Bootup Labs Blog

I was a having coffee with a VC colleague last week.  This is someone I respect, and hope will fund some companies graduating from Bootup Labs.  I have probably explained Bootup Labs and why our investment model works to this individual on at least 7 different occasions.  It turns out that it took 8 times to get the ‘ah-ha’ that I was so patiently waiting for.  Up until then, I just didn’t think he liked the idea.  I’m happy to say, he is now a believer.  But, as any good entrepreneur would do, I immediately reviewed the other 7 pitches in my head — searching for the flaws that made it so difficult to inject the concept into this guy’s brain cells.  Could it be that he isn’t staying up to date with the VC industry? Is he not reading the same blogs, following the same people on twitter that I am? Is he not talking to entrepreneurs at the seed stage, flying to meet the thought leaders in the space, or engaged in local startup community?  And if not, why isn’t he, or more importantly, why was I?  Perhaps I was the one missing something; Maybe there simply isn’t a return-on-time for those activities.  Who am I to judge?  Maybe the status quo is simply good enough?

The truth is that the status quo is good enough for bio-tech, clean-tech or any other capital intensive, high risk, high reward company, which is why you see many VCs move toward those sectors and away from investing in digital media companies.  Internet companies quickly have become low capital, lower risk, investments, but can still have some pretty big exits.  Basically, if the companies you invest in don’t need very much money, then you don’t need to raise large funds, so the 10-2-20 model is officially broken.  (10 year fund, 2% fee on capital under management per year, plus 20% of proceeds paid to management)  If you don’t have a large fund, the 2% management fee doesn’t add up to enough to pay for the fund’s expenses. Plain and simple.

I touched on the concept of a broken VC model over a year ago, and since the economic down turn, it’s been talked about by a plethora of notable industry insiders. But, since then, I’ve learned a lot about the inner workings of the venture capital world, and one thing is for sure: Investing in Digital Media companies (Consumer Internet, Enterprise Internet, Online Gaming, and Mobile Software) requires a new model.

It wasn’t until my 8th pitch to my VC friend, that I defined what “lower capital requirements” means in real life.  It means that some of these companies will never need to raise a series A and most will not need a series B.  On top of that, these companies are exiting within 2-5 years at a rate of 25 exits/month.  This formula has changed so much and so fast, it caught most of the industry off guard, and if they’re not paying attention, they’re paying the price.

The Bootup Labs model is unique, even among our well established peers.  There is TechStars, Seedcamp, Extreme University, Launchbox, YCombinator, etc who all invest around $20k in each group of founders and provide a great deal of support and connections for around 3 months.  Then there is Union Square, CRV, FirstRound, SoftTechVC, etc who typically invest $250k-$1M. We feel the sweet spot is a TechStars-like, mentorship driven program for founders, but instead of focusing on getting them seed funded, we invest $150k and give them 8 months to get their company to at least “ramen profitable“.  After that, they can choose to raise a larger round or continue to grow their business organically.  Their success does not rely on upstream VC support, but many will probably choose to take it anyway as a way to accelerate their growth.  If you happen to be a VC, don’t worry, there will still be plenty of deal flow coming your way.

View this Google Spreadsheet to see how the Bootup Labs Fund makes money, and if you’re an investor, please contact me.

Subscribe to these guys if you want to get caught up.  Their twitter addresses will be listed on their blog too.  Follow them (and us).  Use an RSS reader.  But better yet, start your own blog, comment on this post, and start tweeting out your thoughts.  We’re listening!

• http://crunchbase.com/acquisitions
• http://www.avc.com/
• http://www.startuplessonslearned.com/
• http://www.askthevc.com
• all these: http://firstround.com/blog.html
• http://ycombinator.posterous.com/
• http://blog.softtechvc.com/
• http://sethgodin.typepad.com/
• http://www.unionsquareventures.com/
• http://500hats.typepad.com/
• http://ricksegal.typepad.com/pmv/

The truth is that the evolution of this space is still evolving at an enormous rate.  More on my predictions in a subsequent post.

Part 1 and Part 2 of Brad Feld’s talk from the April 22 Bootup Labs Entrepreneurial Society event are up now on the BLES website (which has had a bit more info added to it). Here’s Part 1 embedded in this post:

Thanks to the other sponsors W Media Ventures, the BC Innovation Council, and Yaletown Venture Partners for helping BLES put this event on. Of course, many thanks to Brad Feld for making the time to come and visit: the feedback on his talk has been universally positive. We’ll cut the Q&A when the questions get too specific next time, giving more time for one-on-ones.

The International Mentor Program page on the BLES website has a few more details on what you can expect from more visitors to Vancouver. A post requesting recommendations for other people you’d like to see will be up next week.

Thanks as well to the volunteers who helped out with this event, especially Sonia Ryan and Neetu Chhabra who ran the registration desk, and Degan Beley who made people feel at ease by making them stand next to each other and get their picture taken. Thanks to Ron Stevens from Mingleverse for covering a big chunk of the speaker dinner afterwards.

Parveen Kaler did a great post on a lot of the content of the event and his approach – he’s building iPhone games at Smartful Studios. Anyone else have commentary to share outside of the great Twitter posts? Please link in the comments below!

Want to be kept up to date on other events like this? Subscribe to the Startup Events notification list. The next Launch Party is June 2nd (on upcoming), with a Cofounder Speed Dating event planned right before LPV7 kicks off.

David Cohen’s post on Colorado Startups shows just how much Brad’s efforts in the entrepreneurial community are appreciated.  It’s actually a perfect lead-in to tomorrow night’s event here in Vancouver, where Bootup Labs is hosting Beers with Brad Feld.  Sponsored by W Media Ventures, BCIC, Yaletown Venture Partners

Get your tickets here

We’re heading into the latter half of April and it finally looks like the sun is out to stay here in Vancouver. Yes, the view out our office window is pretty killer.

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As we have said many times, Bootup Labs is most similar to TechStars in the way it operates.  We can’t say enough how much respect we have for what they’ve accomplished.

Today, Brad blogged about more TechStars portfolio company action with the merger of Limbo into BrightKite and a $9M financing.  And, of course, here is the obligatory TechCrunch article.

This marks the third exit from TechStars’s Class of 2007—the other two being SocialThing to AOL and IntenseDebate to Automattic.

Congrats to the Brightkite crew!

I’ll go ahead and use the same title as Mark Maynard’s original post: What can we learn from Boulder?

His write up is notes on the talk by Foundry Group’s Jason Mendelson in Ann Arbor, Michigan.

[Jason] outlines the necessary traits of a successful entrepreneurial community. They include; a dense concentration of technical, creative people, a strong research community / university (or, in the case of Seattle, Microsoft), an engaged community with desire to see their ecosystem succeed, a supportive legal environment, a culture of risk and respect for failure, and a history of success (which, he points out, is self-perpetuating). All communities have some of these, and lack others. For instance, he sees an erosion in Silicon Valley of folks wanting to see others succeed. In the case of Boulder, they are still young in their development and are still importing management talent from other areas (which he notes is a relatively easy thing to do given the quality of life in Boulder).

I think Vancouver has many of these attributes, but definitely has a lot still to work on. The strong research community / university is an interesting topic. While we have a great concentration of academic institutions in and around Vancouver, my gut says that a lot of research / experimentation actually comes from individuals. I only have to think of the Phone Gap project kicked off by Nitobi, or reaching farther back, Dave Shea’s unveiling of modern CSS web design, CSS Zen Garden. These happened in Vancouver – as in, the individuals were located here when they worked on these items – but very few people looking in from the outside associate “Vancouver” with either of them. These are people that live on the Internet that just happen to be in Vancouver.

And maybe that is one of Vancouver’s strengths. We have many people that “live on the Internet” – and just happen to live here. What I want / need from those people is more flag carrying for Vancouver … assuming that they don’t want to have to move somewhere else.

Another snippet I found interesting was the discussion on Tiers of VC communities:

I his opinion, there are two Tier 1 VC communities. They are the Silicon Valley and Boston. There are two Tier 1.5 communities. They are New York and Los Angeles. And there are a number of Tier 2 regions. They include Austin, Boulder, the Research Triangle area of North Carolina and others.

Vancouver is *very* similiar to Los Angeles in many ways. I would hope that we can grow into at least a Tier 1.5 community. That has always been one of the core goals that Danny and I share: let’s make Vancouver a fantastic place to start and grow companies, so that we don’t have to move to Silicon Valley.

I’m looking forward to having Brad Feld from Foundry Group / TechStars come to town on April 22nd and speak to us on these same topics (have you registered yet?).

Remember, a lot of his talk will be Q&A – we’ve set up a little experimental Google Moderator site where you can submit and vote on questions.

Brad Feld jumped the gun on us and got his blog post up first, when he saw our placeholder event. We’re super pleased that he’s making the time to come up to Vancouver and tell us about Boulder, the TechStars program, and his experience with startups and venture funding in general.

TechStars was the closest model for us in setting up the structure of Bootup Labs, so we’re very interested in hearing some of Brad’s “lessons learned”. Brad is going to make the event highly Q&A based – please bring your questions. Feel free to kick off the questions by posting comments to this entry so Brad can get a flavour for what people want to know.

The event takes place April 22nd in the private room at SteamWorks. We’ll open the doors at 6pm, and Brad will start his talk just after 6:30pm. We’ll be providing some drinks and refreshments. You don’t need to bring anything else other than a stack of business cards and your great ideas and questions – another good opportunity to maybe find a cofounder and network.

The first 50 tickets are free and open for registration now – we’ll be releasing some additional tickets at a nominal cost once these sell out. The full registration form is after the jump, or you can go directly to the registration page at Eventbrite.

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We’re in the prepping stages for the next Launch Party on May 28th and a few other upcoming events and educational workshops. Anecdotal feedback has been really positive about our events, but as we’re gearing up to plan some more through out the year, we’d like to get some direct responses on what you like, what you don’t like, and anything else you’d like to tell us.

We’ve put together a survey to get your responses – the survey is embedded after the jump, or go fill it out directly.

Save the date for our next event, Beers and Boulder with Brad Feld, which will take place April 22nd. We’ll be opening tickets in the next day or so.

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The day after tomorrow, James from AdHack and I will be heading up to the Banff Venture Forum. We’re both foodies, so our trip planning amounts to departure time wrangling so we can make it to Trufflepigs in Field, BC for lunch

AdHack is presenting in the IT Stream, plus will be present on the floor with a booth. I’ll be lending a hand at the booth and getting to know the other companies. I also hope to catch up with Brad Feld of Foundry Group aka Brad of TechStars that my last post was about: he’s the keynote speaker for the IT Stream.

Sandra MacDonald and Michal Berman will also be in town, representing the Sun Startup Essentials Canada program — which launched at the beginning of the year at Launch Party. I think we’ll do an ad hoc dinner in Banff at some point, watch Twitter* and/or blog postings here for updates.

After Banff, James and I will be spending the weekend in Calgary and have a couple of meetings booked already. I have an email out to the STIRR Canada folks to maybe help get the word out about a Calgary Tech Entrepreneur Meetup on Saturday night. For now, here’s a placeholder Upcoming event. Please sign up and let us know you’re interested, as well as suggesting a venue for Saturday, October 5th in Calgary.

*I’m using #bfv08 as my tag for the event. Watch Twemes to just monitor those postings.

TechStars is the incubator that we feel philosophically most aligned with. Their successes don’t hurt, either Danny is down in the Valley right now, and attended their Demo Day. Here’s Vator.TV interviewing Brad Feld about the TechStars model.

Danny actually spoke with David Cohen of TechStars a couple of weeks ago. One of the really interesting pieces of information was that 50% of founders / companies decide to stay in Boulder after the program is over. 50% of companies staying and running companies in a city?! Sounds like pretty fantastic numbers.

In other news, we’re putting together the details around a Canadians in the Valley event — if you’re interested, sign up for that Upcoming link and we’ll update the details as we figure it out. Dana Oshiro and Rebecca Reeve are Canadian ex-pats that were going to take Danny and I for beer when we went down for the Plug & Play event, and of course we decided to turn that into something a little bigger. Thanks Dana and Rebecca for playing along so far.