Leaner, Meaner Innovation

I wrote an article last week for CityOnline and The Mark News.  Below is the full article for your reading pleasure.  Scroll to the bottom to see the video from The Mark News (which I’ve included particularly for you Americans because now that the Olympics are over you likely miss the sound of a good Canadian accent….unless you’re a hockey fan, in which case please don’t hold it against me). Leaner, Meaner Innovation Things have been better for venture capital in Canada. The industry has been contracting over the past five years, a trend that accelerated during last year’s financial crisis as institutional investors started looking for less risky investments. A recent study by the Canadian Venture Capital Association showed VC investment levels at their lowest in 13 years, with Ontario’s numbers dropping off more steeply than other parts of the country. The CVCA says that the industry is “in crisis” and has been calling on the Canadian Government to create a support program to help keep it afloat. How are investors responding to this “crisis” and what does it mean for high growth technology startups in Toronto? As it turns out, the landscape is changing on both sides of the equation and what is emerging is a new kind of startup backed by a new kind of money. 15 years ago, at the height of the technology bubble, it wasn’t unusual for a startup to raise between $10 and $15 million in order to build and release the first version of a product. Today, startups are getting products to the market on a lot less. “Web-based infrastructure means...

Market Sizing for Startups – Get Real!

I’ve had a set of conversations lately about market size estimates for startups and how to demonstrate to a potential investor that the market space you are in is attractive.  A few themes emerged in those conversations: 1.  Extrapolate but Don’t Invent – Emerging markets by definition don’t have perfect market size numbers associated with them.  That’s OK and investors generally understand that.  However, you should be able to show a range of numbers that make sense by extrapolating from the numbers that you do have.  For example if your market is a subset of an existing market, you can use the size of that market as a starting point, make a set of assumptions and then reason your way to an educated logical guess at a market size.  The trick is that the assumptions have to be practical.  You can’t say “The global market for software is $220 Billion therefore our market must be at least a billion!”  I’m joking (but only sort of). 2.  Believe the Numbers – Determining the size of a startup’s addressable market isn’t an exact science and you’ll never be able to figure it out down to the penny.  That’s OK but you have to believe that you are in the ballpark.  It sounds silly but if you can’t really convince yourself that the numbers are close, you won’t be very persuasive when you have to convince potential investors. 3.  Example Customers Count – Once you are armed with a set of numbers and an estimate of market size you need to talk to as many customers as you can to figure out...

VC Pitch Template

I’ve been working on a presentation for a startup to use to pitch their business to VC firms and I’ve used and shared this template enough now that I thought I would share it with all of you.  Every company is different and my experience has been mainly around Business to Business companies but in general I think the flow works.  The slide where you describe current customers will change for a business to consumer play but otherwise the rest applies. Here is the flow: The vision Market opportunity Customers The business problem What is the product/solution Value proposition Sales Partnerships Acquiring and retaining customers Revenue model Development plan Team Current customers/pipeline Fund raising VC fit It’s up on Slideshare and anyone can download it. Am I missing anything? Rocket Watcher VC Fundraising Template View more documents from April Dunford. First time reader?  Why not subscribe or follow me on Twitter or...

Startups and The Vision Thing

David Crow has a thoughtful post about how startups need to think through their exit strategy in order to make smarter decisions along the way to make it happen.  He talks about how he’s surprised that almost every startup he talks to has a plan to get acquired by one of the big guys.  Here’s an excerpt: When I talk to startups everyone seems to think that acquisitions are a dime a dozen. That even based in Toronto, Montreal, Ottawa, Waterloo that they are prime acquisition targets for Microsoft, Google, Oracle, Cisco and other Valley companies. Which surprises me! Sure all of these companies have done Canadian acquisitions, they are the exception and they are done for very specific reasons. While I agree that successful tech IPO’s are rare (especially right now) and that a venture-backed enterprise must have a realistic exit strategy, I also think that the focus on exits at the very early stages of a company can be an innovation-killer.  Particularly when it stops companies from thinking about the bigger picture of how they might really disrupt a market. As a consultant, I’ve had a chance to talk to a large number of startups here in Toronto.  One of the things I find really frustrating is how few of them have a longer term vision for the company.  Most of the companies I talk to have a product idea.  While they can certainly see their product growing and getting popular, the “vision” for the company seems to end there, with the obvious ending being, “…and then we get acquired by a big company.”  This happens so...