Blood on the tracks initiatives

From Talent1st

[edit] Engage to revive technical entrepreneurship -- join grass roots movement in Ottawa, organize peers in Toronto and Waterloo, expand across Canada

Please,

Propose new initiatives to strengthen technical entrepreneurship and sign up to act
Contribute key messages that add value to those key messages produced by those who attended Blood on the tracks: 6 years of technical entrepreneurship in Ottawa
Add references useful to technical entrepreneurs in Canada

[edit] Initiatives to strengthen technical entrepreneurship in Ottawa

Low hanging fruit	Ranked by time to payoff	Ranked by size of payoff
Match IRAP's investments in Ottawa companies	1	2
Increase government procurement of goods and services from small technology companies	2	1
Deploy advanced technology to deliver services to non profit organizations	3	7
Deliver LTW programs designed to create knowledge jobs and wealth in Ottawa	4	8
Couple Ottawa's serial technical entrepreneurs, key decision makers, and organizations that lead global ecosystems	5	10
Establish the Minister's Technology Innovation Round Table	6	5
Improve and expand Ontario marketing programs to attract high tech investment and companies to Ottawa	7	4
Refocus Ottawa talent into growth areas	8	12
Survey technical entrepreneurs about effectiveness of provincial and federal government programs	9	13
Create an inventory of the members of the Ottawa ecosystem	10	14
Mid-term
Establish networked incubators that support massive entrepreneurial activity and outcomes	11	3
Establish a government program that matches investments in technology startups made by VCs and angel investors	12	3
Establish seed fund for early stage startups	13	6
Attract keystone organizations to Ottawa	14	9
Use local universities to support technical entrepreneurship	15	11
Raise awareness of Ottawa's capabilities and success stories	16	15

Parking lot for undeveloped ideas for initiatives

[edit] Sign up to contribute to initiatives

As of Tuesday 7 of September, the following have signed up to contribute:

Nikhil Adnani, nikhil at thinkrf dot com
Tony Bailetti, Bailetti at sce.carleton.ca
John Callahan, John Callahan at sce.carleton.ca
Liviu Cismaru, liviu.cismaru at accentway dot com
Fred Dixon, ffdixon at blindsidenetworks.com
Veronica Giggey, veronica_giggey at rogers.com
Brian Hurley, brian at purpleforge.com
Corien Kershey, corien at hbsmarketing.com
Luc Lalande, Luc Lalande at carleton.ca
Steven Muegge, smuegge at sce.carleton.ca
Bill Stewart, wstewart aat livinginternet dought com
Stoyan Tanev, Tanev at sce.carleton.ca
Michael Weiss, weiss at sce.carleton.ca
Ian Graham, ian at thecodefactory.ca
Richard Alam, alamr at rogers dot com
Dave Vicary, vics at surveinc.com
Mahshad Koohgoli Protecode Inc
Andrew Ross Ingres Canada
Dave McIlhagga DM Solutions Group Inc, dmcilhagga at dmsolutions dot ca
Steve Lecomte, steve.lecomte at gmail dot com
Manu Sharma, OCRI Entrepreneurship Centre, msharma at ocri dot ca
Steve Robins, OCRI Talent Bridge, srobin69 at uwo dot ca
James Bowen, jbowen at ces dot on dot ca

[edit] Get the word out - bring technology entrepreneurs here to contribute!

Add to this list. Please go to these sites and let people know about this initiative. Ask them to join in and participate. Grassroots starts from the seed of "you". Engage! You can make a difference.

Local Ottawa Business, Tech, Venture and Entrepreneur Blogs
Organizations
Facebook, MySpace, Linkedin, Plaxo Groups
- Facebook - Startup North

TIM lecture series

Initiatives to promote entrepreneurship

OS Business Resource
OSBR.ca

Exploit disruptions

Open source for
Ontario companies

Key messages
TIM lectures

References
TIM lectures

OS Bootcamp

TIM theses and
projects in-progress

Ottawa technology community

Make TIM lectures
world class

[edit] Contribute key messages

1 Engage to revive technical entrepreneurship -- join grass roots movement in Ottawa, organize peers in Toronto and Waterloo, expand across Canada
2 Initiatives to strengthen technical entrepreneurship in Ottawa
3 Sign up to contribute to initiatives
4 Get the word out - bring technology entrepreneurs here to contribute!
5 Contribute key messages
6 References useful to technology entrepreneurs

[edit] Successful technical entrepreneurs

Enjoy what they do
Commit a significant amount of time and energy to exploiting their market opportunity
Do not distinguish between office hours, evenings, and weekends
Know their strengths, weaknesses and desires as well as the terrain in which they operate
Have a supportive family
Motivate and inspire others
Set high goals for their startups and themselves
Align key stakeholders (i.e., customers, management,employees, investors, Board members, complementors, intermediaries) around a common purpose
Frequently interact with customers and potential customers
Network with other entrepreneurs, startup CEOs, and risk capital providers
Remain optimistic, thick skinned, and persevere even when many people over and over again tell them how bad their ideas are
Are realistic about how much money they need and are aware they can't get it all at once
Reuse and outsource as much as possible. They know the process they are outsourcing, can't manage something you don't know anything about
Recruit world class team members with diverse business experience, regardless of time and effort required
Recognize that building a team of good people (who generate many good ideas) makes success more likely than building around a single good idea
Concurrently mitigate risks and place bets
Know where to invest
Select a business model, don’t assume one
Are patient for growth and impatient for profits
Recognize opportunities that others overlook

[edit] Founder's dilemma

Founder's importance decreases over time
Founder must work himself/herself out of a job
Need to understand personal exit criteria
Understand the phased funding approach: bootstrap and use the government programs before pitching to VCs and angel investors

[edit] Early customers

Best way to finance a company is through early customers who pay
Find early adopters and engage them early
Early customers help shape the product, attract investors, and validate the business model
Engage early customers early. Customers must help startup develop the early version of the product under a big vision

[edit] Communities

A startup depends on the growth of the: (i) community of the users of their products and services and (ii) community of developers who contribute to the open source projects upon which its products and services rely
Develop communities by:
- providing relevant content
- providing communications utilities that community members can use to interact
- using social media
Use crowd sourcing. For example, issue a call for users to translate manuals into different languages

[edit] Partners

Prior to funding, work with professional service providers (e.g., legal and financial) who are willing to share the starups' risk with you. These organizations provide much needed service in return for your informal or formal commitment to grow the business with them after funding is secured
After funding, work with suppliers who are willing to share the risk with you. These suppliers provide deep discounts, on-site inventory, and free samples
Partner with large and credible companies
Do not partner with a large company that operates a business that generates revenue from products which are older versions of the products you intend to introduce. The large company will: (i) be unwilling to cannibalize their product lines so you can sell your new products and (ii) get in the way of your startup's success

[edit] Advisors

Engage talented advisers who can formally or informally:
- Fill skill gaps
- Provide expert advice
- Provide objective feedback on time
- Assist in identifying and recruiting key talent

[edit] Board of Directors of VC-backed startups

A good number of the members of the Board of Directors of a VC backed startup are investors who are busy doing other things. They have very limited time available for the startup.
It is difficult to manage a Board of Directors of a VC-backed company

[edit] Advise to first time entrepreneurs

Applicable to the early stage

Decide what success means to you. Success is validated by a paycheck
Establish your brand as a promise to customers. Address brand building by delivering the promise across all interfaces with customers.
Value differences, a diverse team adds significant value to the startup
Work with a mentor who believes in you
Time to cash is the key success metric
Address global niches wher you can build a competitive advantage
Find an office on the ground floor. At some point you will want to jump out a window :)

Applicable to the later stages

Find your defining question. For example, for Onconference it is "What drives minutes?" Use defining question to provide you with a laser like focus and guidance. When going through periods of growth, always refer back and use it to make decisions
Aim for base hits, not home runs
Find your differentiation that adds value to your customers
First dominate a market segment and then dominate the value chain used to address the needs of the market segment

[edit] Differences between Bay and Ottawa startups

Distinguishing dimension	Bay startup	Ottawa startup
Entrepreneurship is:	A career path	A risky personal opportunity
Failure is:	Valued and expected	Frowned upon
Entrepreneur's network	Large, global and diverse [[Media:Social_Networks_in_Silicon_Valley.pdf]‎]	Small, regional or provincial
Role models	Service based startups	Technology based startups
Venture capitalist	Top quartile, incentive to win	Novice and unproven, incentive not to loose
Risk capital	Abundant, readily available	Scarce, not readily available
Government is:	Small-business friendly and purchases from small businesses	Large-business friendly and does not purchase from small businesses
Rating startups	Business acumen: A Technology acumen: B	Business acumen: B Technology acumen: A
Go to market strategy	Customer problem --> prototype concept --> market concept --> refine product	Develop product --> test/refine product --> customer problem --> introduce product

Also see references on California vs Canada at the end of the page

[edit] Startup strategy types

A startup top management team must understand and manage many risks. It needs a clear strategy that leads to concise actions to reach, at a minimum, break even operations.
Startups can be organized into four groups based on their strategy:

1. Business with profits

customer contact
deep domain expertise
clear value proposition
focused resources
strong operations
clear business model
lucrative story

2. Technology looking for a home

technology driven
little customer contact
weak or complex value proposition
weak business model
no capability to grow revenue

3. Looking for gold at the end of the rainbow

chases fads
no domain expertise
no value proposition
confused staff
no capability to grow revenue

4. The great story

hype driven
can't deliver on time or budget
good value proposition
weak operations
initial growth, but unsustainable

[edit] Types of Start-Up Innovation

Types of Innovation

[edit] Value

Value can be organized into three types:

Type	Value creation	Value appropriation	Value expansion
Dominant activities	Basic research, applied research and technology development	Product development, new company development, and early market penetration	Product, market, geography growth
Source of funding	Universities, government grants, and angels	Angels, pre-seed VCs, seed VCs, and Canadian VCs	US VCs and public markets

[edit] Cash and time

To an entrepreneur, cash is king
Cash from customers is the best type of cash around
Whoever controls cash and time, controls the company
Time to cash is a key success metric for startups
To attract cash, you can position your startup as an organization that can carry out the R&D that large companies wish to outsource

[edit] Attributes of an attractive technology startup

Management

Short corporate history
Well rounded management team with a track record
Product offers 4-10 times value improvement
Milestones are well defined and traceable; 12-18 months to commercial product; break even plan; $20 million revenue in 3-5 years

Market

Market is early stage, niche
Large market growth opportunity, > $1 Billion global niche
Market need and customer pain are clear
Many potential customers with good business fundamentals

Business

High correlation between channels' businesses and startups market offer
Few complacent competitors who are under capitalized, and not differentiated
Barriers to entry are high and include intellectual property, trademarks, brand
Numerous exits, high demand for company

[edit] Common reasons for business failures

Management

Poor managerial skills
Failure to select and use external advisors properly
Expedient decision making, not reasoned decision-making

Market

Technology does not address a compelling problem that businesses will spend money on now
Poor customer profiling and segment targetting
Mistaken estimate of market demand
Can't market or service product effectively
Depend too much on an individual or on a predicted specific event

Business

Poor business planning
Insufficient capital to create and grow business during early stages
Did not understand capital requirements of an early business
Poor cash management

[edit] Open source

Use open source assets (i.e., software, hardware, processes, content) as much as you can
Contribute to open source projects to:
- Add functionality that your customers require
- Attract talent
- Build company credibility
Open source:
- Lowers barriers to entry
- Decreases cash requirements
- Decreases time to cash
When you use open source, ensure that your intellectual property is clean

[edit] Currencies

All decisions about a startup are about investment
All investment requires selling something
All investment requires a currency: money, time, reputation, prestige, and equity.

[edit] Startup financial needs and funding alternatives

A technology startup needs money to:
- build a product
- build a team
- build a customer base
- build a business

An entrepreneur raises money from:
- own wealth
- friends and family
- government
- angel investors
- debt financing
- venture capital investors

Delay funding from VC investors as much as you can

[edit] Risk capital

Raise enough capital to address the size of the opportunity you are going after
Attracting VC investment is a must when opportunity is large and competitors have access to deep pockets
Angel and VC investors decide whether or not to invest in startup by assessing the following: (i) enthusiasm of entrepreneur; (ii) trustworthiness of entrepreneurs; (iii) sales potential of product; (iv) expertise of entrepreneur; (v) liked entrepreneur upon meeting; (vi) growth potential of market; (vii) quality of product; (viii) perceived investor financial rewards; (ix) niche market; and (x) track record of entrepreneur
It takes angels approximately 600 hours to complete a deal. They fund 1 of 40 business plans they review
There is a big gap between realized value and unrealized value for angel investors
Many technical entrepreneurs find that the time and effort spent interacting with VCs, particularly Canadaian VCs, is not worth it
For a Canadian startup, raising capital is very hard work. Raising capital takes time away from running the business and interacting with customers
When raising VC funds, a Canadian startup faces: (i) scarcity of capital in Canada, (ii) having to overcome the “not in the US” barrier, and (iii) lack of connections into VCs in the US
VCs invest in a good business with an outstanding team
When seeking VC funding, go into it with your eyes open. You will have to give up control and take on additional challenges that may add little to the business
Seed stage companies typically require $500k to $2 million to get to cash flow positive or VC investment
Risk mitigation is beyond the scope of an individual angel. Risk mitigation requires significant effort to review prospect, and due diligence requires diverse skills
Do not mix and match angel and VC investment. It is extremely difficult to manage competing priorities
Examine if funding can be drawn from capital pool companies

[edit] Decrease a startup dependence on VC funding

Tactics to try avoid or reduce amount of VC funds include:
- Bootstrap funding
- Start with a company based on professional services to establish revenue (e.g. DDN started as a service company then transformed into a product company)
- Technologies that allow you to scale on demand:
- Internet contact with customers
  - blog marketing
  - direct feedback
  - support
  - user communities
Simply delaying VC funding can prove beneficial
- allows the company to find the right fit between the right offer and the right customer
- unlikely to know what the fit is right away
- get the company culture set before the money

[edit] VC-Entrepreneur interactions

The venture capitalist	The entrepreneur
Objective: Make as much money as possible in a short time as possible with as little risk as possible	Objective: Maintain as much control as possible to build a company that realizes a vision and make some money along the way
Common statements We invest in people You need more money We will leverage our connections Who else is interested	Questions to ask Do you have money to invest? Do you invest in this area? What is your average investment?

[edit] VC investment facts

Despite current economic downturn in the US, VCs are still investing. In Canada we claim there is no downturn, however, VCs are not investing.
In Canada, the amount of VC investment in startups and the number of companies VCs funded have decreased since 2002. In US, the amount of VC investment has grown from $21.9 Billion (US) in 2002 to 29.4 Billion (US) in 2007
VC money to new ventures was $1.2Billion in Canada while in the US it was $34.7 Billion
Seed investment is $500,000 in Canada and 3.5 Million in the US
In Canada, very little money goes into new ventures. 63% of VC investment is in ventures at later stages. 70% of all new venture money is invested in Quebec
Average amount of VC funding has gone up from $4.2 Million to $5 Million
There is a shortage of domestic capital
Breakdown of VC investment is: (i) 52% IT; (ii) 30% Life sciences; (iii) 8% clean technology, and (iv) 10% Non-technology
US VC investment by destination breaks down is into: (i) $1B in China; (ii) $1.4B in India; and $800M in Canada
The closed window for IPOs just means that more VC funding needs to be placed into new ventures

[edit] Best government programs

In Canada, startups benefit from two great government programs: The NRC Industrial Research Assistance Program (IRAP) and Scientific Research and Experimental Development (SR&ED)Tax Incentive Program

Today, the IRAP program provides targeted advice and assistance to about 8,000 SMEs annually
Technical specialists and not just transfer payment specialists
Understand the development and commercialization process
Provide more than money, they provide access to opportunities and linkages
Looking to hear the "voice of the customer" in the business case
Looking for companies who are coachable
82% of IRAP clients have fewer than 50 employees – and most of them have fewer than 20
IRAP clients
- do not typically have large, developed R&D departments nor technical expertise on hand
- have management capacity challenges
- have limited network nationally and internationally
- range from start-ups to established mid-sized firms
- cover broad range of industry sectors
IRAP provides:
- Technological and advisory Service to small and medium size enterprises
- Financial support to bring new skills into firms
- Financial support to firms for research and/or development
- Financial support for organizations providing innovation assistance to small and medium size enterprises
- Networking and linkages
Benefits of IRAP investment:
- Combination of IRAP and SR&ED is appealing to investors (including US investors)
- Reduces risk and augments VC financing: reduces burn-rate and leverages their investments
- De-risks investment with existing investors
- Funding that does not dilute shareholder investment
- Validation of the venture due to a rigorous due diligence process
- Demonstrates resourcefulness of management teams
- Assures the investors that the company is following good record keeping and financial processes (acceptable to IRAP)
- If VC investment is in your business model, IRAP funding can buy you time and control

[edit] Lead to Win

The 9 day Lead to Win (LTW) program provided first time technical entrepreneurs with (i) rules of thumb and practical experiences; (ii) access to an ecosystem comprised of technical entrepreneurs, local Ottawa services including legal, risk capital, governance, marketing, and financial; and (iii) effective professors with abundant practical experience
The LTW program was one of the most economically impactful events to have occurred in Ottawa in a long time

[edit] Benefits of coupling entrepreneurs with global ecosystems

Aligns entrepreneur’s energy with resources from large number of diverse companies, organizations, and individuals all over the world
Combines entrepreneur’s contributions with those of others to create significant value for customers
Increases likelihood service providers and suppliers will share risks with entrepreneur in return for long term relationships
Increases entrepreneur’s legitimacy and options to grow market
Increases likelihood of selling to governments
Decreases investment to enter new markets, adopt and advance technology as well as raise capital
Reduces cost of recruiting excellent teams
Fosters collaboration with other serial entrepreneurs
Provides gateways to relationships in other ecosystems

[edit] Ecosystem approach to wealth creation and appropriation

Ecosystem approach to wealth creation and appropriation requires the technical entrepreneur to:

Use community’s shared vision and then contribute to it
Launch market offers using ecosystem’s foundation platform
Compete for leadership positions in space, niche and governance
Draw on talent around the world
Develop capability to collaborate
Open development and commercialization processes to customers
Incorporate ecosystem realities into:
- Management of product interdependencies
- Accelerating the adoption of company’s products
- Raising funds
- Working with talented teams distributed worldwide
- Creating and appropriating value