FreshBooks – Bill me already

freshbooks Mike McDerment has helped kick the Toronto software entrepreneur community in the pants. It’s hard to believe that he’s been doing it for as long as he has been. Three Mesh conferences in the past 3 years, building FreshBooks and a number of successful and not-so-successful DemoCamp experiences. Mike has been documenting his lessons and advice for entrepreneurs on his blog, and .

Mike and the FreshBooks team have done a great job going after a under-served market with a product that solves a costly problem for a lot of small businesses. The FreshBooks product helps companies create and manage invoices. They quickly can show clients how much they can contribute to a companies bottom line. There are even rumors floating about the Interweb that FreshBooks has caused Intuit, the 800 pound gorilla, to change their marketing strategy for Quickbooks Simple Start. Why is FreshBooks a Toronto startup to watch?

Quick Analysis

Management Team

The FreshBooks executive team consists of a number of Mike McDerment, Joe Sawada, Levi Cooperman and Mitch Solway. Mike and Joe successfully built a web design professional services firm, Anicon, whose team includes 3 of the FreshBooks founders. The transition appears to be from a professional services firm doing web design and development professional services to a product company (whose name has changed from 2ndSite to FreshBooks). Mitch is an excellent senior marketer with experience of leading a marketing organization during the critical growth year. His LinkedIn profile indicates that Mitch managed a team of 26 people and grew sales from $3M to over $100M. Great acquisition to the FreshBooks team, a seasoned marketing veteran with experience driving traffic and growing sales.It’s a good team with personal experiences with the invoicing difficulties experienced by web design and development firms in managing the financial interactions with clients.

Market

The creator of Quickbooks, Ridgely Evers, has created a company to create a tool to solve business and financial management for smaller companies, he estimates the market size for the number of “True Small Businesses” at 5.1M in the United States. The business accounting market was estimated at $600M in 2005 with QuickBooks accounting for almost 87% market share. It’s obvious that companies need accounting and invoicing tools, and they are willing to pay for a solution that is aimed at enabling a better view into a business for small business owners instead of bookkeeping professionals.

Product

The focus on invoicing is a great strategy for FreshBooks. FreshBooks is a suite of tools that help customers get paid. This is a painkiller. FreshBooks has been aggressively filling in the product suite with tools for tracking time, expenses and estimates, these features help to refine the product offering beyond just invoicing into truly a financial management tool for service based organizations. FreshBooks has exposed most of their functionality through a developer API. The API offers a great way for external developers to integrate their applications to the provided services and for the FreshBooks team to build internal tools and user interfaces to consume and publish upon. Building on an API service, should help FreshBooks in extending the application going forward, adding features requires extending the API and building a browser based client to add to the FreshBooks web site.

The addition of roll up data analytics to provide customers with performance metrics and benchmarking shows that FreshBooks has been working on market leading features that have helped set companies like Mint apart from it’s peers.

Business Model

People pay FreshBooks to use their software. Check out their pricing. Mike McDerment has written about their experiences iterating through pricing models including the impact on conversion rates. But the business model is very simple get people to pay for your software. There are challenges related to the Freemium Pricing Model, where about 3% of registered users become paying customers. There are then 2 key metrics that the FreshBooks guys should be tracking: reach and conversion rate. Reach – how many people in their target market have had contact with FreshBooks advertising, at a conference, through customer evangelists, etc.? Conversion rate – how many registered users become paying users? Does pricing, features, adoption cycles, integration with other products, what are the pieces that drive the conversion to paying customer? The additional questions around customer retention exist, but lets assume that there is a high customer retention rate.

Strategic Relationships

FreshBooks has begun building some strategic relationships including:

Both of these relationships are a testament to the speed and flexibility of the FreshBooks offering. Sunir Shah blogged about the experience of integrating with Amazon FPS and compared it to PayPal and Google Checkout. Freshbooks will benefit in speed to market and additional early-adopter marketing once the FPS is generally available.The Authorize.Net Merchant Toolbox is very straight-forward, being on a list of 21 preferred vendors by a leading merchant account and credit card gateway, should help drive traffic and customers to FreshBooks.

One opportunity for FreshBooks is to seek a strategic relationship with third-party accounting and bookkeeping partners. Creating a referral or associates network for bookkeepers, including a set of offline tools that use the FreshBooks API, could help expand the reach of the product and build a strong indirect sales channel. 

Competition

Mike provides his thoughts on his competition in an interview with CenterNetworks

“I think there are two classes of competitors. There are traditional accounting software providers. The other group is other startups like BillingOrchard and BlinkSale.”

Crunchbase lists FreeAgentCentral as an additional competitor in the web-based accounting and money management tools for freelancers. Competition from traditional accounting software vendors including Intuit’s QuickBooks and NetSuite’s Accounting ERP solution. NetSuite is probably less of a competitor as it targets SME with an offering that is closer to small ERP than individual provider. QuickBooks is an interesting competitor because of the large ecosystem of accountants and bookkeepers that use QuickBooks to perform the accounting tasks for small businesses and freelancers. The same can be said for other competitors including: Sage; Peachtree; Microsoft Accounting; MYOB; etc.

BlinkSale and BillingOrchard are focused on invoicing. Where Freshbooks has evolved their offering to include many of financial functions that a small business needs including:  estimates, time tracking, and expenses. Freshbooks has built a suite of financial management tools for generating, managing and tracking invoices. A better competitor is NetBooks whose offering includes SaaS financial tools that include a wider set of ERP features including sales, invoicing, inventory, and costs. NetBooks appears to be focused on product-based businesses, where FreshBooks feels like it is optimized for services-based businesses.

Barriers to Entry

FreshBooks is a execution play. They have built a product that people want. It solves a very valuable problem. And they continue to add more value to the ecosystem than they take out. There is room for another larger, more established player to use their marketing might to box out FreshBoooks but it more likely that they might try to acquire FreshBooks and integrate it into their product offerings. Here’s what differentiates FreshBooks and provides barriers to entry in the market.

  • Intellectual property
    Just as discussed in the LearnHub analysis, there is nothing to indicate there is an intellectual property protection for FreshBooks. But as John Green points out in the commentary, intellectual property protections are not required to build success market play companies. The intellectual property protections may come in the understanding of the small market business owner and their financial practices and mindset. Having a process to quickly gather, assess, prototype and iterate on changing market conditions along with a easy to customize infrastructure should allow FreshBooks to have an advantage.
  • Customer loyalty
    Customer-centered design is in the DNA at FreshBooks. Adding conferences and generating support, while gathering feedback makes customers love FreshBooks. Check out the feedback on the RoadBurn tour. Understanding the needs, wants, desires and day-to-day lives of your customers lets you build solutions to their problems. It might help explain why FreshBooks had a 99% referral rate. I’m assuming that this means that 99% of existing customers sent a referral message to a potential new customer. I wonder what the conversion rate on referrals is for FreshBooks?
  • Advertising
    FreshBooks has not done a huge advertising spend, but they have been very effective in targeted advertising to the Web 2.0 service firms through placement on key sites (TechCrunch, The Deck, etc.) and by having a strong presence at key web design conferences: FOWA, Mesh and SxSW. The FreshBooks team has made very effective use of their marketing and PR budget to generate buzz and get on the radar of many of the Web 2.0 and startup media players.
  • Sunk costs
    Customers have sunk costs once their financial data has been entered into FreshBooks. However, with the FreshBooks API it is easy for a competitor to build a data migration tool and make an easy path for dissatisfied FreshBooks users to move off the platform.
  • Network effect
    The addition of the benchmarking service may help build additional network effect from participating in the FreshBooks ecosystem. However, billing and accounts receivable are a very individual company practice. There is some opportunity to gain improvements by implementing best practices, however, best practices are not network effects. Unless FreshBooks is able to negotiate lower transactional costs on merchant account transactions or leverage the behaviours of the crowd there is no network effect available.
  • Vertical integration
    This is potentially the most under investigated barrier to entry for FreshBooks. Building an integration with bookkeepers and accountants could offer FreshBooks an indirect sales channel and provide customers with both the tools and professional services.

Summary

FreshBooks is a company that is truly customer driven. You can see the commitment to the user experience with customer dinners when the FreshBooks team visits a city (San Francisco; the Roadburn and New York). They have build a great product that fills a gap in the offering by the 800 pound gorilla. They have assembled a star team of Toronto technology and marketing talent. They have built a successful business by adding value to their customers ecosystem. I have some questions around customer acquisition costs and the lifetime value of a customer including referrals, but it looks like a great business that needs some marketing muscle to grow to be a multi-hundred million dollar a year business.

FreshBooks is hiring and has openings for:

LearnHub: Social View of Learning

learnhubSaw on TechCrunch this week that John, Gosia and team had redeisgned the home page of LearnHub. Congratulations!

LearnHub is the evolution of Nuvvo. It’s a set of online tools designed to make learning fun and engaging for students, and easy and effective for teachers. It’s built on new technology, Nuvvo was built on a Java stack using Hibernate and Struts. LearnHub is build on the Ruby stack using Rails. It also represents an evolution in understanding of how important communities and interaction are in the learning process.

“We participate, therefore we are”

What is the social view of learning? Joshua Porter summaries very nicely,

The mere threat of social interaction changes our behavior…if you know your work is going to be put on public display, you’ll be much more motivated to make it good.

John Seely Brown presents Learn 2.0 as a shift from a view where knowledge is something that can be transferred to students. To a view where it is the social interactions and activities that help support the learning of content.

“This perspective shifts the focus of our attention from the content of a subject to the learning activities and human interactions around which that content is situated. This perspective also helps to explain the effectiveness of study groups. Students in these groups can ask questions to clarify areas of uncertainty or confusion, can improve their grasp of the material by hearing the answers to questions from fellow students, and perhaps most powerfully, can take on the role of teacher to help other group members benefit from their understanding (one of the best ways to learn something is, after all, to teach it to others).” – John Seely Brown [Minds on Fire – PDF]

LearnHub supports a set of social activities. Including blogging, comments, quizzes, tutoring, testing, and a reputation system. The reputation system provides a mechanism for students to evaluate teachers, the input and tutoring advice of other students, and generally create a public mechanism for building trust amongst the participants. The combination of using a socially motivated reward system, i.e., reputation, along with participatory social tools seems like a fantastic start for successful social learning communities. Coupled with the lessons from Nuvvo about how to build efficient course management tools, it sets LearnHub up to be a competitive player.

Quick Analysis

Management Team

The management team consists of Malgosia Green, John Green and Michelle Caers. The team is relatively inexperienced, but looks like a strong young team. Recent experiences building a succesful acquisition in Silicon Valley and lessons learned from a failed attempt at Nuvvo, should provide a strong basis for keeping LearnHub’s product development and business development on track.

Market

Bersin & Associates estimates the LMS market in 2006 at approximately $480 million/year and growing at 26% per year. March 2008 post shows the market at over $700 million with a strong focus on Web 2.0 and participatory tools as a important focus for vendors. There is a strong market for LMS solutions in India where there is a good mix of public and private sector adoption of learning management tools, there is a strong educational market with a strong group of private universities that account for 90% of the educational spend.

Product

The LearnHub product offering shows the experience of having build Nuvvo. The learning management tools included for teachers are comparable to those included with Moodle and Blackboard: courses, lessons, polls, quizzes, tests, student management, multimedia instruction, etc. The advantage for LearnHub is the participatory nature of the product is not bolted on after the fact. The LearnHub tools appear to be built around social learning. The integration of a reputation system that leverages many of the standard social design patterns, allows LearnHub to build tools for educators around a participatory community that supports individual learners improving the learning experience. The reputation system combined with the focus on easy-to-use instructor and participant experiences really set LearnHub apart from their enterprise competitors.

Business Model

There are still some open questions about the business model. The current model appears on the surface to be advertising based, there are Google Adsense on each pages, and larger educational institution brand advertising. With an investor like Educomp, there is bound to be additional business models brewing.

Strategic Relationships

The investment and strategic relationship with Educomp places LearnHub in a very good spot. Educomp is a large Indian educational technology provider with a strong presence the K-12 market in India. This is a strength for Savvica.

Competition

There are 2 leaders in the LMS space with the closed source Blackboard/WebCT offering, and the open-sourced Moodle. Moodle offers individual professors and instructors a great course management system, but it is missing many of the features and functionality necessary to run an institution. Blackboard is the 800 pound gorilla in North America and has recently added managed hosting and community features.

Barriers to Entry

Much of the barriers to entry analysis requires looking at information dependent on details of the business model, marketing plan, and a better understanding of the relationship with LearnHub’s investor Educomp. The barriers to entry in the LMS market appear to be related to existing vertical integration and key agreements in the educational market.

  • Globalisation
    My thought here is that the partnership with Educomp provides rapid access into the larger local Indian educational market. And that the size of this market will allow LearnHub to be able to adjust the tools for use in other English speaking markets.
  • Customer loyalty
    LearnHub is building tools that people enjoy using. And is trying to build a community around learning that allows students to eventually become teachers. Customer loyalty and community liveliness are metrics that can be track as LearnHub develops. First steps include their agile, human-centered design and development process.
  • Network effect
    There are strong network effects that are dependent on finding the right instructors, institutions and courses. Content is still king, and with the right participatory model surrounding the content LearnHub is set to build a vibrant community that replenishes the content but also improves the learning experience.
  • Sunk costs
    It’s pretty easy, once you get your courses and material entered into the system there is a huge cost to move them to another provider. Getting the right content and instructors is key to leverage the learning tools and community tools.
  • Research and development
    Let’s just assume that LearnHub continues to be out in front of the R&F curve. Leveraging an existing community and layering in new tools and techniques as they are discovered, invented or evaluated for effectiveness.

One key barrier that is difficult to assess from the outside is the one of intellectual property. Much of the LearnHub system is public, and many of the social design patterns are freely available an published by others (see Yahoo’s Reputation Design Patterns). It will be interesting to see how quickly existing LMS providers adopt social tools, Blackboard has a Community System but appears to be offering this as enterprise software to educational institutions to deploy. Missing the internal insight it’s very difficult to assess the intellectual property protections. In my search of the US Patent Office, I could not find any filings related to Savvica or LearnHub.

Summary

The experience in Silicon Valley appears to have prepared John & Gosia in building a solid business plan around an existing problem with key differentiators in the community tools for elearning. There are a few open questions around a business model that allows LearnHub to generate significant revenues, and the barrirers to entry for a competitor. However, the investment by Educomp and the existing Educomp salesforce and business development efforts lends significant credibility to the LearnHub efforts. LearnHub is building tools that are leading the social learning trend and have strong investment and business development relationships in India.

Savvica, the company that makes LearnHub, is hiring.

Links for 2008-06-11

This is posted from ecto, which is a perfectly fine editor, but it’s no Live Writer, looks like I need to auto-run Parallels.

  • Bumptop beta invite
    I received my Bumptop invitation last night. And it looks like I’m not alone, Connor Turner published his experiences running it under XP. I haven’t read the requirements yet, assuming it will install on my Dell m1330, it will be going on later today after a backup. I’ll publish screenshots later.
  • Angel, VC, or Bootstrap?
    Anand Rajaraman from Cambrian Ventures (not associated with Cambrian House) talks about the risks and benefits of bootstrapping versus raising angel money. In particular, he discusses Greg Linden’s post-mortem of Findory, and the risks some entrepreneurs may experience when bootstrapping. It’s interesting model for angels that relies on personal relationships and technology expertise in the area of the company. This makes sense when looking for an individual investor, but I’m having a hard time understanding how this advice impacts organized angel groups, like National Angel Organization, maybe Dan or Bryan can help clarify.
  • The business that are now dead
    Ever since I heard Albert Lai say “How many of you work in traditional media, well, you’re f@&%ed!” at Mesh 2006, I’ve been trying to figure this out. It’s a great article challenging the death of traditional media. These are huge advertising markets, TV, radio, print are still big parts of the ad spend. They may not be growing markets. There may be greater opportunity and less capital risk on the Interwebs, i.e., it takes less money to start a blog network than a newspaper. But NY Times, BBC, World Online (never heard of them, well Django started there), News Corp and other traditional media folks are doing interesting business online. That said, bloggers and online media are not something you can ignore (even though you may think i said something else last week).
  • 9 Companies building on top of SharePoint
    ReadWriteWeb has a story from Enterprise 2.0 about 9 companies launching integrations with SharePoint. I wrote about nForm’s Midori which offers project management on top of SharePoint. There are 9 other companies including: Awareness; NewsGator Social Sites; Atlassian Confluence; WorkLight for SharePoint; Spotlight Connect for SharePoint; Telligent’s Community Sever Evolution; Tomoye’s Ecco and others. Tomoye is based in Gatineau, QC and has been building communities of practice tools.
  • Patterns for Designing a Reputation System
    Yahoo! User Interface Blog has published Reputation Design Patterns. Great work by the Yahoo team including Randy Farmer, it’s a great understanding of the social-design related UI elements for communitys and social networks.
  • The realities of life and startups
    James Robertson responds to Aaron Swartz about what keeps people from joining startups. For the first time since I started doing the startup thing in 1998, I deeply related to James’ comments. I have a new baby, I had a failed startup, and I’ve joined Microsoft. Time is the most important thing. Followed very closely by money. I try to spend as much time with my daughter as possible. Even at Nakama, I had a different viewpoint on work than my 20-something coworkers, I work a lot, but I don’t expect to spend 65+ hours a week in the office. For me, being able to have a pay cheque to pay my mortgage, to put food on the table, to provide the best possibilities for my child (hopefully children), these are the things that require either a well funded company or a job that I define at a company like Microsoft. The long and short of it, if you’re a student or a recent graduate, you should think about programs like YCombinator, even Canadians get accepted.

Canadians at YCombinator

Wow, at least 2 Canadians were accepted to this session of Y Combinator in Cambridge, MA. It looks like Y Combinator program is becoming the MBA program for entrepreneurs. Graduate from a degree program, work for a couple or 3 years, and then decide to start a company and get the unbridled focus offered by Paul Graham and the Y Combinator gang.
Michael Parkatti and Mike Marrone are writing about their experiences for the Globe and Mail in the Y Combinator diaries.
Michael provides some details about their backgrounds in the first post,

It’s been almost three years since I finished my post-graduate degree at the London School of Economics. In that time I’ve begun a career as a management consultant, worked for an Internet startup in Calgary (taking my finances to the breaking point), worked for a startup in Vancouver, committed to start a PhD program and now have started my own company.

Mike Marrone has a similar story. In the three years since finishing his Bachelor’s at Trent University, he’s worked at a small technology company in Ottawa, an Internet startup in Calgary, and Yahoo Inc. in Sunneyvale, California.

What a fantastic opportunity to get exposure to world-class Internet and software entrepreneurs. I had the pleasure of meeting Paul Graham at FooCamp07, and was just completely blown away by his personality, insight and engagement of entrepreneurs and designers.

My favourite part of the blog post is the description of what they are trying to do:

“we’re simply two guys trying to make something that people want”

Imagine that. Software that solves a problem. Makes peoples lives better. Changes the world. I’m curious at what was their Y Combinator submission. I’m curious to see what comes out at the end of the process. I’m curious if Michael and Mike decide to return to Canada after the Y Combinator experience. Whatever ends up happening, my hats off to these guys.

I can’t wait to see this story develop. I hope it turns out better than the 90 Days blog.

Enterprise 2.0 – Midori + Sharepoint

My good friends Gene, Jess and team at nForm have finally demonstrated their awesome new project management applicaiton Midori.

midori

Midori is built on top of Sharepoint. And uses a completely custom layout engine.

Part of Midori is an engine that gives us complete control over SharePoint’s interface and interactions. We’re still refining the interface, but we’re able to make Midori look and work like just about any other web app (including standards-compliant mark-up and a bunch of ajax-y interactions).

The thing that blows me away is:

While we haven’t made it completely cross-browser compatible, I use it regularly from my Mac without trouble.

I don’t use my Mac for accessing many of the internal Microsoft SharePoint sites, mostly because the experience on Firefox 3 is unspectacular. But having built a truly cross-platform layout engine for SharePoint is a powerful tool. I wonder if they would consider licensing it to third-party SharePoint developers.That’s a different question.

Why SharePoint?

Gene suspects ‘we’ll even answer that nagging question "why SharePoint?"’. I have a few suspicisions including:

With companies like Atlassian shipping the SharePoint Connector for Confluence and NewsGator releasing Social Sites and SharePoint and SocialText’s SocialPoint (comments from Don Dodge), there is an ecosystem of products forming to help fill the gaps in SharePoint. It’s a product that is easy for IT departments to acquire, install and deploy. There are challenges (opportunities man, opportunities) for companies in deployment with the user experience and configuration options. But I could see companies like nForm, ThoughtFarmer and others building functional, usable, pleasurable user experiences on-top as a solution for the grow market space.

Don summaries some of Ross Mayfield’s , CEO of SocialText, interesting points about building on the Microsoft platform.

  • The "humanizing" of Microsoft has changed his mind about working with Microsoft. He cites Ray Ozzie, Robert Scoble, Channel9 and blogs from Microsoft employees as examples.
  • SharePoint 2007 is a market leader, validates the category, and grows the market for everyone.
  • The short term value (role) for a wiki that supports SharePoint is immediately apparent.
  • SocialText has a profit motive, balanced by freedom, that will sell more seats of SocialText and SharePoint. Everyone wins.
  • SocialText customers told him this was a good idea. You can’t lose when you listen to your customers.

I’ve spent the past year trying to balance my desire to build profit driven companies with the freedom of the open idea. But for companies like nForm, partnering with Microsoft is a great way to leverage a successful sales and marketing engine that can help you sell more software.

Plus nForm is hiring:

Resources

Canadian VCs: Wake Up!

Canadian entrepreneurs give Canadian VCs a really hard time. Suzie Dingwall Williams on the CVCA blog, VC Rants (which at the time of writing was not responding to http requests), puts forth a great challenge to Venture Capitalists. 

If Canadian innovation is to scale, there needs to be a call to action for all participants in the ecosystem. This is a marketing exercise that needs to be led by you, the VCs. When was the last time you went to a bootcamp? Provided sponsorship dollars to entrepreneur-generated initiatives? Extended your channels in the US to provide a broader network for your portfolio? Many of these events are not immediately accretive to you, but they are vital to community creation. Let me re-phrase that; there has never been a more vital startup community, but it is one being fostered largely without VC involvement. This must not continue. The need to take a long-term approach to deal flow has never been greater.

This is the reason that Jevon attended the CVCA conference. It is the reason we supported the Canadian Innovation Exchange. It’s the primary reason that we decided to host Founders & Funders events. There are a lot of potential misunderstandings between the people that start high-potential-growth technology companies and the people that fund them, it’s about bringing them together that these differences begin to resolved. Rick identifies VC’s and entrepreneurs need to talk early, these helps work out the kinks (I also love the tension between VCs and angels identified in Rick’s observations).

I’m unfortunately not at StartupCampWaterloo tonight. The only VC present was Peter Frisella of TechCapital. I love the Waterloo events, they are small, they are focused and there is a lot of feedback for entrepreneurs. I attended StartupCampMontreal last month, which is a totally different experience for me than a Toronto event (as I’m pretty quiet and reserved mostly due to my perceived language concerns). There is a definite understanding by the Montreal VC community that there is a lot of talent and potential dealflow that happens at these events. There were 32 submissions for the last event, with 5 presenting companies. The benefit for Montreal is the facilities provided by SAT, we’re just missing a common gathering venue in Toronto. Yeah, same old rant. Maybe a challenge to my colleagues at MaRS and BOT to move beyond breadth/reach events and to let us focus on a couple of depth events. Or maybe a challenge to the local VCs to help sponsor a series of events in FY08 and FY09 in Toronto.

As entrepreneurs we give Canadian VCs a bum wrap. Suzie makes a great point about innovation, wealth and the responsibility of entrepreneurs to be aware of impact on local innovation.

Every dollar of investment that comes from outside Canada ultimately leaks profit and wealth creation outside of Canada. There cannot be sustainable growth if the benefit of local innovation is reaped beyond our boundaries by private equity tourists. Every entrepreneur should feel a moral (if not economic) imperative to include Canadian VCs as part of its growth plans, and to serve as ambassadors for you abroad, directing deal flow from beyond your way (leak unto others as they leak unto you).

Canadian VCs are good people. They’ve build some great companies. The last 10 years haven’t been kind to them. An average 10 year return of 1.8%  when compared to the US average 10 year return of 18% (thanks Heri) coupled with the strong community connections being built to the US, is shifting the mindset of entrepreneurs south. However, Suzie has done a great analysis about the mindset of the Canadian VC community.

Many VCs will tell you that their job is to deploy capital, not to support the entire startup community. They cannot monetize spending significant portions of time with entrepreneurs and companies that may never need their money. Fair enough, in one sense. In another, it represents a huge lost opportunity.

Canadian entrepreneurs are in serious need of help in understanding how to build a $1B business (well even a $100M business would be great). As Canadian entrepreneurs we should by reaching out to our local VCs.

9 days until Founders & Funders

It’s only 9 days until Founders & Funders Toronto. The challenge is to find a group of companies, in Toronto in the software and media spaces that are high growth, and high potential to raise venture capital. We have an excellent group of attendees. Think you should be attending? Nominate your company, we’re looking to bring together the people that start high-potential-growth companies and the people that fund them.

What set’s these companies apart? Their ability to explain their business in 140 characters. Maybe. Are they connected to the power players in this industry? Calling Jevon and I power players is flattering, but untrue. The Founders & Funders event is not a training event, it is not a sales event, t is not a recruiting event. It is not for service providers looking to sell services to these ventures.

Lots of folks didn’t really understand the venture capitalist are in the business of making money and that means investing into an idea that will turn itself into a pile of money with a 5-7 year timeframe; sooner would be better.  Lots of questions about how to buy us out causes me to make the point here  I made in meetings: If you aren’t into taking an idea, giving up some equity and getting to a liquidity event, we shouldn’t be an option for your funding.” – Rick Segal

It is a networking event focused on the people that start high-potential-growth companies and those people that fund them.

VC’s and entrepreneurs need to talk early.  I made the case that the early you speak with me the better which apparently was counter to everything others are saying.

Founders & Funders is designed to provide a social forum to help the money and the talent talk. As I used to say to Sutha at Ambient Vector, “it’s not that I don’t think there will be a YouTube for mobile, just convince me why you’re going to win”. Don’t tell me that your exit strategies are one of the following:

  • IPO
  • Acquisition
  • Diversification
  • Failure (please don’t let it be failure)

Help me understand why you’d be a candidate for IPO or acquisition. Is a would be acquirer buying your team? Your technology? Your customers? What business development are you doing to get acquired? Have you talked to the M&A folks at RIM? Or Yahoo? Your job is to get people excited about your company and your product offering(s). These aren’t questions that I ask because I like to hear myself talk, I want to know that you’re building a high-potential-growth business. I want to understand your business, market, product, business model, customers, strategic relationships, competition, barriers to entry, etc.

Nominate your company to attend Founders & Funders.

Startups on .NET

I’m not alone is wondering about where are all the .NET startups, Sasha Sydoruk wrote ASP.NET startups. I asked about startups building on .NET (though, from a survey design perspective the link was lost in a long, deep post). My friend Aaron is building on .NET and Mono, check out Mindtouch‘s DekiWiki. Geoff is building Moonlight with Miquel and the team at Novell. Don Dodge, Lynda Ting, Dan’l Lewin and the Emerging Business Team write an excellent blog for early-stage companies in the Microsoft technology sphere at Microsoft Startup Zone. There is a growing list of Canadian companies, now that former Toronto VC Lynda Ting has joined the EBT in Silicon Valley.

Lots of these companies aren’t sexy but they solve real problems for real customers and generate real revenue. And that is sometimes a much harder problem.

Are you building something on .NET? Drop me a note.

MeshU – How to Demo like a Demon

Leila and I are all done our presentation for MeshU. Unfortunately, we have a major FAIL for knock’em down TinEye demo, Leila and I just failed to manage the demo machine and the screen resolution. Not the best example. The basic take aways are pretty simple. Demoing is about telling a story to excite the audience about your company, solution, product. Very simply put demoing is about software. Tell me the problem you are solving then show me the damn software.

  1. What problem are you solving?
  2. Why do users want it?
  3. Remember to slow down and breathe.

We did not cover the differences between demos and pitches. A demo is not a pitch. A pitch may contain a demo. Let’s be honest, we’re all here to see the problem and how your software solves it. Once you’ve captured the attention of individuals, the conversation will naturally flow into details about the company, the team, the development environment, etc.

Many thanks to Ryan Feeley for the visual refresh.

Resources

Presentations

Pitching

Demoing

Example Demos

Business Plan

What would you do with $44 Billion?

Forty four billion dollars! It’s a huge sum of money. It’s a lot of money to pay to create Pepsi (apparently I prefer Coke). Others have provided their analysis of the deal. There is a mad rush to create a true competitor to Google in the rapidly growing online advertising market and now that a combined Microhoo/Yahsoft which would have created a set of highly trafficked sites and a huge amount of ad revenue, it is now off the table.

Cash. Stock. Debt. It doesn’t really matter because $44 billion is a lot of money. It’s more than the combined venture funding in the US in software since 2002! The actual amount according to PricewaterhouseCoopers MoneyTree is closer to $31B. Interestingly, angel investors in 2007 put $26 billion into 57,120 ventures according to a study by Center for Venture Research at the University of New Hampshire!

To hell with a $10 million dollar Facebook Application Fund. Never mind a $100 million dollar iPhone Fund. What about a new huge software fund aimed at funding new solutions on the Microsoft platform?

Going on an acquisition spree seems to make a lot of sense, Kara Swisher calls it Project Granola, but imagine the power of creating MicroBook, FaceSoft AND all of the other properities already out there. Digg. TechCrunch. GigaOM. LinkedIn. Meebo. The list is almost endless. Building a open media ecosystem to compete with Google, Yahoo and others. What about investments in non-North American properties? It’s a great time to be building media properties. It’s not the first time that it has been suggested that Microsoft could benefit by encouraging entrepreneurs to build successful media businesses.

With the $30 billion left over, it could be like Christmas in July for the geeks and venture firms of Silicon Valley. But Microsoft could scoop up a lot of good stuff, even if prices are high.

Here’s a list: LinkedIn. Digg. Flixster. Slide or RockYou. Veoh. WordPress. Sphere. Sugar. Some international stuff. And more.

Then, some noted, Microsoft would have to give massive financial incentives to those entrepreneurs to stay and thrive. Most importantly, it would have to keep its Redmond hands from interfering.

Time to take the lessons from building a successful software business, and see if the proceeds can be used to build an online media business(es).