The local product design economy

Update: I changed the verb acquiring to joining. A lot of the chatter has been about how this is not an acquisition. And I agree. It is not. As the post states at the top, TeehanLax is shutting down. It is reminiscent of the Smart Design closing (see Dan Safer’s post) and some of the reasoning behind the Adaptive Path acquisition by Capital One. It sucks. But I’m not planning on leaving Toronto, and I’m celebrating my friends like a wake and trying to understand the implications. 

TeehanLax is shutting down. This is getting a lot of coverage:

Why so much coverage? Well it is because TeehanLax was one of the best design firms around, if not the best in Canada. They designed 2 of my favourite apps: Prismatic and Medium. You could see the tension between the services side of their business and the desire/pull of being a product company.

BarCamp Toronto

I first met Jon and Geoff back in 2004. It was after the release of their PVR report comparing the user experiences of the Bell and Rogers PVRs to TiVO. They had an interesting approach, doing interesting work, just trying to build a different kind of company. That was evident when Jon agreed to host BarCamp Toronto in November 2005. It was a different approach than Sapient, ModemMedia, Scient, Viant, Razorfish or other agencies in Toronto were taking. It wasn’t a client development strategy, it wasn’t a recruiting strategy, it was an offer to participate in the conversation.

Photo by John Lam https://www.flickr.com/photos/john_lam/67605248

Photo by John Lam

The shutting down of a company that I described last week as a “building big, impactful [indie] company” is interesting. Jon, Geoff, David (Jeremy, Peter, Tamera and the entire team over the years) you built a company that I respected. And I am very happy that you’ve made the best decision for you and your families. It’s your company, you get to make the decisions, so don’t listen to the naysayers.

Photo by Tom Purves https://www.flickr.com/photos/thomaspurves/3328461206/

Photo by Tom Purves

Here are a couple of observations about one of my favourite design firms shutting down in Toronto.

  1. Short term: design talent availability
    There is a bunch of design and development talent that is available for other Toronto companies to hire. These people have been trained in one of the best design cultures in Canada.  They produced an environment that produced some of the best products in the world.  If anyone from the TeehanLax team needs connections to interesting companies please drop me a note and I will do my best to connect you.
  2. Short term: More people evaluating Toronto companies for acquisition
    This is the third Toronto design and development company acquired in the past 24 months. JetCooper acquired by Shopify. Xtreme Labs acquired by Pivotal. Now TeehanLax shutting down and joining Facebook. This is important. Toronto is a great place to acquire talent. Hopefully there is an equal respect for the design and development work being done here. (This excludes the amazing talent like Mike Beltzner, Mike Shaver, Scott Boms, Sam Ladner and others).
  3. Longer term: The loss of a gravity centre for design talent
    There are other places that are gravity centres. Pivotal Labs is a great place for engineers and designers to learn the power and efficiency of paired environment. Farhan and team are doing wonders to explore and implement a very powerful cultural tool. TeehanLax built a culture that produced great digital products and experiences.

    “We were happiest when the products we were creating reached our standards. We were happiest when we spent time thinking about how to create the conditions and circumstances for this to happen. We were happiest when we were working with our team members.”

    It will be interesting to see if the T+L diaspora can have an impact on the ecosystem like the Trilogy diaspora in Austin or IDEO diaspora in Palo Alto.

  4. Services firms are not destined to be huge companies
    The back of the napkin math I use to calculate a services business is approximately $200k in revenue per employee. Sold at under 5x EBITDA (given a 20-30% margin and averaged revenue of past 2 years plus forecast using error correction of previous forecast, lets say 1x revenue). There is great business, it’s just a hard business to scale nonlinearly. And when “someone slides a number across the table big enough that you just can’t say no”  a product company that is scaling like crazy is likely to be able to slide a bigger number than a services company. It feels like we’re seeing that ceiling being hit by XtremeLabs (sold to Pivotal), TeehanLax (joining Facebook), JetCooper (sold to Shopify), maybe BNotions (AK has departed for Gallop Labs).
  5. Opportunity in the product/design/user experience space
    TeehanLax was a design firm. It was a design firm that respected technology. There are other firms in Toronto that are a mix of product, design and technology including Normative, SayYeah, BoltMade, Nascent, TailoredUX among others (including those with a more technology focus VennPivotal LabsOK Grow!Isle of CodeThe Working GroupBNOTIONSEndLoop StudiosUnspaceRangle.ioPeople & CodeDigiflareFunctional ImperativeMetaware Labs).  TeehanLax showed that it was possible to build a world-class design shop in Toronto. I’m hoping someone realizes this is the combination of the caliber of the output, the process to build the culture and the requirement of building the business/revenue streams.

Interesting times in Toronto. Congratulations to Jon, Geoff and David. Thank you for being amazing. And the best of luck on your journey.

Building Media Empires

Is it possible to build a new Canadian media empire?

I’m not even sure what a media empire looks like. People still want content. And content needs distribution. It feels like the majority of distribution in Canada is controlled by a small number of players:

  • Postmedia
  • Torstar Corporation
  • Rogers Media
  • Corus Entertainment
  • Astral Media
  • St. Joseph Media
  • Now Communications
  • Blue Ant Media
  • DHX Media (thanks @johntoryT0 for the correction)
  • plus more

I still don’t really understand the economics of distribution and monetization of traditional media. But this seems like a start to understanding about the Canadian landscape. In 2014, there was a lot of VC money (yes, yes, VC dollars is not the only metric of success) going into journalism companies (I  really like the CB Insights description of fat content companies): Buzzfeed, Vice, Huffington Post, First Look Media, Pando Daily, Vox and others. Canada seems to be stuck in the online properties of traditional media outlets.

We produce interesting/engaging content including YouTube stars:

I want to build a better understanding about content creation, distribution and monetization in Canada. Where should I start?

/me goes to spend more time consuming CANADALAND.

 

 

Questions for 2015

Benedict Evans posted the questions he’d like answered in 2015 and in mobile with the platform wars over. Here are some of the questions I’d expect to see answered in 2015 for Canada and Canadian companies.

  1. What happens to Canadian companies in the mid-stage?
    Jim Orlando described a strong 2015 market in both early stage (local) and late stage capital (international) for technology startups. Are their enough Canadian funds that can invest >$15MM/company, i.e., >10% of their capital pool, to fund growth stage Canadian startups?
  2. Where will Kik land?
    Ted Livingston’s view of messaging as universal UI and the race to become the Wechat of the West feels like the right thing. It seems like figuring out how to operate profitably is not the most likely outcome, so it must be an exit. Facebook has already acquired Instagram and Whatsapp, so it seems like this is out (particularly given a teenagers view of social media apps).  Does a non-Google Android provider like Cyanogen or Xiaomi purchase Kik?
  3. When will a Canadian company report their first major cyberattack and breach? We’ve seen attacks and branches on the federal government it feels like only a matter of time until a financial institution or retail announces a major breach.
  4. How many narwhals will we see?
    There have been a number of US companies go to the public markets including HubspotBox and others. It feels like there are a number of Canadian companies that are on cusp. How many will forego the TSX and only go NASDAQ or NYSE?
  5. Will Shomi and CraveTV become true OTT competitors allowing non-cable subscribers access to compete with Netflix? Or do these offerings plus GameCentre Live and other live sports keep cable subscribers in Canada?
  6. Will Netflix be forced by content owners to cut down on grey market geofencing? What does this mean for services like Unblock-Us and TunnelBear? What does it mean for accessing foreign content like BBC iPlayer, Premier League Pass, NFL Game Pass? (p.s. where is my Internet access to Formula 1?)
  7. Will the Copyright Modernization Act changes that went live on Jan 1, 2015 impose additional fee increases because of management costs for independent ISPs?
  8. When will ApplePay launch in Canada? Will Apple be able to get mobile payments adoption than Suretap, Enstream, PayWave, PayPass, etc. that the carriers and banks have?
  9. Will one of the Canadian wearable companies begin rolling up others, that do not find product-market fit or a large enough audience, for the talent? Or will they be acquired by larger players like Under Armor?
  10. What impact for will the falling Canadian dollar and resource economy have on the tech ecosystem? We’ve already seen the rise of minimum app prices in the iOS store on Jan 9 to Cdn$1.19. Will a weaker Canadian dollar see a resurgence of the conversation and companies around near-shoring for larger US companies? Will this continue to build a stronger acquisition market for startups that struggle to find mid-stage growth capital?
  11. Do we need a Canada-based data centre for one of the larger hosting providers, i.e., Digital Ocean, AWS, Azure, Rackspace? IBM opened a SoftLayer data centre in Markham in 2014, with a few startups building on the infrastructure but all of the startups were still very small. Does data or computation sovereignty matter to Canadian startups?
  12. Is there a need for another startup conference in Toronto? There are great events in Montreal (Startup Festival), Vancouver (Grow Conference) and an investor focused event in Toronto (Canadian Innovation Exchange). But is there a need for more functional led events (design, growth hacking, CTOs, etc) like Warm Gun or Brooklyn Beta?
  13. Does one of the wireless carriers create a division or group with tools and pricing to support a strong IIoT ecosystem? We’ve seen Canadians like their oligopolistic carrier ecosystem, but there are segments like Wind Mobile users that are willing to compromise coverage or roaming for price. It is unclear if a 4th national carrier can survive on these customers alone, and the CRTC has determined that Telus cannot absorb Wind as their discount brand (like Fido or the MNVOs on Bell). Is there an alternate model where Wind or other carrier bets on the data carriage fees and the necessary tools to build a stronger IIoT ecosystem. The tools that mix RFID, cellular and Wifi?

Thanks Gideon Hayden for feedback and insight on the post.

Not your typical tech startup incubator

This is just too awesome. It looks like the Hyperdrive team staring as a Blue Man like group doing an interpretive dance number. And because when you’re trying to stand out as a startup incubator/accelerator/cyclotron you need to think different in order to change the world.

I guess I know why I’m ordering a red body suit.

ebooks, monopolies, monopsonies, DRM and me

I was late last night reading. I had finished reading Evan Currie’s Valkyrie Burning (Warrior’s Wings Book Three) on Amazon. I went looking for new publications from Evan which included The Heart of Matter: Odyssey One. But there was a change in price, The Heart of the Matter is $7.99. Sure it’s not a lot of money. But I’ve previously bought 4 of Evan’s books (including the price I paid):

So from an average price of $3.49 to a new book of $7.99. A 229% price increase. I want my authors to get paid. I like them earning more and generating more and better content. But a 229% price increase, and it’s not just the popularity of authors but current events and my choice of operating system that have me paying more. So I support an author and they become “famous” or “popular”, and I’m am supposed to grin and bear it because I can. I’m all for paying for integrated services, I’m all for authors earning more, I’m all for a better experience. But seriously a 229% price increase, something doesn’t feel right.

Amazon Prime pricing for $0.00

But wait, I can get the book for $0.00 as a Prime member. I didn’t think Amazon Prime was available to me in Canada. I was on Amazon.com, but my credit card and my shipping address is Canadian. Maybe with hope that Amazon Prime was finally available in Canada. I don’t think so, Kindle Owner’ Lending Library is only available in the US. I was just being hopeful that perhaps another large company had decided to invest in the Canadian market, much like Netflix and take on the regional licensing restrictions. </sigh>

I am trying to better understand the implications of my choices, i.e, buying and consuming DRM books in a closed ecosystem (see Kindle SF). I like integrated services. I like unified experiences. But I don’t like being taken advantage of, or having freedoms taken away.

Distribution, Disintermediation, and Monopsony

I was trying to understand Amazon’s ebook strategy and what its implications mean for me as a consumer in Canada.

We’re use to monopolies, well really ogliopolies (wireless companies, banks, internet service providers, we’re good on this one) and monopsonies (Canadian Wheat Board that ended Aug 1, 2012) . But I was surprised in Charles Stross’ analysis of Amazon, was they were playing both sides of the monopoly/monopsony market equation.

“And the peculiar evil genius of Amazon is that Amazon seems to be trying to simultaneously establish a wholesale monopsony and a retail monopoly in the ebook sector.” Charles Stross

One explanation for the increase in kindle prices is predatory pricing. And it’s not like the DOJ is investigating Amazon, Apple and the big six publishers for predatory pricing of ebooks. This has disintermediated retailers and how consumers purchase and consume books. Next to disintermediate the publishers themselves, and Amazon with Kindle Direct Publishing has given authors a way to get large distribution and forego publishers. The ebook market is growing at 200 percent per year, and Amazon owns “70 to 80 percent of the [ebooks] market“.

 “By foolishly insisting on DRM, and then selling to Amazon on a wholesale basis, the publishers handed Amazon a monopoly on their customers—and thereby empowered a predatory monopsony.” Charles Stross

Crap, I fell for it. Other consumers fell for it. Publishers fell for it. What to do next?

“And the only viable Plan C, for breaking Amazon’s death-grip on the consumers, is to break DRM.” Charles Stross

O'Reilly eBooks Advantage - No DRM

This means changing my behaviour to support authors and publishers that publish DRM-free content. Thank you O’Reilly, all of the technical books I’ve purchased are available without DRM. It also means that I might consider removing the DRM from my existing Kindle purchases, oh wait, I can’t do that any more. It might violate the Terms of Service for Kindle, which you, like me, probably didn’t read. It’s too bad that I have bought a “limited license to use the product, rather than actual ownership of an object” with the ebooks (yah, it surprised Bruce Willis about his iTunes collection). It is why for a long time, I purchased movies on DVD rather than iTunes. At least, I could back them up.

But the goal isn’t to put the books back on my Kindle, but to have a back up copy that is future proofed.

Bill C-11 and Changes in Canada

But I can’t do that in Canada since Bill C-11 which passed in June 2012. It includes a digital locks provision that is “one of the most restrictive digital lock approaches in the world“. It seems that my worries in Dissident, Citizen were more about the Canadian government. And it seems that my worst nightmares about copyright and content are coming true.

I am going to have to rethink all of my media consumption behaviours. Ranging from ebooks to mp3s to DVDs.

I’m starting to really understand companies like Wattpad, Smashwords, CD Baby, O’Reilly and others that offer distribution, monetization and consumer choice related to DRM.

Additional Reading

Hacking Health

Hacking Health, Oct 19-21, 2012 at MaRS in Toronto

A Hacking Health  event is happening October 19-21, 2012 in Toronto. The event focuses on bringing innovation to health care. It brings together clinicians with developers, designers, and entrepreneurs to look for real world solutions based on real clinical experience. It should be a very interesting event. The Montreal event has a 138 developers, 28 designers, 66 healthcare experts and 32 mentors. This signals a huge opportunity in the healthcare clinicians and practitioners for new tools and change. I wonder if the health care funding mechanisms/decision making will limit both the development and the adoption of any potential tools. It would be an interesting to discussion to have with others at the event.

Hacking Health Montreal Breakdown of Participants

 

The event in Montreal generated 19 projects, including:

  • HemoTrack – a mobile app that collects real time usage of Factor VIII, bleeding events and uploads that information to a web application accessed by physicians to monitor their patient’s health. This project included Dan McGrady
  • Kinect Burn Area App – Using the off-the-shelf Microsoft Kinect, the 3D depth sensor feature accurately and rapidly provides doctors measurements of total body surface area. The camera feature allows clinicians to visualize and accurately mark the area of the burn on screen and automatically calculate the % of body surface area burnt as well as fluid requirements of the patient.

I’m hoping to get out and participate (weekends are incredibly valuable, taking time away from kid activities and time means this really has to deliver value for my participation).

UW VeloCity Evolving

CC-BY-NC-SA Some rights reserved by Вεη
AttributionNoncommercialShare Alike Some rights reserved by Вεη

December 31, 2011 marked the end of my reign as the Entrepreneur-in-Residence (EiR) at UW VeloCity. The VeloCity residence announced a new leadership team before Christmas Holiday. I’m still affiliated, I’m still an alumni and I’m still an avid supporter.

I was lucky enough to spend 6 months with the students and their companies in Waterloo. I made the trek down the 401 to Waterloo almost every Tuesday night for dinner. The dinners were modelled after the YCombinator dinners. We brought in our friends and acquaintances from the world of high tech entrepreneurship to talk to the students. To share their experiences starting companies, raising funding, working with cofounders, etc. The goal was to provide a social, educational experience for the students and hopefully teach them something about the industry and software culture.

I was an undergraduate back in the early 90s. I wrote Objective-C on NeXTSTEP boxes. But no one at Waterloo really promoted starting a software company as a career path, maybe I’m just an idiot, but I never thought that I could start a company and sell the software I was writing. There were a few startups (MKS, RIM, Maplesoft) but this wasn’t a career path that was promoted. You could argue may this was because I was in the Kinesiology department. But spent a significant portion of my time in CS and SYSDE (SYSDE142, 342, 542 and others). The closest was a class about database management in the department of Management Sciences but it definitely wasn’t about entrepreneurship (how much do I still hate Access).

It wasn’t that hadn’t been exposed to entrepreneurship. I grew up in an entrepreneurial household, my Dad had left Clarkson Gordon to start his own small business accounting and consulting firm in the early 1980s. And my first real job was with a small usability consulitng firm, but I thought that I would get a job at CIBC or IBM or maybe Delrina. I was never provided the skills, the experience or even the awareness that entrepreneurship (software entrepreneurship) was a career path. I went to CMU for graduate work, and I was exposed to founders from MIT, CMU, Stanford and other places. My first job after grad school, I did research at UIUC and was exposed to things like early Netscape. But it wasn’t until I started working at Trilogy Software with a bunch of Stanford graduates did it become clear that I could start a software company. I always wished that someone had shown me entrepreneurship (beyond consulting) as a career path.

My view about VeloCity comes back to my own experiences at UWaterloo. And the role that VeloCity needs to play in exposing and educating UW students about high-tech entrepreneurship. It will be great to see the evolution with Mike Kirkup (LinkedIn, @mikekirkup) and Brett Shellhammer (LinkedIn, @bashome). VeloCity represents something that wasn’t available to me when I was a UW student. For me, VeloCity represents the next stage of evolution for the University of Waterloo cooperative education program:

” the solution was not just classroom instruction but “the co-operative program,” which offered students alternating terms of paid work in industry to get practical experience.”

Velocity feels like a starting ground for the next set of education at Waterloo. With the launch of MITx in addition to Open Courseware, MIT is attempting to change the face of higher education. There is inspiration and direction from TED, TEDx, and SingularityU. There is also the rise of self-learning platforms like Codeacademy, Khan Academy and others. It is time that UWaterloo explored evolving the cooperative education program beyond the constraints of the existing program. For me VeloCity represents the start of a new academic experience.

I can’t wait to be a part of what is next.

 

Keep on rockin’ in the free world

Photo by Frank Wuestefeld Some Rights Reserved CC BY-NC-SA
AttributionNoncommercialShare Alike Some rights reserved by Frank Wuestefeld

Don’t go in to the light! A couple of days ago it was the 5th anniversary of my heart attack at DemoCamp. I am really luck to have friends like JayJoeySuthaLeila and Greg who understood the symptoms and were caring enough to protect me from myself. I’m very lucky we were at MaRS, because for the heckling I do, the first rule of real estate was my friend. Location, location, location. And I’m really thankful for the spectacular care I received at Toronto General Hospital.

I missed what was one of the most important early DemoCamps, it takes almost these 5 years to play out, but look at the schedule.

  1. Skydasher/Feedcache: Skydasher is Tucows latest super-secret attempt at bringing great services to Webhosters and ISPs and their customers. Feedcache is a big, queryable cache of syndication feeds that application developers can play with. Presented by Ross Rader and Joey deVilla, developer relations dudes at Tucows.
  2. BlogScope: Online analysis and visualization tool for blogosphere. By Nilesh Bansal, grad student from database group, University of Toronto.
  3. BumpTop: Next-generation desktop organization software powered by a physics engine. Presented by Anand Agarawala. Video also available.
  4. Joshua Wehner – Rails based web application
  5. semanticPAL – learnable natural language user interface from nSM Semantic Modules Presented by sasha uritsky

On the schedule were BumpTop and Blogoscope which eventually became Sysomos. Both of which were acquired approximately 3.5 years after their inital DemoCamp presentations.

I often get asked why I continue to do this: DemoCamp, StartupNorth, Founders & Funders. I’ve tried to write about my motivations about this community of crazy, under-appreciated technologists, designers, entrepreneurs. I think that this is a special place. I’ve met a lot of good friends. I’ve learned a lot about great people. I hope that I’ve been able to make Toronto a better place. And I wonder what my role should be going forward. This is my hobby. This is my passion. This is my distraction. I do it because it makes me feel better.  It’s just too bad that this isn’t a real gig. I tried at Microsoft. Mark Relph and John Oxley really understood the power of a strong Canadian emerging technology and startup community. It was time to move on. Others think they can manipulate, own and harness the power of loosely connected pieces where the only benefit is in providing a space for the collisions to happen. I like to think of my role as conductor. How do I get the right people to collide so sparks happen.

I’m left thinking I’m very proud of all of the entrepreneurs that I’ve met in the past 5 years. I’m thankful for how much each of you has helped me. And if you feel like I’ve been dishonest or untruthful, please let me try to rectify that. If I’ve ignored you, it’s because your message wasn’t what I wanted to hear. Help me hear you. And to everyone who has become a friend. My table, my bourbon bottle and my office is always open. Please keep on making Canada a place that I am proud to be a citizen.

Mesh is TO’s most important DIY conference

Mesh Conference is Toronto’s most important DIY conference.


Copyright All rights reserved by geoperdis

That’s right Mesh Conference is a DIY event. It’s the Do-It -Yourself endeavour of small dedicated group of individuals. And you can see each of their personalities and interests in the schedule and speakers. Rob Hyndman (@rhh), Stuart MacDonald(@stuartma), Mark Evans(@markevans), Mathew Ingram(@mathewi), and Mike McDerment (@mikemcderment) have been working very hard since 2006 to build a world-class that has attracted renown speakers, mayors, and attendees. The secret is that Mesh is an event that all of them want to attend. The reason they invest time and effort into this event is because it is really for them.

Ingram, Hyndman, Evans, MacDonald - missing McDerment
Copyright All rights reserved by photojunkie

Why is Mesh Toronto’s most important DIY event?

There are great events ranging from my DemoCamp to EcommerceCamp, from MakerFaireTO to Open Toronto, TechTalksTO to HackTO.  There are a great number of local events that have emerged. The thing about Mesh is that it started in 2006. Over 5 years ago, shortly after the first BarCampToronto. And since the very first Mesh, it has always had an air of professionalism that others should strive to obtain. Mesh from the very first event was an event that was world class. It was Canadian in size (about 1/10th the size of a US event). But it has always been DIY, it has never felt DIY.

Rob, Stuart, Mark, Mathew, Mike and Sheri deserve true accolades for building an event that defines the emerging technology, emerging culture, emerging policy in Canada. Thank you!

I hope to see everyone at the Allstream Centre this week.

Mesh 2011

Apparently I’m late to the game with the recognizing that Mesh Conference 2011 has announced a new location and their schedule.

New Location

AllStream Centre at the CNE

The conference moves to the Allstream Centre at the CNE grounds. This is a first year Mesh won’t be at MaRS. I’m hoping the new space allows for new conference experience. MaRS is a fantastic venue, but Mesh has really outgrown the space. It will be interesting to see how Sheri and the team organize lunch, social events, and other interactions to build strong connections between attendees.

Speakers

I’m excited there are a lot of my friends who are speaking at Mesh. These folks are just world class and it will be interesting to hear about their experiences.

I’m also incredibly stoked about Gabe Zichermann (LinkedIn) from GamificationCo. Gabe wrote Game-Based Marketing and hosted The Gamification Summit. Looks like another conference that covers marketing, culture/society, business, and media. It’s a great Canadian take on the web, technology, politics and culture.

I am disappointed that MeshU did not survive the fiscal constraints of running a conference. I know from our past experiences running StartupEmpire the lack of sponsorship and revenue that a smallish conference can generate.  I’m hoping that there will be something for design technologists and entrepreneurial technologists in Toronto in the near future.