Billions With Zero Knowledge

Silicon Valley loves risk taking and failure. Canadian investors are risk adverse and scared of funding real innovation.

-Many Canadian Entrepreneurs

This something I hear from many entrepreneurs who lament the challenges of raising capital in Canada.   It’s a gross over simplification, but a catchy idea when people are having a hard time raising funds.

It’s true that Valley based venture capital firms not only accept that failure happens, they celebrate it by recycling the best parts of the team, idea and lessons learned for a new project.

In Canada we don’t hear enough about our failures and the people who go on to find success with new initiatives.

I was thinking about these cultural differences when I read this post by Wade Roush “When Startups Fail” where he interviews entrepreneur Christopher Herot about Zingdom’s shutdown. 

Part of the reason high-tech entrepreneurs are attracted to Silicon Valley is the perception that it’s a place where risk-taking is encouraged. West Coast venture capital firms not only excuse failure, so this perception goes, but celebrate it: if a high-tech entrepreneur doesn’t have a couple of tanked companies on his resume, he probably wasn’t being innovative enough. By contrast, the perception about investors in New England is that they penalize failure, which therefore becomes a taboo subject.

Both perceptions are probably exaggerations. But whereas West Coast companies come and go like the butterflies in Santa Cruz, it’s still unusual to hear any of the details when an East Coast startup closes down. That’s why a blog post last week by Christopher Herot has been attracting so much attention.

I met Christopher at TED this year and read his post about shutting down Zingdom with a lot appreciation for his honesty in posting the details of shutting down his company.  I’ve had to shut down my share of companies and have had many failures that have contributed to my successes.

If you swap out New England & East Coast with Canada you have the same perception that investors penalize failure and attach a negative stigma to projects and teams involved in them, which therefore becomes a topic not often talked about.   

So it is in that vein that I ask Montreal local entrepreneur, Martin Dufort to answer some questions about his experiences with Kakiloc (a location based social networking web experiment that shut down in November, 2007).  I met Martin in the Barcamp community in 2006 and got to see the hard work that he and his partner Alain put into building Kakiloc.

They were innovating on a number of fronts and I enjoyed introducing them to various investors where they often impressed people, but ultimately were not able to secure funding.  (If you hadn’t seen their demo where you could watch them drive up to your meeting via the web - you missed something very cool).

I really would like to congratulate Alain & Martin for their failure. I can’t wait to see which eventual success they will be able to attribute this failure too. Their willingness to admit a failure, discuss what they learned and move on to new adventures is what true entrepreneurs do and they deserve a lot of credit for doing just that.

First I would like to thank you Austin for giving me this opportunity to tell the Kakiloc story. I’ve learned a lot from this endeavour and reflecting on it and the associated failures and the shutdown could be valuable for anyone trying to startup a business and being faced with the same challenges.

1) Tell me a bit about when you & Alain started Kakiloc and it’s original vision?

The inception and the ideas for Kakiloc were derived from an open source project I created in June 2005: Rufopode. This project still available on RubyForge, but no longer maintained, was a small library enabling the extraction of GPS receiver data in order to properly plot them in Google Earth. My goal was to view and visually compare multiple training sessions and provide insight into my training schedule. The ultimate goal was to provide a realtime view of other athletes riding the same course and compare performance accomplishments.

I quickly recognized this was targeting techno-savvy people and the audience size was very small. I then brainstorm on how to apply this to a broader audience: Locate friends and family members using GPS technology while on the move with your cell phone. After explaining the concept to Alain, Kakiloc was born and we started coding the concept.

2) How far along did you guys get in your development and what were some of the main challenges?

We started prototyping the concept in November 2005 at the same time that the Google Maps API was picking up steam. Within a week, we had a rough prototype using Ruby on Rails for the Web site and Python on the Nokia S60 mobile platform. We were able to retrieve the GPS coordinate from the phone and map it on Google Maps so we could follow our location in real-time. It was quite astonishing at first. We knew we had something interesting with a lot of potential so we went forward with the implementation without thinking about the underlying business model. At that time this was mostly another hobby project.

From there, we showed it to people and they were really enthusiastic. Our first public demo was at the OGRE meeting [http://location-based.blogspot.com/2007/08/looking-for-windows-mobile-beta-testers.html] and an iPhone version [http://montrealtechwatch.com/2007/03/31/the-future-is-mashups-and-mobile-services/]. Also it’s much harder to raise money in Canada if you are ill-prepared on the financial side or if you business plan is not rocket solid. The large number of VC funds in the US and especially in the Valley, allows you be much more successful and gather interest at a much earlier stage even if you are ill-prepared. We are still missing that initial commitment spark here to ensure very early-stage companies can continue to innovate and move forward within the Canadian ecosystem.

Companies like Loopt (with $12M in funding), Plazes ($2M Euros), and others are also exploiting the location-based aspect. However they started with a very focused goal and built on it. Plazes even tailored down their mobile functionality to respond to user’s criticism about being too complex. However, the market is still open and we are seeing more of these companies shifting their business model: Loopt is now providng Location-Based Ads (LBA) in collaboration with CBS. You have to be agile and follow the market wave. If you have a clear understanding of your roadmap and your capability, that’s easy to do. We did not have that 20/20 vision and that’s why the uptake on our service was pretty low.

6) One of the most important things I see entrepreneurs not knowing, is when to stop and move onto other things.  What went into your decision to shut down the Kakiloc experiment ?

We were maintaining stats about registration versus usage level. We had a very low usage rate. People registered, specified their initial location and then expected something return. For most of them, there was no reaction because none of their friends were in close proximity. The fundamental action-reaction paradigm was broken. We were unable to achieve a sustainable user base. At that point, we needed to take a huge decision. Either we re-launched the site to be more focused and easier to use or we shifted our business model to explore a specific vertical (a business model shift). Still with no funding available and nothing in the medium-term pipeline, if was very difficult to do either. We discussed the future roadmap, the re-shift, we weighted the pros and cons, we read the seminal book by Seth Godin “The Dip”.

After a number of days of insightful introspection and discussions, my partner Alain and I decided to split. We made an agreement that I could continue to use and operate the Kakiloc intellectual properties. This was a very friendly split. However, the service quietly died as a consequence. It is impossible for a single person to handle everything. That’s the reason why, starting a company solo is 95% of the time a big no-no. You have no one to bounce ideas to, discuss issues, promote and demote stuff. Kakiloc was shutdown on November 6th, 3 days after the death of my mother. The official announcement was actually sent on November 29th to all our contacts [http://location-based.blogspot.com]

The Kakiloc technology is still alive and I’m looking at the right fit for it. I’m also evaluating other options in the real-estate business where it could be applicable. Lately, interesting things are slowly starting to surface and I should be able to potentially announce something interesting very soon.

I’ll keep you posted. Thanks for the opportunity Austin.

Happy location reporting - Martin

Thanks Martin for participating in this interview. I’m looking forward to your next adventure as an entrepreneur.

Ben Yoskovitz wrote a post about celebrating failures that also mentions Kakiloc.

On Tue 8 Apr 2008.