Canada

Five Reasons to be Bullish About Canadian Startups

By Mark Evans in Startups 2 Comments Tags: , ,

As we head into 2012, there’s been a lot of back-slapping and congratulatory talk about the number of Canadian startups and more mature technology companies purchased this year – a back of the napkin calculation pegs it as more than $2-billion.

While deals are exciting, I think there are other, more significant reasons to be bullish about the Canadian startup landscape. My list includes the following:

1. There are more startups being established as businesses as opposed to projects. They’re being created by entrepreneurs who have a pretty good idea about how they will make money by selling products that meeet a need. This stands in contrast to startups that are more projects and/or features than businesses. To me, it signals the growing maturity of the startup community and a recognition that just because it’s less expensive to do a startup, it doesn’t mean there should be any less focus on building a business.

2. The infusion of more seed capital from a growing number of players has filled a huge void in the marketplace. In the process, it has allowed entrepreneurs to capitalize on strong ideas as opposed to watch them stay unrealized due to a lack of capital. The only way Canada is going to build a vibrant and robust high-tech community is making sure entrepreneurs can develop, grow and take risks so they can have a good shot at being successful.

3. The emergence of more serial entrepreneurs who have jumped back into the fray after being successful. This includes people such as Dan Debow, Mark Ruddock and Marcel Lebrun, who bring experience, skills, personal capital and a powerful network into a new opportunity.

4. More walk as opposed to talk. It wasn’t that long ago that there high-tech events were teeming with wanna-be entrepreneurs who would leave their corporate jobs if they could only get some seed capital, or if there would other people who wanted to join them, or if starting a business wasn’t as expensive. Today, there’s a new wave of entrepreneurs happily willing to take a shot, including younger people who may not have a lot of experience but are loaded to confidence and enthusiasm.

5. The maturation and growth of the startup community. When David Crow started DemoCamp, it, in many ways, was flying solo. Today, there’s a fast-growing community that has shown a willingness to support each other. This includes organizations such as MaRS, the growing number of incubators, and many people who share their time and energy with other entrepreneurs.

While the startup community must continue to evolve and there’s still a need for more growth capital, there are plenty of reasons to be bullish about the landscape and the ecosystem. There was great progress made in 2011 that, hopefully, will be used as a foundation for even better things in 2012.

Will Canadian Tech Be As Hot in 2012?

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

As many Canadian shoppers head out the door to battle the crowds for Boxing Day deals (a strange and bizarre activity in my opinion!), it is interesting to look at back at how many Canadian high-tech companies were snapped up this year.

According to Techvibes, there were 34 high-tech companies acquired – two each by RIM, Google, Zynga and Salesforce.com. The total dollars that flowed to Canadian entrepreneurs and investors was more than $2-billion, fuelled by mega-deals for Kobo, Radian6, Coradiant, MKS and Algorithmics.

Without a doubt, it was an awesome year for anyone involved in the high-tech, startups, entrepreneur and venture capital sectors. After being an M&A wasteland for many years, Canadian technology finally attracted serious and much-deserved attention, which will hopefully encourage more acquisitions and, as important, provide Canadian entrepreneurs with the cash to do it all over again.

An Anomaly or the New Normal?

A key question is whether 2011 was an anomaly or an indication the Canadian high-tech landscape has evolved. In 2011, there were several established and fast-growing companies purchased such as Rypple and Radian6. There were also many emerging startups snapped up such as Zite, Tungle and Pushlife.

With so many high-tech cash acquired, did it flush out the most attractive M&A target or is there another wave of attractive startups on the horizon?

My take is it’s probably the latter given the number of interesting startups that were funded this year, many of them businesses making revenue as opposed to ideas requiring capital to be nurtured.

Buy vs. Build Alive & Well

At the same time, the buy vs. build landscape is still very much alive and well. In a fast-moving world, companies such as Google, Zynga, Facebook and Twitter don’t have time to develop new ideas and features internally so buying technology and, as important, teams/people has become standard operating procedure.

The key issue for Canadian startups is how much capital they’re able to get before the buyers coming calling. If Canadian startups are well financed, it will give them more time to gain more traction, customers and sales to attract a higher valuation. If they’re not able to attract growth capital, many startups could get snapped up prematurely and, as a result, leave a lot of money on the table.

While there was a flurry of seed financing (less than $2-million) this year, I would argue the Canadian high-tech landscape will not be able to take the next step forward without players who can provide startups with $5-million to $10-million. There are small signs of activity, most notably OMERS’ $180-million fund, but it’s just a drop in the bucket for what’s needed.

As someone who spends a lot of time working with startups, it was an exciting and busy year. To me, it was the year that we really walked the walk as opposed to just talking the talk. For too many years, Canadian entrepreneurs talked about the possibilities and the problems they faced; in 2011, they started to make things happen in a major way.

So, what do you think? Is 2012 going to be as active and exciting for Canadian startups? Who do you think are the most attractive acquisition targets?

For more thoughts on the year that was, Jevon MacDonald has a post on StartupNorth encouraging startups, entrepreneurs and investors to “get to work”.

More Powder for Canadian Startups

By Mark Evans in Startups Comments Off Tags: , ,

It seems fitting that as 2011 winds down and the Canadian startup landscape celebrates an amazing year of activity, iNovia has unveiled a new $110-million fund.

Inovia III will focus on investments ranging from a few hundred thousand to as much as $10 million over the life of a particular company. The capital was raised from Teralys Capital, BDC Venture Capital, AVAC Ltd., Alberta Enterprise, the BC Renaissance Capital Fund and the iNovia General Partners.

For people not familiar with iNovia, its portfolio includes Well.ca, Beyond the Rack, Collective and Fixmo, which recently raised $23-million.

iNovia’s new fund provides more support for Canada’s startup community, particularly seed investments, which are being fuelled by an increasing number of startup incubators that have popped up here, there and everywhere.

At the same time, iNovia’s ability to support and participate in series A investments will be important because this is the biggest hole in the Canadian venture capital landscape. Without vibrant participation from institutional investors, many Canadian startups have no choice but to look south of the border if they want to raise anything more than $5-million.

While it is not a terrible situation given there appears to be more U.S. VCs willing to invest in Canadian startups, there still needs to be domestic support for startups looking for growth capi

Rypple, Revenue and Canada’s Startup Ecosystem

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

Another day, another acquisition within the Canadian high-tech community as Rypple gets acquired for a reported $65-million by Salesforce.com.

It’s great news for Dan Debow and David Stein, the company’s venture investors Edgestone, Bridgescale and Extreme Ventures) and the Canada’s already buoyant startup community, which continues to hungry for seed and growth capital.

Revenue, Revenue, Revenue

As important, Rypple demonstrates what I see as an important theme within the Canadian startup landscape, which is creation of companies designed to be businesses that drive revenue by selling services, as opposed to simply being ideas with a business model that still needs to be created or fleshed out.

Starting a business that features sales as a key part of the model may seem like a straightforward proposition but you’d be surprised by how many startups have little or no clue about where the revenue is going to come from.

Rypple, on the other hand, was created from the get-go to deliver services that companies would buy as a way to evaluate the performance of their employees. In other words, revenue was always front and centre.

If you look at the startup landscape, there are lots of examples of startups who have embraced the same approach. So as they’re attracting customers, enhancing their technology and looking for growth capital, revenue is coming in the door. The list includes ScribbleLive, AtomicReach, Pressly, QuickMobile and TribeHR.

To me, this is exciting because startups are being hatched to create businesses that will succeed or fail based on whether their services fill a need and resonate with consumers.

Canadian Startup Landscape Maturing

This is not to suggest good ideas shouldn’t be nurtured and financed, or that startups that embrace the freemium model are taking the wrong approach, or that deciding to create a business model down the road makes little sense. But it does illustrate how the Canadian startup landscape as evolved and matured, driven by entrepreneurs focused on building viable businesses.

So hat’s off to Rypple, which went from startup to buy-out in three years. And congratulations to Salesforce.com, which dipped into the Canadian high-tech community last year with the acquisition of Radian6.

For more thoughts about Rypple’s purchase, Wellington Financial’s Mark McQueen puts the spotlight on what the deal means to the Canadian venture capital community. Another interesting destination is Techvibes “Acquisition Tracker”, which lists all the deals that have happened this year.

The Sad and Positive Side of Startup Failures

By Mark Evans in Startups 8 Comments Tags: , , ,

As the Canadian startup landscape becomes increasingly active and entrepreneurs get more bullish about their prospects for success, it’s important to remember startups are also high-risk propositions. It means there are far more failures than successes.

I was reminded of this reality yesterday when Thoora announced it will be shutting down on Dec. 15. It will be a sad day for Thoora’s employees who have fought the good fight during its “crazy journey”. For people who sit in the glass-half-full camp, Thoora has provided many people with invaluable experience that, hopefully, they will benefit from down the road.

In Canada, we tend to treat failure as a bad thing when, in fact, there are many positives. Instead of whispering about a startup not making it, we need to see failure as an important part of the startup ecosystem. Not every startup is going to be wildly or even mildly successful or purchased by Google, Facebook, et al. In the real world, many startups don’t make it for a variety of reasons.

It is, however, disappointing when a startup fails because the ecosystem operates on boundless optimism about what’s possible. It is difficult, if not impossible, to be an entrepreneur if you don’t believe you’ll be successful. This is why it’s sad to see startups shut their doors.

Over the next few years, there will be lots of failures such as Thoora. With the thousands of startups now be created, many of them will work hard but gain little or no traction. This is the dark side of current startup euphoria.

At the same time, life goes on. As someone who worked for two startups that weren’t successful in attracting many users or revenue, I can honestly say the experience gained was invaluable. Now when I work with startups to jump-start their digital marketing efforts, I tap many of the lessons from my startup experience that will, hopefully, play a small part in helping them be successful.

Startup Incubators: Here, There and Everywhere

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

Every time you turn around, there seems to be a new Starbucks opening…and a new start-up incubator – something highlighted earlier this week by David Crow in StartupNorth.

For entrepreneurs looking for a helping hand – real estate, advice, cash, mentorship, friends – incubators can be a great resource. But you have to wonder if there is such thing as too many incubators and what, if any, downsides there may be.

I ran into a couple real examples of the incubator-palooza. I had coffee with someone today who went from the idea of creating an incubator to launching an incubator in eight weeks, including the raising of capital to get it off the ground. Another person told me about a lawyer who wanted to start an incubator to serve his clients – and saw no problem getting money to do it.

We’re living in fascinating and confusing times. There’s lots of start-up activity, enthusiastic entrepreneurs, a growing amount of capital and an evolving and maturing ecosystem. This is happening in parallel to volatile global economic conditions that suggest we may be teetering on the edge of a recession.

As someone who makes does a big chunk of my business with start-ups, the activity is awesome – not only for business but it’s great to see more Canadian entrepreneurs willing to go for it and build something, rather than just talking about it or the reasons why they can’t or won’t do it.

The growth of the incubator ecosystem is encouraging on one hand but it also raises questions on the other. If, for example, you get promising start-ups emerging from incubators how many of them will be able to get capital to take it to the next level? Unless, there’s financing to support them, many startups could see their potential wither on the vine.

In the scheme of things, these are probably good problems to have because new players will hopefully emerge to take advantage of exciting opportunities.

In the meantime, I suspect the incubation will continue to be a growth business, although, like, startups some of them will come and go before you know it.

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