Bootup Labs Blog

On March 3rd, It was announced that Section 116 will finally been fixed in the most recent Canadian budget.

Many US venture firms or angel investors are not even aware of the reporting requirements under Canadian section 116 of the Income Tax Act.  But those that are, have often foregone investing in Canadian private companies because of it.  It’s been a big barrier, and it’s finally been removed.

In a nutshell, section 116 required that, upon a share sale, the purchaser must withhold 25% of the purchase price from non-resident shareholders until the shareholder obtained a clearance certificate from CRA, which could take many many months.

Special thanks to Steve Hnatiuk at Yaletown for his work via the CVCA for working so hard to get this issue resolved, who emailed me this:

The fact that US VCs would have to file clearance certificates for every single one of their underlying fund investors was a massive disclosure and administrative burden that significantly complicated distributing exit proceeds to the investors.  This was simply too big a deterrent and tax risk for many US venture investors to take on, and resulted in complicated and expensive structures often being put in place for Canadian deals as a work-around.  All of these things impaired the ability of Canadian companies to access venture capital from the US.

And, I will quote Keith Spencer from Fasken who put it simply:

Practically speaking, US vc’s can now invest directly in Canadian technology companies, pay no tax in Canada on their gains, and not be subject to any filing or withholding requirements. We’re open for business baby!

This is a great step toward helping capital flow across the boarder in both directions. Since, The more deals that are done by US VCs in Canada, the more deals Canadian VCs are invited to participate in south of the boarder. The circle life is complete.

Dave Shea is about to flee the city for the duration of the Olympics, and had some free time on his hands. We arranged to bring him in and work with the Jan 2010 cohort on designing some custom beer labels.

Why beer labels? Well, Dave himself is well known in the international web design community, and he’s also known locally for enjoying a beer or two, especially at the Alibi Room.

Also, the new Flack Block offices that Bootup Labs has several full size old bank vaults. While thinking about what do with it, we came up with the concept of everyone pitching in to brew beer, and storing it in the vaults. Couch Beers are about to get a lot more interesting in the coming weeks!

Check back throughout the day as we start posting the beer label designs.

Dave started with the colour palettes of all the companies, and then figured out two complimentary palettes, so each company started out with either the red or blue base. Each company has a style of beer, the Bootup “power button” icon has been incorporated around the neck of the bottle, and the border around the label recognizes the archway of the Flack Block building that all our offices are in.

These are awesome beers, and now the next challenge will be sourcing how we brew them. I know foodtree is busy sourcing green apples already…

I’m really excited to be on a panel at the Future of Funding event in San Mateo on Feb 18th.  I’ll be joined by Adeo Ressi, CEO of the Founder Institute (and TheFunded.com), David Cohen, CEO, Techstars and Reshma Sohoni, CEO, Seedcamp, and It’ll be moderated by, Matt Marshall, CEO and Editor, VentureBeat.

Incubators and Accelerators

Time: February 18, 2010, 2:30-3:30pm

Description: There is an increasing number of incubators and accelerators appearing around the country. What has been their effect? What models are working? How are they succeeding, and what challenges are they facing? This panel will examine the growing role of incubators.

If have any intrest in learning more about how the funding world is changing, and how fast, I encourage you to attend.  Here’s a 50% off link.

It’s been a long year of ramping up and working with our 5 “Beta Fund” companies. Our first full blown Demo Days are coming up in January/February, we’re finalizing the details to lease a new space, and in general 2009 is aiming to end with a bang.

Today, we’re happy to announce the companies that will be joining us as the January 2010 Cohort:

• Blast Ramp is collaborative distribution platform for companies that sell and ship consumer products.
• Compass Engine helps developers create the next generation of location based games.
• foodtree brings the community and transparency of the farmers market online.
• ReadFu brings contextual summaries for every link
• Status.ly is a device-independent lifestream aggregator with focus on personalized customization and real-time filtering.
• Zedmo lets you find events and social topics. You can discover these Zedmo “channels” according to their location, popularity, or topic

Full details, logos, links to Twitter accounts, and all that good stuff are available on the portfolio page.

Want to get involved? Well, our May 2010 application process will open up in the new year, so register to get notified when applications open. Also, BES is still looking for companies to join us for Demo Days.

We were also covered on ReadWriteWeb as part of The Advantages of Launching Outside the Valley. Hat tip to Techvibes for catching Foodtree and Zedmo before they were officially officially announced

2010 is going to be an exciting year, and I’m looking forward to kick things into high gear and working with such a great crew of people to build their businesses.

Bootup Labs Demo Days

Today we announced our plans for our first Demo Days for Bootup Labs’ first crop of companies. The event will be broken up into two events

Vancouver on January 28th, 2010
Hyatt Regency Vancouver
655 Burrard Street,
Vancouver, British Columbia, Canada V6C 2R7

Silicon Valley on February 3rd, 2010.
Plug And Play Tech Centre
440 North Wolfe Road
Sunnyvale, CA 94085-3869

<< — INVESTORS RSVP HERE – >>

Bootup Entrepreneurial Society

The Bootup Entrepreneurial Society (BES) is an independent non-profit group founded to support founders starting digital media companies in Vancouver.  BES is organizing the Bootup Demo Days event.  In addition to the 5 Bootup Labs companies, BES is inviting 5 additional BC companies to join us, free of charge, travel expenses paid.  Interested companies should apply to be a part of this first-of-it’s kind event.  You can read more about it from their blog post.

Yes, we know things have been quiet here at Bootup HQ (besides Danny’s great posts and our always active Twitter account). This year has been a busy one, working with our portfolio companies that are part of our beta fund.

Now we’re ready to go into full operation. And that means we want YOU! (insert picture of Uncle Sam pointing at entrepreneurs in the audience).

Our January 2010 cohort application is now open »

What are we looking for? Well, our four “big bucket” categories are consumer Internet, mobile, gaming, and enterprise Internet. We want to work with digital media startup teams that want to hunker down and spend 8 months growing their business, either getting ready for further investment or growing their “cash engine” to a profitable state.

Yes, this is similar to Y Combinator or TechStars. The TechStars model is the one we’re most inspired by, although we’ve put our own unique twist on it. We believe, like they do, in a mentor model, and that being in the same physical space is important.

Oh, and in case I’m not being clear, you absolutely should apply to any other accelerator programs you can get your hands on. I actually think that for first time entrepreneurs, the question is no longer whether or not to take part in a startup accelerator, but rather, which one to join.

We’ve already gotten a handful of applications from across Canada and around the world. In the US, it’s a little bit harder to get into the country as an entrepreneur (see Startup Visa for what some people are trying to do to fix that), but we’d love to hear from teams wherever you’re based.

Head on over to the application page to get started. The relevant dates for the January intake are as follows:

• Application deadline: November 6
• Interviews with select applicants: November 9 through November 20
• Offers made to selected companies: November 30 to December 4th
• Program begins: mid-January, 2010
• Program ends: end of September 2010

Our about page has the extended remix version of our program details, we’ll keep updating the FAQ based on questions we get, and our contact page is open if you need anything else.

I attended this month’s VANTEC Angel Network meeting today.  I’ve attended many of Mike’s events in the past, but today’s was different for some reason.  I don’t know what it was. I just felt much more productive, professional. Maybe it’s because Mike has increased the cost to the investors from $10 per session to $50 per session (or $300 for the year).  It’s still not a lot of money, but only serious investors will pay.  Maybe Angels are feeling more confident about the economy.  I like to think my rant about inappropriate public comments about the presentation style has something to do with it, but honestly I highly doubt anyone in the room had seen that post.

Anyway, kudos to Mike.  He’s providing a great service to our Startup and Investor community alike.  If you’re looking for money, I recommend VANTEC.  There’s no cost to present, but you need a sponsor (a current investor or advisor will do), and then you have to go through a selection process.

The companies that presented and are in the digital media space were:

• Jostle.me – a collaborative Social intra-network to help employees communicate, collaborate and find hidden talent within their own organizations.
• Ayogo – a company that can port video games to social networks and help monetize them.
• Wireless Image – Very simple and cool way to advertise via people’s mobile phones.
• TinySpeck – This company didn’t actually present, but Stewart Butterfield (founder of Flickr.com, which was originally started in Vancouver) was in attendance to sponsor  Michael Fergusson’s Ayogo.  In the process, he mentioned the name of his new Startup and thought you might want to check it out.

If you’re interested in learning more about investing in Digital Media, check out my previous posts. More to come!

• VC is not broken – Anymore. Digital Media’s new funding models
• Assessing Competition Risk for Digital Media Startups

I often hear the statement: “I’m not going to invest because if [fill in the blank large company] wanted to do this, they would just wipe you out.” I usually respond: If that was true…

• …Yahoo would have taken out Google
• …Amazon would have taken out eBay
• …MySpace would have taken out Facebook
• …Facebook would have taken out Twitter
• …Blockbuster would have taken out NetFlix
• …and the list goes on and on and on.

I had the pleasure of getting to know some of the management team at Amazon who was around long enough to remember when they had the option to buy eBay.  They tell the story as if it was the largest missed opportunity that Amazon ever made, and they never want to make that mistake again. Still, they waited until Zappos had an $800M price tag before they bought them, but how come Amazon didn’t just do it themselves?  I use Amazon as an example, specifically because they have to be the most innovative large-companies that I can think of, and they still can’t defend themselves against anyone coming along and making a superior product.

Exceptions to the rule will always have to do with some sort of manipulated market channel.  Anyone who owns/rents a Motorola DVR knows what I’m talking about here.  No reasonable consumer would ever buy this product if they had a choice.  It’s the worst piece of garbage I’ve ever used.  Especially if you’ve used a Tivo before.  Motorola has the muscle to be able to negotiate big long term contracts with the cable companies and force them to restrict consumer choice.   There are similar exceptions with AT&T and the iPhone, and Microsoft with Windows.

But, The Internet is unique. It’s the ultimate in disintermediation.  It’s very difficult to lock up any particular channel.  For example, If I don’t like Google, I’m headed over to Bing with one click.

On the Internet, the best product wins.  It’s truly a case where the best defense is a strong offense.  And winning has NOTHING to do with the size of the company you’re competing against.  Large companies “get this.”  77% of acquisitions made by the top 10 acquirers in the entire technology industry are web companies.  Large companies have really no choice but to succumb to using the start-up ecosystem as their outsourced R&D departments.

So, what can you conclude about competition risk for digital media startups?

1. There is no such thing as a big company who is going to come and eat your lunch.  All companies, regardless of their size, are run by a collection of individuals.  By definition a decision maker is just one person, whether you’re in BigCo or NewCo.  And, although large companies have more data and more money, their decision makers have to listen to lots of opinions (causing a watered down unfocused product), too many people to please (causing the product to launch and change very slowly), and have a reduced tolerance for risk because they’re afraid of losing their job if they screw up.  These are all impedance’s that startup decision makers don’t have.
2. The product development and engineering teams the most important positions in the company.  Companies may soon fight for the elite PD guys the same way that TV networks fought for Dave Letterman. See Boris Wertz’ post (any my comment) to get a glimpse of our future.
3. The best of the best will usually not want to work to make someone else rich, when they can simply start their own company.  So, the most innovative product teams will not fear risk, and leave to start their own companies.

All this boils down to another great reason to invest in digital media companies.  I’d love to hear your thoughts on this.

I hear it all the time – almost daily, in fact.  Entrepreneurs deal with wildly varying, passionate, almost religious, beliefs around how to pitch their company to Investors.  They have advisers, board members, friends, family, potential investors, consultants, and sometime even the gardener telling them how to get their point across to prospective investors.  My advice to you is this: listen to all of them, but put their advice into each of the following buckets.  You see, everybody is so sure that they have the right answer, because most of the time, they do.  They just forget to understand the conditions in which you’ll be delivering the pitch.  And that, changes every aspect about how you deliver it.  I tried to work out how many pitches I’ve given over the past 10 years.  My guess is about 100 pitches, which have resulted in 10 rounds of investments.  Adjust your pitch to match the conditions, and you should receive better responses:

5 Pitch Conditions

1. The Pitch Event/Angel Forum Pitch – For many first time Entrepreneurs, this is first contact.  The goal here is to  pitch interested investors one-on-one.  Many entrepreneurs make the simple mistake of trying to tell a room full of people about every nuance of their business in 10-20 minutes.  They feel that, “if they only knew about this feature, and that deal, or the other markets that my product could expand into” that they would get funding.   I recommend you follow Guy’s pitch advice for group presentations.  Also, read my post about loud-mouthed (probably ambulance chancing consultants) at Angel forums.  If these guys try to criticize your pitch in public, just deflect those comments by responding with, “I’m happy to answer any questions you may have about the business or my team.”
2. The Coffee Shop Pitch – The chance to pitch a VC or Angel one-on-one is the most important part of the fund raising gauntlet.  This is when an Angel or VC will decide to do further diligence, or leave you on the side of the street.  This often follows a Pitch Event, but if you’re lucky enough to get a personal introduction (which is always better) then this may be the first time the individual has heard the pitch.  In either case, your pitch needs to be dynamic, interactive, responsive, which will result in a fresh and real delivery.  It’s much more of a discussion than a pitch, except you’re doing most of the talking.  You should be open to sharing every detail about the company; No NDAs are accepted or required here.  Do not follow a rigid format.  You can use slides, but mix it up with as many actual live demos as you can and based on what the investor may care more about. (to know what they care about, ask them)  You have the unique ability to watch for the “ah ha” moment.  Keep your eye out for this moment, it’s what you’re working toward.  You’ll know it when you see it.  When you do see it, think of what you just said to cause this reaction and go into more detail about that aspect of the business.  This is when the questions will start to pick up, because it’s at this moment that the investor switches from “why should I invest in this deal,” to looking for reasons “why not to invest.”  Make sure he/she doesn’t find any, and you’ll be on to the next stage.  Oh, and be careful never to answer challenging questions in a defensive tone.  This will make you seem closed to advice and difficult to work with.
3. The VC Partnership Pitch – Following the Coffee Shop pitch, you will be subjected to a certain level of diligence.  If the investor was a VC (vs an Angel) and things went well, then you will then be asked to pitch the Partnership.  This usually happens on a Monday and if it goes well, you will hear about it by the end of the day.  If it doesn’t you’ll hear a no by Wednesday.  Of course this isn’t a perfect formula, but I can it’s hard for me to recall a time that this wasn’t true.  This pitch is usually the easiest because you’re being “sponsored” by a partner in the partnership.  To get the investment approved, it requires by-in from his/her entire firm.  The Partner will work with you to construct the exact slides that will sell the firm.  Work with them, but for the most part do exactly what he/she says.

Other Pitch Conditions

This post is not about pitching to customers, but it needs to be noted that the pitches below also differ from the rest.  I mention this because I have seen many entrepreneurs pitch their companies to investors as if they were pitching to a customer.  They spend way too much time on the product and not enough on how the business makes money.  Knowing about these other two buckets will hopefully help you decide where to move store the advice you receive.

1. The Customer Pitch – For example, Industry events, customer’s offices.
2. The Public Peer Pitch – Demo Camps, Launch Parties, etc
3. The Board Pitch – Every board meeting is a mini pitch.

Universal pitch advice

1. Exude a calm confidence in what you know.
2. Talking fast usually means you’re nervous. SLOW DOWN.
3. Using lots of inflections in your voice means you’re passionate, but be careful not to sound defensive.
4. Using your body means you’re really passionate, but remain pragmatic.
5. Never get defensive when someone criticizes  your idea or approach.  Chances are they have a really good reason for doing so, and you may want to think about their advice a bit more. But, it’s nice if you can say, “We looked into that, and this is what we discovered…”

Pitching yourself

Don’t forget that there’s always a sub-pitch that you will always have to keep fresh.  That’s learning how to effectively pitch yourself.  When Bootup Mentor, Patrick Lor came to town to work with our portfolio and some other local companies to refine their pitch, the first thing he made us all do is pitch ourselves in less than 30 seconds.  In almost every case, we went over time and didn’t focus on our achievements.  Even the most egotistical of us, could have done a better job transmitting our resume with pride and confidence.  People want to invest in winners, tell them that you are one.

Good luck!

I’m a small Angel investor, but I’m first an entrepreneur.  I’ve been the pitcher and the pitchee over 100 times.  Having this perspective has taught me something that I wish to share.  I offer this advice up in the best interest of both entrepreneurs who detest the experience of pitching to a group of angels, and Angels who are (hopefully) looking to find a great place to invest some of their money.

Becoming a good pitcher during your first few months on the job is not a prerequisite to building a billion dollar organization.  There, I said it.

Think about it. Most pitches are done by first time founders, who have never pitched before.  I remember back to the time I delivered my first pitch.  It was terrible, but I got better.  And by the time I finally convinced someone to take a chance on me, I was pretty good.  BUT, the company was exactly the same underneath.  The only difference between the first group of Angels who heard my terrible pitch and turned me down, and the later group who finally invested, is that the first group missed out purely because of a poorly delivered pitch.  Who gives a $%^&* how well the CEO delivered his pitch?  Instead, ask yourself “Do I want to know more about this business?”  By definition, you are a smart person; You should be able to fill in some of the gaps on your own, or at least form some intelligent questions to ask the CEO afterward.

A side note:  There is more often than not, at least one know-it-all, loud-mouthed, wannabe-almost-angel who takes pleasure in criticizing and humiliating the entrepreneur in front of a room full of strangers.  Please, do not listen to people who comment on the presentation.  Yes, there are actually people who do this, and it’s more common that you think.  To this (probably consultant) guy/gal, who seems to always sneak into the Angel Forums:  I ask you to please stop.  You’re not helping.  You’re there to learn about the business, not give a public lesson on pitching styles.  We don’t want to hear from you.

Just remember, that it takes two people to effectively communicate.