Does It Matter If The Future Isn’t Available in Canada?

Vito Pilieci has written an interesting rebuttal to Macleans’ “You can’t buy that here” article - an article which mirrors many of the concerns I raised in my own “Borders Keep Out Innovation, Too” post. I can’t fault Vito’s logic - yes, Canadian developers could create iPhone applications using the SDK even before the device arrived in Canada; yes, Canadians can technically read e-books on iPhones, netbooks, laptops, or other devices without waiting for Amazon’s Kindle device; and yes, Canada is no more disadvantaged with respect to services like Hulu than countries like Japan, Korea, or even the entirety of Europe.

And yet, despite such a resounding thumping, there is still a ring of truth to the original article. A niggling, unsettling je ne sais quoi that speaks to a core injustice that unsettles Canadian technophiles. It’s not that Vito’s arguments aren’t sound – it’s just that they’re so unsatisfying.

Sure, you could develop iPhone applications in the simulator - but you would miss the experience of using the device in your daily life, of truly understanding the implications, applications, and untapped potential of the device. And yes, you could curl up with an ebook on your laptop or smartphone - despite the fact that the form factor is completely uncomfortable, and the screen technology strains your eyes. And yes, you could take comfort in the fact that you’re no worse off than consumers in any other country outside the US.

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SAP Cost-Cutting: Vancouver Next?

Earlier this week, The Wall Street Journal covered SAP's looming cost-cutting measures - a prudent response to the slowing global economy and expected revenue shortfalls (ValleyWag has the original email text). One question that should be mind of many in Vancouver: what does this mean for the local Business Objects/SAP branch?

The local Business Objects office has been through several incarnations. It started out as Seagate Software Information Management Group (formed by hard drive manufacturer Seagate Technology), rebranded as Crystal Decisions, and subsequently sold to French software company Business Objects in December 2003. Its acquisition by German uber-software vendor SAP, announced in October 2007, only closed in February 2008.

Yet, less than a year since the sale to SAP became final, could the Vancouver Business Objects/SAP office be at risk? The loss, or even significant reduction, in the 1200 employees (at least as of 1200 employees according to the City of Vancouver survey of head offices), could have a significant impact on the local tech community.

So, who's got the dirt on what's going on inside the local office? Cough it up people!

VEF Momentum

VEF Momentum kicked off its series of events for younger entrepreneurs with its first event at Tunnel Multi-Lounge last night. In the keeping with its goal of inspiring young and aspiring entrepreneurs, the event kicked off with a quick "battle of the screencasts" from five young local companies:

  • PeerFX: A peer-to-peer currency exchange that significantly lowers the cost of exchanging money
  • Volo Innovations: Business management software for fitness clubs, studios and trainers.
  • Goodboog: A virtual catalog that provides companies with a global web presence in 25 languages within 15 minutes
  • TeamPages: A social network that makes it easier for coaches, team managers and players to: manage their teams.
  • Recon Instruments: Developer of heads-up display goggles suitable for use while skiing, snowboarding, or other winter activities.
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BC Shines in Deloitte's Technology Fast 50

Deloitte's Paul Fletcher and Fraser Liptrot hosted an intimate gathering last night at La Terrazza to distribute the spoils of business success to a number of successful local technology firms as part of the annual Deloitte Technology Fast 50 program. The Technology Fast 50 ranks "the country’s 50 fastest-growing technology companies based on percentage revenue growth over five years" and has been recognizing the achievements of the Canadian technology sector for over a decade.

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VEF Kicks Off

This year's Vancouver Enterprise Forum kicked off its new season last night, the first in a series on its "Technology Legends"-theme. A theme designed to encourage local entrepreneurs and aspiring entrepreneurs to come listen, learn, and be inspired by experience and wisdom of local stalwart entrepreneurs. As always, the event kicked off with a set of Lightning Talks from five local organizations:

  • VEF Momentum: Na'im Merchant formally introduced VEF Momentum, a program to connect and educate a new generation of young entrepreneurs in Vancouver, with the goal of offering relevant content and networking opportunities to mentor and inspire young and first time entrepreneurs. The first VEF Momentum event will be held September 30th.
  • SFU Time Ventures Incubator: The SFU Time Ventures Incubator highlighted its "Milestones to Success: SME Seminar Series", which will hold two seminars ("Investor Ready I", and "Investor Ready II") covering the characteristics required to make your venture attractive to investors, and the mechanics of raising your first $2M. These seminars are a steal at $99 each, with a 20% discount for students.
  • Cyber Search Services: In a flip on the traditional machine-centric search, Cyber Search provides on-demand search that uses expert humans to solve the problem of extracting useful information from the Internet. Cyber Search charges users a fee to tap human capital worldwide to compile information gathered from search engines in an organized way that provides useful knowledge.
  • Collabrient Networks: Igor Kraychik introduced his organization's solution for building vertical/industry-specific communication solutions on top of existing carriers. In honesty, I really didn't grok this one enough to be able to explain it.
  • Angel Forum: Bob Chaworth-Musters reminded the audience of the registration deadline for the upcoming Angel Forum on November 17th, and upcoming Investor Ready workshops ("Equity Term Sheets and Company Valuation" and "Being a Director in the 21st Century").

Personally, I was rather surprised that so few companies chose to take advantage of an opportunity for free publicity. Ambitious yet frugal are entrepreneurs are reminded they can participate in Lightning Talks at future VEF events by email lightning@vef.org.

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VEF Momentum Launches

The young turks behind VEF's Momentum haven't wasted any time getting things rolling. Since we last mentioned them, they've launched their web site, and have announced their first event:

The night will begin with icebreakers and introductions, followed by an invigorating presentation by Geordie Rose, the founder and Chief Technology Officer of D-Wave Systems. Geordie founded D-Wave out of UBC in 1999 and has been instrumental in building D-Wave into a successful Quantum Computing company. He will be offering his experience in starting his business, getting financing and navigating his way through Vancouver's entrepreneurship scene. He'll close with his insights on how Vancouver has transitioned over the last several years into a technology entrepreneurship hub. The night will conclude with a question-answer period followed by networking and drinks. Refreshments will be served.

  • Date: Tuesday September 30th
  • Time: 6:30-10pm
  • Location: Newly established “Tunnel Multi Lounge”
  • Address: 622 W.Pender St., Vancouver: www.entertunnel.com
  • Keynote Speaker: Dr. Geordie Rose, Founder, CTO D-Wave Systems
  • Theme: “Building momentum in Vancouver: Lessons for a young entrepreneur.”

Light dinner will be served & registration will be capped at 150 due to occupancy restrictions. You can register for the event here, and tickets are free for early birds until September 23rd ($5 thereafter). See you there!

Startup Lesson: Your Technology Is Not Your Business

Jevon MacDonald's "How Startups will save Venture Capital in Canada" identifies the lack of a sufficient number of startups as the core problem in Canada's VC/entrepreneurship ecosystem. I have to agree with him in that the major challenge in Canada is the lack of a sufficient number of fundable startups. Being fundable doesn't mean that the startup will actually need to raise money, merely that the startup has identified a real customer need, and has a plan to capture the opportunity in that market.

Unfortunately, many entrepreneurs in the Web 2.0 world currently suffer from an obsession with technology. Instead of generating a business model, identifying paths to market, or validating assumptions, many tech entrepreneurs are focusing on choosing one technology over another and being buzzword-compliant. Building a startup in this fashion is kind of like creating a superhero who has lots of cool powers and gadgets, but neglecting to create a back story that explains to the reader why the hero is driven to fight crime. If you're this company, you're Batman – except your parents weren't murdered in front of you as a child by The Joker, and you had a relatively happy and fulfilling childhood.

Instead of focusing on technology, a startup (or any company for that matter) needs to focus on its business case. Clarifying the business case can be grueling, but at its core it only really requires good answers to a few key questions:

  1. What problem will your startup/product solve?
  2. Who has this problem?
  3. How are they currently solving this problem?
  4. Who else is solving/has solved this problem?
  5. How are you different than any of the other solutions?
  6. How will you make money from providing this solution?

This is the usual point in the article where I provide a personal story to illustrate my point. So, not wanting to disappoint, here we go:

The first product I worked on as a product manager was quite possibly the most boring piece of software ever created. It was also extremely lucrative. It took one programmer, one QA person and me to build, test, and market it...yet it retailed for $7500 for a 2-CPU version (yes, it was licensed on a per-CPU basis). While I can't provide insight into the revenue for the product, the company I worked for publicly disclosed revenues over the four years I worked there in excess of $100M on a product line consisting of only a half dozen products. Suffice it to say, a non-trivial percentage of that $100M could be attributed to this product. The return on investment on the product was well over 1000%. While this product wasn't a startup in and of itself, its revenues would put many startups in Vancouver to shame.

What was this magical money-making software? Well, it was a command-line encryption utility. It took files and encrypted them, or took encrypted files and decrypted them. That's it. It featured no graphical user interface, and used a dozen different standard public domain or otherwise open/standardized cryptographic methods to secure the data.

Any software engineer or technology-centric entrepreneur that hears me talk about this software is instantly horrified. "Why would anyone buy this software? And for $7,500?!? Why not just use a copy of GPG (a free, open source program that does exactly the same thing)?" The problem with an engineer's response to this is that it focuses solely on the software itself. But nobody just buys software, they buy a solution to a problem. The totality of that solution is not limited to technology, but also includes knowing the customer's motivation, how much the solution is worth to them, where they look for solutions to problems, and even where they go to buy. All of these pieces fit together.

So why was this software successful? Why was it able to charge so much?

  • Urgent problem: Enterprises regularly transfer large amounts of data between themselves and their partners and have built systems to automate these transfers. However, over the past five years enterprises have faced an explosion in the number of federal, state, local, and industry mandates requiring them to protect confidential business, financial, customer, and employee data. Given the alternatives (negative press, lost customers, fines, loss of license to operate, prison), companies wanted a solution that could secure these data transfers, and they wanted it fast.
  • Well-defined target customer: At a high level, the customer for the product could be anyone handling large amounts of sensitive business or customer data. However, the nature of the laws governing data privacy made it very easy to be more specific - financial services companies. Anyone in financial services had standardized on FTP for large data transfers, and now stood at the intersection of a large number of very scary industry and government mandates that required them to protect customer, employee, and financial data. So, there was not only an urgent problem that needed to be solved, but customers with lots of money who were willing to pay for software that solved that problem.
  • Over-priced, aging existing solution: Interestingly enough, the customers already had a solution in place in many cases. However, the company providing that solution had sold off most of the core assets and was running a minimal skeleton support team. Customers were annoyed because problems weren't getting fixed, and there was little indication that they could continue to rely on the solution to continue functioning on newer platforms. The existence of a solution was useful for two reasons: it validated that there was a problem that needed to be solved, and it told us how much customers were willing to pay.
  • It came from someone they trusted: The company I worked for was a well-known information security brand, and had been for nearly a dozen years. Most people in IT would have used early versions of this company's software while they were in college, and hence it was the first company that came to mind when they started looking for a data security software product. While it is unusual for a startup to have a known brand, technologists often overlook the inherent value of marketing. If no one knows your solution exists, or knows the unique capabilities it provides, it doesn't matter if your solution has inherently better technology or not.

To summarize (using this handy format): The product provided a command line encryption utility that secures large data transfers for enterprises, such as financial services companies, that are subject to regulations requiring them to protect sensitive data from unauthorized access. Unlike competing solutions, the product provided an up-to-date, supported solution that integrated easily with existing data transfer solutions, and came with the commitment of ongoing support from a leading information security software provider.

Jevon is correct that the required solution is for Canadian startups to start hustling, and that hustling means building viable businesses. When you can answer the six questions I outlined above in a succinct manner, and back up any claim you make with hard facts, you've got yourself a viable business.

Congrats - now get back to work!

Stewart & Caterina: Come Home!

Popular photo-sharing site Flickr started in Vancouver in 2004 and become the darling of the emerging trend that would become Web 2.0. Its sale to Yahoo! for a rumoured $30 million should have been a proud home-town success story; however, the fairy tale was marred when Yahoo! required the company to move to Silicon Valley as a condition of the sale.

There is, however, the possibility of a happy ending nevertheless. In case you missed the news, Stewart Butterfield and Caterina Fake, the company's founders, are leaving beleagered web giant Yahoo! While there is no news of any plans for the near future, I for one would like to extend an offer to the dynamic duo: come home guys!

Who's with me?

Update: There is now a Bring Caterina and Stewart Home Facebook group - go show your support for the cause by joining the group!

Why Join (or Start) a Startup?

I spoke briefly at yesterday's Techvibes Start-Up Career Fair, introducing ten bright-eyed local startups who are trying to shake things up and are looking for some help along the way. I spent some time thinking about what I could tell the audience about why they should join a startup, or better yet, start one themselves. In thinking about it, I decided that I should really be targeting people who are about to finish school, have just finished school, or better yet, are just going into school.

Why should you join (or start) a startup? Three reasons:

  • You're young
  • You don't know any better
  • You've got nothing to lose

You're young – Like Kevin Kelly, I have a death countdown clock on my laptop's desktop that is counting down the number of years, months, and days until I will likely expire. It's depressing, but it puts just how much time you've got on your hands into perspective. Statistics Canada estimates that the life expectancy of someone born today is 80 years, and all trends point to continued increasing longevity. In all likelihood, medical advances will extend life expectancy even further during your lifespan.

For someone early in their career, the implication is clear - you've got a lot of time on your clock (calculate it for yourself if you don't believe me). Take it from someone who's experienced the crushing desperation that can only be instilled by the beige walls (and carpet, and tile, and doors) of the old MPR Teltech building at SFU: forty years is too long to be stuck in a cubicle, playing silly corporate games, and building value for someone else.

You don't know any better – Let's face it, four years in university or two years in college probably haven't taught you very much about the "real world". While many might view that as a negative, I choose to look on it as a positive – you don't know what's impossible. Many of the greatest inventions were created by people who simply didn't know any better. Or, to put it another by stealing a lyric from the Arrogant Worms, "History is made by stupid people - clever people wouldn't even try".

Consider the invention of the integrated circuit. This monumental achievement was created by Jack Kilby, a new employee at Texas Instruments, while the rest of the company was on vacation (as a new employee, he wasn't yet entitled to the mass August vacation taken at the time by everyone at TI). Unencumbered by oversight and experience with what was or wasn't possible, he created the first integrated circuit and revolutionized an industry. The greatest missed opportunities these days aren't those that nobody knows about, they're the ones that everyone thinks are "impossible" or "unrealistic" to pursue.

You've got nothing to lose – If you're young, you've got relatively few responsibilities. You're probably not married. You probably don't have any kids. You probably don't have a mortgage. You might have school debt, but you can always find ways to delay repayment anyway. You can live cheap.

In other words, there's really not a lot of risk to taking some time to pursue a startup. How much money do you really need if you're living with three other geeks in a house in Burnaby and eating Ramen noodles? And if you screw up, what's the worst that will happen? You'll have to get a job. In my experience, there will always be opportunities to work for someone else when you really need the money.

When I first decided to pursue being a part of a startup, it was the middle of the Web 1.0 boom. Everyone I worked with at IBM wanted to start a company or go join a startup, but no one did. Everyone had an excuse as to why they couldn't go and do it - and that was when I realized I needed to leave. Since then, I've lived around the world, seen a lot, learned a lot, and, I'm proud to say, never once starved along the way. I've never regretted it. And neither will you if you take the leap.

So say it with me: I'm young, I don't know better, and I've got nothing to lose.

e-Preneur Book Launch

John Fluevog's fabulous new digs in Gastown hosted a cozy gathering of friends and selected media (that would be us) this evening for the launch of Richard J. Goossen's new book, "e-Preneur: From Wall Street to Wiki: Succeeding as a Crowdpreneur in the New Virtual Marketplace". The book examines the phenomenon of "crowd-powered" companies that use massive online communities to collaborate and power businesses.

While crowd-sourcing is a central part of Web 2.0 businesses like Digg, not many have examined the ability for this model to apply to other businesses in, you know, the real world. I was pleasantly surprised to see that one of Richard's case studies focused on Fluevog itself, which has actually been using crowd-sourcing quite successfully to engage its customers to help design new products. A Fluevog representative was on hand to highlight the success they've witnessed with Vog Populi, their online campaign that gives Fluevog customers a say in which products the funky fashion design company should release next (they're currently seeking input on their Spring 2009 collection).

The event was nicely rounded out with commentary from two more familiar Canadian faces: Mike Sikorsky of Cambrian House, and Marc Baumgartner of NowPublic. While these might be more traditional web-based applications of "crowd-preneurship", if Richard's predictions hold true, they're just the beginning of a new era of companies and their customers working together to build new products.

Death To "Honest Work"!

Last week, the Vancouver Sun reported on the precipitous drop in median earnings in BC, as well as in Quebec, over the past 5 years. The comments in the story's online forum are anything but inspiring, oscillating wildly between downright embarrassing and borderline xenophobic. Some of the readers espouse disgust at the idea that "some people" have had the utter gall to figure out how to make money. And others suffer the delusion that their mere presence in the world bestows upon them the right to expect success, as if showing up should be its own reward.

Most shockingly, in my opinion, is the apparent unwillingness of British Columbians to recognize that news like this might just be our own damn fault.

I've learned over the years that there are only really two ways to make money: the right way, and the wrong way. A couple of years ago, I discovered both ways simultaneously when I tried my hand as an author for New Riders. For five months, I spent my evenings and weekends writing JXTA, a programming guide for a fairly obscure open source framework for writing peer-to-peer applications. On the surface, that might sound like a great resume-builder, but the true horror of becoming an author doesn't reveal itself until you examine the underlying economics.

Industry standard author contracts give the author a 10% royalty on the cover price - for a $45 book, an author makes $4.50. That doesn't sound bad, until you learn that in cases where the book is sold through a large distributor, such as Amazon.com, the royalty rate is effectively 5%. Upon discovering how little I would be making as an author, I quickly joined Amazon's Affiliate Program. This program allowed me to place a link from my web site to my book on Amazon.com that paid me a referral fee for each visitor that clicked the link and subsequently bought my book. It was the least I could do to try to milk a little extra money out of my five months of effort.

Surprisingly, that amount turned out to be not so little. As an author, I made a paltry $2.25 on every copy of my book sold through Amazon.com; however, as a random dude on the Internet using an affiliate link to the exact same book on Amazon.com, I made $4.50. Read that last sentence again, and think about it for a second. That's right, I made more money by helping Amazon.com make a sale than I earned as an author on the same sale. Twice as much, to be exact.

I'm willing to bet that many of the commenters on the Vancouver Sun article would find something dishonest about a system that skews its rewards in this fashion. British Columbians seem to pride themselves on "honest work". Cutting down trees, that's honest work. Building new houses, that's honest work. Working for transit, that's honest work. As near as I can tell, "honest work" is actually some kind of Socialist code for "hard labour" - and linking to a book on Amazon.com certainly doesn't seem like hard labour at all.

Personally, I'm not interested in hard work. It's not that I'm lazy, it's just that given the choice, I'd rather get paid again and again for work I've already done. While you might think that being an author with a royalty rate counts as "lazy work", the economics I outlined above show that getting paid to simply link to a book is far lazier. And being the publisher or distributor of a book? Well that's the laziest job of all.

There's a lesson here for BC: we've got to learn to be lazy.

The United States, and Silicon Valley in particular, is built on being determinedly lazy by leveraging the power of intellectual property to its fullest. Intellectual property is the ultimate enabler of lazy work - in extreme cases allowing you to make money without even having to hire employees, create a product, get it to market, and fend off the competitors. All that's left is the good stuff - collecting a cheque.

In contrast, British Columbia seems to focus on industries that demand us to constantly work hard. Industries whose primary inputs are physical labour. Industries that require us to ship physical goods. Industries where we can only provide the service to a customer that is standing right in front of us. Industries where when you work for an hour, you get paid for an hour of work, period. In other words, industries with absolutely no leverage or upside.

It's not simply the natural resources or tourism industries that fall prey to this problem - the technology sector in BC isn't faring that much better. If you look at the big technology players in BC, all of them are dutifully helping someone else be lazy - just look at the video games industry. As many of the panelists at the last DemoCampVancouver attested, the video games industry in Vancouver spends its days working for other people: Electronic Arts' head office is in LA (guess who gets the cheques on all those sports games?); and the plethora of scrappy local video game startups that build games for other companies don't own their own IP.

The same is true throughout BC's technology scene - ClubPenguin is owned by Disney, Crystal Decisions is owned by Business Objects is owned by SAP, Creo is owned by Kodak. If we really want to battle the decline in wages, we've got to stop acting like an author, doing all the work, and receiving a fraction of the benefit - we need to think how to become a publisher. We've got to start building companies that generate recurring revenues for BC, that scale to serve customers around the world, that make money while we sleep.

Hard work is easy. Lazy work, that takes real skill.

Angel Forum Investor Choice Awards

Just a quick post to wrap up the loose ends from Tuesday's 23rd Angel Forum in Vancouver. Overall, the day was a smashing success – investors rated the day at 4.25 out of 5 and made their votes count for the Investor Choice Awards (award sponsors in parentheses):

Congratulations to all the winners! And for those of you who are looking for money for your own venture, the next Angel Forum is expected to be in November. Start polishing those pitches!

Shopster: Go Sell Something

ShopsterBattling our way through the inevitable carb coma at Angel Forum this afternoon was made a lot easier with a refreshing pitch from Shopster. The premise behind Shopster is deceptively simple: provide a way for anyone to open an online store. Shopster's "retail enablement platform" handles everything you'd normally expect from a turn-key shopping site solution: it handles order management and payment processing, and generally makes it easier for small and medium-sized players to build a full-service e-commerce site. However, unlike those services, Shopster not only provides the e-commerce store technology, it also provides access to a network of suppliers that will provide a retailer with their products they can sell via their Shopster storefront. This is somewhat similar with Amazon.com's aStore offering, with the noted exception that aStore is limited to Amazon.com's own inventory, and has limited customization features. Thus, Shopster's enables customers to create a store, choose products from a wide variety of suppliers, and create a highly-customized store targeted at a specific niche market.

Clio Legal Practice Management

clioAfter years of law school, you'd hope that lawyers would know everything, right? Well, not so much. Building a legal practice is less about the law, and more about thorough practice administration. This is an especially heavy burden for the 80% of law firms in North America consisting of less than ten lawyers. Luckily, Themis Solutions has developed Clio, a software-as-a-service solution that automates and simplifies the logistics of managing a law practice. The solution handles file management, client management, time tracking, billing, calendaring, and document management. Interestingly, Themis was formed out of a partnership with the Law Society of British Columbia (LSBC), a partnership which afforded them the opportunity to leverage a large base of beta users, and refine their solution. Clio launched its public beta last month, and expects to ship its first version in June 2008.

Open Box

Open BoxThere's nothing quite like a room full of stiff angel investors to test the pitching skills of Open Box, a software solution focus on enabling yoga studios to manage their businesses. Yoga studio owners are not generally business people, and hence OpenBox's PranaStudio allows yoga studio owners to understand and manage the current state of their business.

Using PranaStudio, yoga studio owners can manage scheduling of classes, instructors, and students, generate reports to facilitate decision making, and engage their student community through one-click email groups for student communication. OpenBox is currently servicing 76 yoga studios and is gearing up for expansion in North America and beyond.

(And again: Open Box was one of only four companies to heed our call to send us materials for Angel Forum. See how this works - you pitch us, we give you free coverage. How about that? )