News: QuickMobile Raises $2.3M

Company: QuickMobile
Headquarters: Vancouver
Product/Service: Develops mobile apps for conferences and special events. Its clients include the World Economic Forum, Disney, Microsoft, Salesforce.com, Dell, Hilton Worldwide, Accenture, the Sundance Film Festival, and the San Francisco Film Festival.
Investment: $2.3-million – a combination of debt and equity from angel investors. The round includes VanCity, Canada’s largest credit union. (Press release)
Quote: “We have seen exponential growth over the last year as meeting planners have moved away from traditional print-­?based media and adopted our mobile conference app to fully leverage the ubiquity and interactive capabilities of mobile devices”
- QuickMobile CEO Patrick Payne

 

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