Billions With Zero Knowledge - Austin Hill, Entrepreneur & Angel Investor

Congratulations to my brother Hamnett, father Hammie & the entire team at Radialpoint. Yesterday they publicly announced that they completed the acquisition of Toronto based Casero.

Here are some interesting facts from the press release,

• With the acquisition of Casero Radialpoint’s customer base includes 20 leading ISPs worldwide with direct access to more than 50 million subscribers. Radialpoint’s addressable subscriber base now includes one in every three broadband connected homes in North America and Western Europe.
• Radialpoint has grown rapidly over the past five years, from 75 to 250 employees, while experiencing an average annual revenue growth rate of 40 percent.
• This year the company is estimating 50 percent annual revenue growth over the previous fiscal year and expects to exceed the $100 million mark in annual revenue within the next two years.
• Radialpoint has been profitable and cash flow positive since 2004, and projects an estimated EBITDA growth rate of 40 percent this year.

It’s been awhile since I wrote about the incredible continued growth at Radialpoint, but if you haven’t been tracking the company here are some other recent events that have occurred,

• In September 2008 (actually a week or so before the economic crash) the company raised $98 million from the private equity firm TA Associates (our friend & Akoha investor John Meeks joined the Radialpoint board)
• In January 2009 Radialpoint acquired Boston based HiWired an award winning PC Support solution.

This is the latest in a series of transactions that Radialpoint has completed becoming one of the fastest growing & largest software companies in Canada.

This latest transaction is also interesting for the following reasons,

• Casero was founded, financed & run by Canadian serial entrepreneurs Kevin Kimsa & Paul Atkinson.  This is a great deal for them (congratulations to the entire Casero team).  I’m pleased to see Paul joining the board of Radialpoint and the company staying in the hands of a Canadian technology company instead of being sold to a foreign company.
• Kevin & Paul have had a number of startups in Canada and have also been angel investors & coaches for entrepreneurs at Universities such as Waterloo.
• Casero was funded in part by Canadian VCs including ArgoGlobal Capital a fund that Canadian serial entrepreneur, angel investor & venture fund operator Charles Sirois helped establish.

This is one of the best examples of our serial entrepreneurs (from multiple generations of tech & Internet successess in Canada), VCs and fast growing Canadian companies working together to create large Canadian based market leaders.

There have been a lot of discussions on the Canadian startup blogs recently about promoting Canadian success stories & the role of our serial entrepreneurs, angel invesetors and VCs working together to create an ecosystem of success.   (See Rick Segals recent run of great Canadian tech posts (1, 2, 3, 4); Chris Arsenault’s CVCA post on our industry being alive & kicking, Startup North’s great coverage of Incubators & Ignition and the debates about the problems with our VC industry and MontrealTechWatch’s recent coverage of the increases in Quebec provincial support of the VC industry and local startup incubators)

I continue to see incredible signs of success at every level of Canada’s technology ecosystem.  There are many problems with the global economy, the Canadian innovation sector - but as Radialpoint continues to show, there is a lot of exciting success stories occuring in our own backyard as well.

Radialpoint is just one example - but it happens to be one I’m very familiar with and couldn’t be prouder to be associated with.

On Wed 22 Apr 2009. [7] Comments

With conference season upon us the Montreal technology community is preparing to descend on a number of very large industry events.

Our community has a number of speakers, attendees & company presentations occurring at:

• SXSW Interactive in Austin (March 13-17)
• Game Developers Conference in San Francisco (March 23-27)
• Web 2.0 Expo (March 31-April 3)

Conferences give us a great chance to network with many of our industry counterparts from around the world. They also provide us a chance to meet members of our local community that we may not have connected with while in Montreal. Meeting your local counterparts at these events allow us to help support each other in many ways while we are stateside. Whether you are looking for a job, trying to recruit for a position, inviting people to listen to your session talk or need help trying to meet that critical investor/partner/speaker or guru your local community might be able to help you get more out of your conference experience.

If you are planning on attending any of these conferences this year please send a tweet using the conference hash tag & #MTL to introduce yourselves including who you are, which company you are with (if any) and any information about meetups, promotions, presentations or help you need to get the most out of your trips.

• #SXSW #MTL Example: @georgefavvas CEO of @smarthippo is at #SXSW #MTL this week where SmartHippo is going to be doing a fun promotion.
• #GDC #MTL Example: @austinhill from @akoha #MTL is doing a keynote at #GDC Serious Game Summit
• #Web2Expo #MTL Example: @acroll @seanpower Authors of new O’Reilly book on Watching Websites are speaking at #Web2Expo #mtl

This will allow other Canadian & Montreal tech community members to reach out, introduce themselves and hopefully lend a helping hand to each other for any specific things you are trying to get done. It also allows those of us not attending events to keep an eye on your tweets from Montreal.

If this picks with with other cities such as #Tdot (Toronto), #Van (Vancouver), #Cal (Calgary), #Ott (Ottawa) or #CAN (Canada) you can use these links to track the Canadian tech community at these conferences. Expat Canadians are also welcome to grab the #CAN tag to join in on the fun.

Update: As Boris Mann suggests in the comment below, there are more often used Twitter hash tags for other cities.  The tags he suggests are YVR (Vancouver), YYZ (Toronto).  The round up links haven’t been updated for this, but if you are using Tweetdeck you should find it easy to create a search that includes a number of the variants on city hash tags.

• #SXSW - Full Canadian City round up
• #GDC - Full Canadian City round up
• #Web2Expo - Full Canadian City round up

At the very least we can co-ordinate meeting up for drinks to showcase our drinking prowess to our industry counterparts around the world

On Thu 12 Mar 2009. [4] Comments

Thank you to everyone who submitted entries to the StartupEmpire giveaway. The quality of the writing and thinking was excellent and it was inspirational hearing so many people wanting to further their entrepreneurial careers. Our hats off to all of you.

While our selection criteria was by no means perfect, we did consider things like the quality of the writing, the uniqueness of the product, whether the person was applying based on need or because they forgot to buy tickets in advance and whether they met the submission deadline.

We only had 10 tickets to giveaway unfortunately so Raymond Luk and I had to make some tough choices. The good news for anyone who wasn’t selected is that there have never been more entrepreneurial events happening across Canada. We hope to meet all of the companies at one of these events at some point in the future.

So here is the list of winners (in alphabetical order):

• Chris Advansun (DramaVida)
• Bryan Bogensberger (Reasonably Smart)
• Leonardo Borda
• Felipe Coimbra (YOWTrip)
• Dan MacGrady (IntegrateSales)
• Paolo Mazza (Alexandria High)
• Chris Pyper (MyWebVine)
• Christine Renaud (E180)
• Raul Rupsingh (Softshell Computers)
• Reynold Xin

Congratulations everyone. We’ll see you all at the conference in a few days.

I would like to thank Raymond Luk & Flow Ventures for helping me organize and sponsor this contest.  Flow Ventures is active in the Canadian Startup scene and participating in the Canadian angel investing community.  Both my companies Akoha and Standout Jobs do work with Raymond and his firm.  They are great partners for startups.

We also want to thank Angelsoft for the contribution of a number of OpenDeal coupons to allow companies to submit their fundraising needs to their network of angel investors.   We will be announcing the winners of the AngelSoft packages at the conference.   I’m now using Angelsoft at three of the venture funds/angel networks I’m a member of.  They have over 400 angel & VC funds using the software with almost 14,000 investors.  This is a great resource for entrepreneurs looking to raise funding and we are thankfull for their support of this contest.

On Tue 11 Nov 2008. [4] Comments

I’m really pleased to be speaking at Startup Empire on November 13th in Toronto.   I’m going to be running a hands on workshop for entrepreneurs entitled “Slow down &  Speed Up - Managing A Startup in Turbulent Times”.

In my workshop I’ll be sharing some strategies & tools for the following aspects of your business,

• Avoiding the wall - Raising Cash and Extending Runways in a Economic Downturn .
• Risk Reduction Roadmap Planning, linking financing, scenario planning & risk reduction. 
• Performing Honest Assessments of your Market, Team & Capabilities to Win.
• Who is investing now in Canada?

Jevon McDonald & David Crow have put together a great line up of speakers and sponsors.

The organizers have recently dropped the price to a very affordable price of $69 for the entire day conference.

At the same time I know many entrepreneurs who watching budgets & may not feel they can afford to attend (travel & conference fees) so we are announcing a quick contest for entrepreneurs interested in joining us at the conference.

FlowVentures, AngelSoft and Brudder Ventures StartupEmpire Contest

In the spirit of creating great opportunities for entrepreneurs I have partnered with my friend Raymond Luk from FlowVentures and the team from AngelSoft to sponsor 10 entrepreneurs to get the following packages.

• A free pass to StartupEmpire.
• A copy of Guy Kawasaki’s brand new book Reality Check which I recently read and is a great collection of essays & practical advice on many of the aspects of running a startup.
• A copy of Randy Komisar’s “The Monk and the Riddle” one of my favourite startup books which is a quick read about startups & finding meaning as an entrepreneur written during the last tech collapse.
• A $100 credit towards any travel costs you incur to attend (To help out of town attendees get to Toronto.  If you win & are in Toronto we’ll ask you to donate your travel subsidy to one of the other winners who are travelling farther)
• Angelsoft has donated a number of discounted and free applications to their OpenDeals program where you can submit your company to be viewed by over 10,000 angel groups.  These will be given to startups that apply and qualify as companies looking for funding ($100-$250 in value).

The contest is open to any entrepreneur, startup or aspiring entrepreneur who working building a technology startup.  

To enter the contest all you need to do is send an email to startupempire [@] brudderventures.com answering the following 3 questions.   Submissions must include your contact information, URL & Company contact details (if applicable) and should not exceed 1 page per answer.

1. If you are a startup tell us about your company, size, market, product and what stage you are at in your growth. (If you are not part of a formed startup but) If you are an entrepreneur, programmer or aspiring entrepreneur tell us about your background, your plans as an entrepreneur.  Tell us what you’ve done to advance your entrepreneurial aspirations.
2. Why do you want to attend Startup Empire - what do you want to accomplish there?
3. What are the 3 questions that you would want answered by any of the speakers @ StartupEmpire?

All entries should be received by this Saturday November 8th.

On Wed 5 Nov 2008. [3] Comments

Ottawa based entrepreneur, Allan Isfan who is founder of FaveQuest (who was also formerly EIR with Skypoint Capital) contacted David Crow and I a few months ago about wanting to bring Founders & Funders to the nation’s capital.  

Ottawa has been a long time hot bed of technology activity in Canada, but recently has undergone a lot of difficulties and changes.

He has done a great job of organizing the first Founders & Founders in Ottawa which is occurring next Wednesday, October 29.  The event is invite only (in the tradition of other Founder & Funder events).  There are few tickets left - you can email Allan at allan.isfan [@] favequest.com letting him know why you think you should get an invite if you would like to join the event.

Allan asked me to do a small speech to help kick off the inaugural event in Ottawa.   I’ll be speaking about why now is a great time to do a startup, and some of the opportunities I’m seeing in the angel, entrepreneur and Canadian startup scene.

On a personal note, I’m very excited at the success that Founders & Funders has achieved.  Since Patrick Lauzon and I started the concept, there have been Founders & Funders events in Calgary, Waterloo, Toronto, Montreal and now Ottawa.   I know that there is a pending event in Vancouver to be hosted & organized by Boris Mann at BootupLabs.

David Crow & Jevon MacDonald have been instrumental in helping spread these events.

With the changes in the global economy and dark clouds of startup funding forming over Silicon Valley and the tech world I think these events are going to be an important part of ensuring our early stage innovators continue to have opportunities for funding, learning and peer support.

On Thu 23 Oct 2008. No Comments

This blog has been relatively dormant the last 6 months as we’ve been preparing Akoha to be unveiled publicly.

Yesterday Akoha was able to announce that Akoha has been selected as one of the 50 (actually 52) finalists at the TechCrunch50 conference.

I still can’t announce the details of what we have been working on, but you can watch our TechCrunch50 presentation live on Wednesday (tomorrow Sept. 10th) during the Games session at 10:30PST at the TechCrunch 50 website.

You can read periodic updates on the details of Akoha on the Akoha blog.

On a personal note I want to congratulate all the TechCrunch50 finalist companies. I know how much hard work by our team has gone into premiering Akoha at this conference (dubbed the Superbowl of Startups) and want to congratulate all the companies who were also selected. We are having tons of fun watching your own companies launch and can’t wait to step onto stage and join you as presenters.

We will have more to post soon. For now you can hold on - Akoha is coming.

On Tue 9 Sep 2008. [3] Comments

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. [7] Comments

In the last two weeks while I was traveling, two Montreal based companies were acquired by large US companies.  In and of itself, this is a great thing to celebrate in our Canadian technology community - but there was something additional worth celebrating in each of these cases.

These companies were co-founded by some of my former employees at Zero-Knowledge Systems.  Small bonus is that I get to scoop my buddies at StartupNorth, MapleLeafTwo and MontrealTechWatch - which rarely happens

Microsoft acquires Montreal based Credentica

In the year 2000, Zero-Knowledge acquired the rights to Dr. Stefan Brands work and hired Stefan to help us build privacy-enhanced identity & payments systems.  It turns out we were very early into the identity game, failed to commercialize the technology - and during the Dot.Com bust cycle we shut down the business unit and released the patents back to Stefan.  This was groundbreaking stuff that Stefan had invented, and we invested heavily in trying to make it real, but there weren’t enough bitters in the market at that time.  We referred to the technologies as the “RSA” algorithms of the identity & privacy industry.  Unfortunately the ‘privacy & identity’ industry didn’t exist.

Stefan went on to found Crendentica to continue the work of commercialization of his invention. Today he announced that Microsoft has acquired his company and he and his team are joining Microsoft.

Microsoft’s Identity Architect Guru Kim Cameron has more on the deal on his blog (he mentions the RSA for privacy concept as well).

Adam Shostack (former Zero Knowledge Evil Genius, who also created a startup & currently works at Microsoft) has this post up.   George Favvas, CEO of SmartHippo (also another Zero-Knowledge/Total.Net alumni - entrepreneur) also blogged about the deal as well.

Congratulations to Stefan and the team.  This is a great deal for Microsoft, the identity industry and his team. (I know we tried to get Microsoft to buy or adopt the technology back in 2001 :) 

Stefan has been an entrepreneur working on commercializing this technology for almost 15 years.  He has persisted in the face of many downfalls and this is a great day for him.

EMC acquires PI Corporation

Almost five years ago, one of my top employees, Alexis Smirnov came to me to inform me he was leaving and joining a new startup called PI Corporation.  Although I was sad to see him go - I gave him my enthusiastic support.

At the time Alexis Smirnov was Lead Architect and Product Manager for Synomos, a spin out of Zero-Knowledge Systems that I ran (and ultimately shut down) which was working on personal data protection policy systems.  Alexis was one of the founding architects of PI Corporation where he joined Paul Maritz to build an innovative & secure personal information data store.

Also part of the founding team was former Zero-Knowledge scientist and cryptographer Dr. Adam Back.  (You can still see the founding team page for PI Corp at Archive.org since it’s been taken down from the PI Corporation website).

EMC is now building a cloud computing service with Paul based on this technology.   Much of PI Corporations founding team was in Montreal and grew to include 5 former Zero-Knowledge team members (Props to Adam, Phil, Andrew, Alexis and Roger) working on a diverse international development team.

EMC’s VP Technology Alliances Chuck Hollis has more on the details of the privacy related acquisition and what it means for EMC on his blog.

Congratulations to all the PI Corporation team.

Startups Birthing Startups - It’s Startup time & do you know where your FairChildren are?

When speaking about the benefits of joining a startup during my speech last week at StartupCamp Waterloo, I mentioned the great number of former Zero-Knowledge Systems employees who have gone on to be part of founding teams of other startups. (I currently track 12 former employees who have created their own startups or been the on founding team of startups since leaving Zero-Knowledge - I’m sure there are more.)

This cycle of entrepreneurship was something my brother, father and I fostered @ Zero-Knowledge.  We made entrepreneurship a key part of our culture, promoting employees thinking and acting like mini-entrepreneurs. We had ‘Startup 101′ courses at our Zero-Knowledge University employee orientation week.   We taught employees about venture rounds, cap tables, stock options and we shared details about how we were planning on growing & funding the company. This was based on the belief that knowledgeable & empowered employees would be better able to understand the how’s & why’s of the companies operating decisions. We believed it would help them weather the challenges of startup life while identifying and executing on opportunities. I think this was a contributing factor to the culture of entrepreneurship that grew out of ZKS.

I won’t dismiss the other contributing factor could have been employees getting a front row seat to many of our mistakes that might lead them to have said “if these guys can do it - why not me?” - which is just as valid a reason to join the startup game.

John Stokes at MontrealStartup asked about companies birthing startups recently.

David Crow highlights the ‘Fairchildren‘ principle in a recent post about Toronto’s startup culture. 

The concept Fairchildren hasn’t been defined tightly, but I think if you were among the first hundred employees of startup, or where a senior executive at a pre-revenue startup and go on to be a founding member of a new startup then you can consider yourself a ‘Fairchild’.

I can’t keep track of all my former colleagues but I hear from more and more of them who reach out for advice on startups, financing and to leverage the alumni network for introductions.

The simple truth is that startups give birth to other startups.  Employees meet each other, great teams get experience working together and lessons are learned that lead to other ideas and startups being formed.

Both of these deals are great examples of what happens when startups birth startups, and I’m very proud of my former colleagues success with these ventures and hope that their time at Zero-Knowledge helped contribute to their startup adventures & success.

This is not unique to Zero-Knowledge, nor were we the start or finish of this.  Many companies have been formed from the employees of SoftImage & Discreet, Megatoon Studios in Quebec City grew into divisions @ TotalNet & and gave birth to A2M the gaming company - there are countless examples of Corel employees starting new startups.

Canadian Fairchild Unite

We need support & showcase the Canadian Fairchildren of startups.  So if you are a Canadian Fairchild, a founding member of a startup that grew from another startup - please introduce yourself (Leave a comment, or contact me privately).  I want to hear your story.

On Fri 7 Mar 2008. [7] Comments

Instead of trying to answer the Aquinas like epistemological question of how many angels fit on the head of a pin, this post is about the changes that are occurring in the Canadian angel community for high-tech startup funding.

For a community of angel investors to be effective, there needs to be a density of intensity that creates, attracts and supports healthy deal flow and investment activity.  This density of intensity acts like a vacuum drawing entrepreneurial talent, mentorship, other investors and VCs providing a series of experiences and market data on what is working.  We see which deals & people attached to deals are worth re-investing in and it helps create the proper farm system for later stage investing and success.

Done right it creates a system that achieves escape velocity and can continue with its own momentum giving birth to many high tech success stories, that in turn feed talent, capital and mentors back into the community.

Historically there have been a lot of problems with the various attempts to organize the angel community in Canada.

While not the only example, a visible sign of these problems was the Toronto Angel Group and Toronto Venture Group suspending operations.  I only had cursory run-ins with these groups, but I know from many other angel investors and entrepreneur friends that these organizations failed to galvanize the community and service either the angel or entrepreneur communities effectively (despite a lot of volunteer effort by many people I respect and consider friends).

A healthy angel community that provides such a farm system for venture investors is becoming even more critical in todays market where rapid development and the lower cost of building web applications puts most deals below the venture capital radar. 

There is currently an oversupply of early stage capital in Quebec, with more then a billion dollars of new venture capital going into VC coffers in the last 5 years targeted at early-mid stage investing. Despite this we do not have enough companies reaching the threshold of being ‘venture ready’ to access this capital.

There are many exciting developments occurring in the Canadian early stage technology community, with Montreal seeing it’s fair share of that activity.

Beyond Montreal across Canada I’m seeing the seeds of an active community of early stage angel investors. One such example is the new Toronto-based angel group Maple Leaf Angels who are building a community of angel investors and have been quite active in doing deals in Toronto.

The National Angel Organization is working to focus some of this activity and last year published a great reference document on creating angel groups. Bryan Watson and Daniel Mothersill are actively helping seed and advise networks of angel investors on banding together.  People interested in angel investing (either from the point of view of an entrepreneur, or investor) can check out their document of best practices that explains many of the in’s and out’s of angel investing.

The role of angel investors is critical in Canada’s innovation ecosystem, and one that has been often overlooked.

Randy Komisar (entrepreneur, VC partner with KPCB and author of a great fable on high tech startups, The Monk & the Riddle) in this interview with Brown Hen points to a critical aspect of the Silicon Valley culture of innovation.

Successful people also reinvest in innovation; they want to be a part of the next big thing; they want to help mentor, guide and support aspiring entrepreneurs. This reinvestment is probably the most significant reason Silicon Valley is so prolific in terms of innovations.

To create this community we need to bring together the entrepreneurs and angel investors from successful companies that feed the density of intensity (i.e. Lot’s of deals with experienced mentors occurring quickly within the same geographic area).  Some of these deals with fail, but if the pace continues and a few succeed we will begin to see more of a cohesive investment, talent and technology community emerge with all the benefits that other geographic centers of technology innovation have created (NC-Raleigh, Denver, Israel and some of the activity out of Europe all come to mind).

This ecosystem also requires successful exits.  What would happen if Canada had a bunch of exists like Club Penguin (In the Gaming industry, Canada has a critical mass of talent and an ecosystem that we should be seeing more independent web-based game developers going out on their own)? What if we had a number of web-based exits like Flickr & StumbleUpon that find the mentorship, capital & management talent in Canada without choosing to go to the Valley?

That is what the valley has developed over the last 50 years, a very focused and rapid cycle of innovation & failure that creates expertise, learning and reached a critical mass of activity to achieve its own velocity to support new innovation.

This is not going to occur overnight.  It will take time, and the work of many dedicated individuals willing to put their own money, time and effort into building the communities of innovation that attain their own escape velocity.

This is not something any single person can do (people with more resources, time & experience than I have tried). My own contributions need to be measured given that I have a startup working towards launch and another team I support as Chairman & co-founder having just launched.

On my own part creating successful, high profile projects that our teams, investors and the community can be proud of is part of how I can best contribute to this ecosystem.  Given my focus on these projects, I’m no longer doing any direct new angel financing deals for the foreseeable future.

I am however involved in a number of initiatives to help support this type of ecosystem.

I am involved as an investor, and on the board of directors of Montreal Startup, a new early stage investment fund comprised of angel investors as the limited partners.  I am also serving on the board of directors of Les Anges Quebec, a new angel network being created in Quebec. 

With the help of my friend & local angel investor Patrick Lauzon, we organized & hosted a dinner called Founders & Funders last fall to bring together VCs, Angels and Entrepreneurs. This event was also held in Toronto, hosted & organized by Jevon McDonald and David Crow.  We are going to be hosting more of these across Canada with the help of other local groups.

I’ll be posting more details on these initiatives over the coming months.  Each initiative approaches the problems of early stage funding, creating exciting opportunities in different ways, but I feel they are all complimentary and provide me with an outlet to support early stage entrepreneurship while allowing me to stay focused on my day job

On Sun 24 Feb 2008. [3] Comments

Heri who is doing a very cool job writing MontrealTechWatch recently did two maps of the Montreal Technology Community scene. Very cool to see lot’s of friends and thanks to Heri for doing this (and for the mentions).

On Tue 17 Jul 2007. [6] Comments