Blogmatic

I was chatting with one of my favourite new start-ups the other day in the common area at TheCodeFactory and the topic of selling on the Internet came up. They explained that they were consulting with a local Entrepreneur in Residence and the first question asked by the EIR was “Who is your first customer?” I am reasonably certain that the expected response was something like Big Red (fictional service provider), Big Blue (another fictional service provider) or Dancing Goats (yet another fictional service provider). However, that was not the response that they received.

The answer “if you give me $2.99 you will be my first customer.”

Fortune magazine annually produces a list of the top 500 companies in North America. This is known as the Fortune 500. These are large companies with likely thousands of employees and multiple locations.

The Fortune 5,000,000 is a term coined by David Heinemeier Hanson of 37Signals used to describe selling to small businesses online. The Fortune 5,000,000 is arguably that mythical Holy Grail we often hear referred to as SME’s (Small and Medium Enterprise). Selling online has opened an incredibly efficient channel for tapping into this vast market.

From a local perspective, as I see it, the challenge in Ottawa is that there is a significant paradigm shift from selling to the Fortune 500 (traditional telecom sale) compared to selling to the Fortune 5,000,000. If you are selling BIG ticket items to Big Red or Big Blue in a pre-millennium mindset it is quite a leap to selling web aps. The difference between channels, value chains, direct sales and other traditional sales is light years away from the virtual distribution and selling online.

If your first question to a start-up selling web aps is “who is your first customer?” You are likely coming from that Fortune 500 paradigm and don’t get it.

Next post will delve a bit into what are some considerations for selling online.

Cheers,

Ian Graham

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I had the opportunity to attend a session this morning at City Hall regarding Innovation and the knowledge based sector in Ottawa. The session was well attended and there were probably 30ish folks representing a number of different groups around the table doing a SWOT (Strength, Weaknesses, Opportunities and Threats) exercise. There was one gentlemen (whose name I didn’t catch) sitting at the end of the table that made an interesting comment. It went something like this;

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“I would rather have one well funded organization doing ED than spreading things around and giving everyone peanut butter.”

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Here are my thoughts on peanut butter. First of all I like peanut butter. Peanut butter has plenty of protein which is great for building muscle. Peanut butter is relatively inexpensive, a jar can make a lot of sandwiches and if times are tough peanut butter can go a long way. I like peanut butter and personally my preference would be to have an equitable system where everyone gets to share.

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Interesting to see what comes out of this SWOT review. In a recession we need to be thrifty and peanut butter for everyone sounds far more appealing than more Twinkies and cupcakes for the pudgy kid.

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Cheers,
Ian Graham

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I am a firm believer that your most precious resource is time. There is only so much of it, you must spend it as it becomes available and “Time is money”. You can never reclaim time, or make more of it you can only schedule it wisely. Personal productivity and time management are tightly coupled.

In my opinion one of the highest forms of praise you can offer someone is saying that “I have a lot of time for that person”.

Cheers,
Ian Graham

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It is not the strongest of the species that survive,
nor the most intelligent,
but the ones most responsive to change.

— Charles Darwin

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It’s that time of year again. Time to reflect on all of the start-ups I have meet over the past year and highlight three Ottawa area start-ups which, in my opinion, have some real potential and the right stuff. Each year this task gets more challenging because Ottawa really has a rich and vibrant start-up community and as a rule of thumb I learn of a new start-up every business day. Since this is my third year picking the ones to watch the talent pool is progressively becoming richer and deeper. 

Ottawa area Start-up veteran and a company that provides excellent leadership in the community is TravelPod. TravelPod is founded by Luc Levesque. TravelPod is perhaps one of the most Internet savvy companies in the world and an excellent example of the sort of latent talent that exists in the Ottawa area. TravelPod was the first company in the world to develop a facebook application and when Facebook announced on a Friday they would be opening their interface TravelPod had an application available on the Monday. The TravelPod website comes in at roughly 7,333 in Alexa ranking and has a Technorati authority of 3,591 incredibly impressive.  What I like most about TravelPod is their ability to innovate and the exceptional people and culture of the organization.

Lavablast is a company I have had the opportunity to get to know very well and use their product at TheCodeFactory. I am continually impressed by their “can do” attitude and the strong team that they have assembled. We originally met after Start-up Ottawa did a post for the Start-up directory introducing them to the Ottawa community. I went on their website, submitted an information request and within a week we had a signed agreement. One TheCodeFactory member indicated that our member profiles were missing Twitter and wouldn’t it be neat if each time a member signed in we could issue a tweet. Sent a note to Jason Kealy and within two hours the feature had been added. Lavablast has a good understanding of their target market, strong technical capabilities and excellent people. Definitely a company to watch.

Exocortex led by Ben Houston and have a remarkable world leading product in the area of fluid simulations. With patents pending a growing team and exceptional technology they are a most awesome company in the making. What I like most about Exocortex is the founder. If you have ever seen the movie Good Will Hunting, Ben is Will Hunting, one of the most brilliant mathematical minds in the world. However, there is much more to Ben than exceptional intelligence. Ben is also a very pragmatic individual and going about building his business in all the right ways; by adding to his body of knowledge, seeking advice from numerous sources and adding good people with complimentary skill sets to his team. Exocortex is an Ottawa area Start-up to watch.

Cheers,
Ian Graham

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I have written about passion being a key driver for entrepreneur a number of times; Passion the poison pill, Entrepreneurial Characteristics, The 3P of Entrepreneurship and Stupid Passion. I am also a regular reader of Ben Casnocha blog and he recently had a post “Can Making Money Be the Main Driver for Entrepreneurs?” There was an excellent comment by one of his readers that I wanted to share with everyone:

All money and no passion = sell the business at a premium (say 5 years revenues) before it zags.
All passion and no money = find a co-investor to share the risk before you go belly up.
Lots of passion and lots of money = buyout competition before it becomes a threat.

Something to think about.

Cheers,
Ian Graham

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There is a very cool idea called Vencorp being championed by Sean Wise of Wise Mentor Capital. I had previously seen reference to Vencorp on Startup North and there is a recent article in Profit Magazine that gives a more detailed overview of the venture.

What I like about this approach to funding start-ups is that it takes into consideration that starting a business today is less capital intensive and the fund also leverages the wisdom of crowds to determine which companies receive funding. Rather than have a fixed board or serial entrepreneur judging the merits of a proposal the Vencorp community vote on a monthly basis to determine which start-ups are fund worthy. To become a member of the Vencorp community all one has to do is sign up and membership is free. There are incentives and points awarded to community members based on their track record of contribution and success. Community members can use points for various items  within the Vencorp site.

I really like this idea and wish them success. This is a very timely initiative that addresses the needs of the start-up community and provides a merit based system for awards. Vencorp is providing an innovative service to entrepreneurs, start-ups and the community at large. Perhaps a matching contribution from the provincial government could be leveraged to deliver some much needed value to the start-up community. Personally I would much rather see all levels of government supporting initiatives like Vencorp with matching funds than building bureacratic boondoggles.

Cheers,
Ian Graham

PS, also posted on TCF blog but thought this is such a great idea I would double dip.

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Had an interesting conversation with a local entrepreneur this morning. One topic of keen personal interest that came up was how outdated the current VC funding model has become and is it in fact an anachronism to a bye gone time, much like the Jurassic period is to the dinosaur. The funding environment has changed significantly since the bubble burst; however, the VC funding model has remained relatively, at least from my perspective, the same. My simplistic take is that the Jurassic VC funding model (Series A to X) is built on funding companies that will reach the $100M revenue in five years homerun.

The problem with this model is that the number of companies capable of reaching $100M in revenue within 5 years is miniscule. Of the 300 – 400 companies I have meet in the past two years there is maybe one that would be $100M in 5 years. This adds some more fodder to the Funding Paradox series of posts. I have, however, met plenty of companies that would and/or could be $20M to $50M companies within 5 – 7 years. Therefore alternatives to the VC funding model would seem to make a whole lot of sense if you are serious about building a strong local economy. I have chatted about this in previous posts and will bring it up again; Mini-Financing makes a whole lot of sense.

What is Mini-Financing?

Mini-Financing is akin to micro-financing with a bigger payload suitable to starting a team based business. The loans would ideally be a convertible debenture in the $250k to $500k range targeting growth companies. The funds would be managed by a volunteer board that made selections based on merit. More dreaming and pondering to come soon.

Cheers,
Ian Graham

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How can hard work be a competitive advantage?

“The harder I work the luckier I get.” – Samuel Goldwyn

I think the quote above says it all. If you work hard it makes it more challenging for your competitors to accomplish the same goal. If it was too easy anyone could do it. Every roadblock you face and overcome is another bump in the road for the competition.

In very simplistic terms, if it is hard work for you then it is going to be hard work for anyone that tries to follow you. The more bumps and obstacles that you have overcome the greater the barrier to entry you will have created. There is a saying in weight lifting; “no pain, no gain.” The same is true in business if you start a pain free business then anyone else can do the same. When you find yourself faced with significant challenges in your business think of it as being on the right track an opportunity to distance yourself from the competition.

Cheers,
Ian Graham

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I had an interesting conversation with a very well respected Ottawa area leader in the start-up community. The discussion was based around getting the right people for your start-up. This is particularly important for a growing company. The conversation went along the lines of making sure that you had “A” type people on the team, A type being top calibre rather than type A personalities.

Any way this got me to thinking… is the person the most important part of the start-up team or is it the fit with the existing team.

There is an old business adage to the effect of “Better B Strategy and A Implementation than A Strategy and B Implementation.” I think you can apply the same concept to start-up team members and fit with the existing team. The saying would go something like this:

“Better a B person and an A fit than a A person and a B fit”

In my opinion team cohesiveness and productivity will be what separates the good from the great in the start-up community. Productivity is directly related to how well the team functions together. While you need good and great people fit is the lynch pin to success and when under stress (which will occur in a start-up) what holds the team together.

Cheers,
Ian Graham

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