a canadian startup

More Notes from the Rick Segal Roadshow

Rick Segal was kind enough to visit Guelph today (as part of his cross-country-road-show) to talk about raising venture capital in Canada, the room was packed, with about 35 people attending. Also attending was Scott Pelton, from GrowthWorks, which offered some contrast (but mostly commonalities) between the two VC firms.

I thought I would share with you some of the rough notes I took down, as I thought it would be nice to capture some of the candid figures Rick gave during the talk. Apologies for the messy notes, it has been a busy week and we are launching a new, exciting thing tomorrow evening.

Rick introduced himself and explained that his goal was to introduce some of “metrics, good, and not-so-good news” about venture capital in Canada.

• The good news, he said, is that you can get funded in Canada. But the state of Venture Capital is “on life support”

The fact that VC’s have to go through so much trouble to insist that Canadian venture capitalism is a possibility should scare people.

In summary, Rick said, Canada is a great place to run a business because of:

1. Government programs
2. Government connections
3. Many opportunities
4. A favorable Market

I have heard these arguments before and was just in Silicon Valley last week. Though many of those items are great things for us Canadian entrepreneurs, I think that we sometimes over-estimate their value. Silicon Valley investors are not sending their companies to Canada by the hordes because of SRE&D credits. Those things are great, but if you went to an American investor with those items, arguing that Canada is the next hot place, they would say “neat, but whatever”

The reason to start and run business in Canada, in my opinion, has to be more like Jevon’s article in StartupNorth. We don’t run businesses here because we did the math and this is a more favorable market, we run businesses here because we’re from Canada, and we don’t want to go to the Valley (and we know our home country better). But to argue that, generally and economically, Canada is a better place to raise venture capital and run a startup, is, in my opinion, post-rationalization.

Rick talked about the greatness of his VC firm, JLA. JLA is all technical people with the exception of John Albright himself. They are investing and currently on the beginning of Fund IV. Rick spent time explaining why a new fund is the best time to get in bed with a VC. Funds, he explained, invest money for 3 years (deployment) and then use the following 7 years to “harvest” the portfolio. “Harvest” is a euphemism for “liquidate”, he sort of said.

Rick also talked about a fund to be announced in the next two weeks that is just for for the mobile space.

If you are making a blackberry client that allows you to order pizza from the nearest GPS located store over twitter, now would be a good time to send Rick an email. I think this was a real, slightly humorous, example from Rick’s talk.

Rick also spent time talking about his background in his previous companies. He gave an example of how a startup might grow and the mistakes most startups make. He said that it often takes 6 months to raise money and get a cheque, so plan for that and try to raise enough money for 18 months so by the 12th month, you can raise the next round.

Pema also has a summary of what he gained from the talk Rick did in Toronto.

Thank you to all that attended. Thank you Rick Segal, for giving this talk. Rick is one of the few investors in the community that actively participates and communicates. It’s nice that he drove down from Toronto.

Photos from StartupSchool 2008

I’ve put up some photos from the StartupSchool 2008 event that I attended on Saturday at Stanford University. Here.

Well.ca Accepts New Friends

A Look Back

A year ago, I went to my first Internet conference, mesh 2007. I had to save up to pay for the admission ticket. I had a plan and an idea, but still no business cards. I had, just that day, registered a new domain: Well.ca. I designed the logo (still used today) on my laptop during a talk by Mark Evans. Over my BlackBerry, during a break in the conference, I emailed back a new graduate applying for a job — that was Chris, our first software developer.

In our first days of operation, we literally hand-filled-out postage labels to ship to our customers, and, carrying towers of boxes, I walked them over to the local post office. It’s exactly one year later — the mesh conference is about to take place again, and we’ve grown from 2 employees to what will be 9 by the end of this month. We no longer hand-write postage labels, but we still write hand-written notes to every one of the thousands of new customers that have bought from our site.

Thank you for your orders, we mean it.

We have the nicest staff working at Well.ca, and together as a team, we’ve done something that, a year ago, people told me couldn’t be done. As new entrants into this very established market, we’ve managed to build a store with more choice than an average brick-and-mortar drugstore.

How do you build an online drugstore from scratch, carry 10,000 different products (and figure out software to manage them all), have $3 shipping anywhere in Canada, and do all of this while still maintaining what I believe to be the most genuine, friendly customer service in the world? We figured out a way.

In the last 12 months, Well.ca was mentioned in several national newspapers, we have customers in every single province and territory (with an unexpected, but strong following in Nunavut). We’ve had to build and rebuild our shipping system 4 times to handle the growth.

A New Investment

I am proud to say that we have just gathered a group of new friends, and accepted a new investment from Jim Estill, CEO of Synnex Canada, along with the Maple Leaf Angels. To my knowledge, this is the largest investment the Maple Leaf Angels have made to date.

A link to the press release is here.

Who are these investors? And what’s in store for Well.ca? Well let me tell you a bit now, and hopefully more later.

Who are these Investors?

Jim Estill is the CEO of Synnex Canada. Jim’s is one of Canada’s biggest entrepreneurial success stories, and his office is just down the street from us. A graduate of the same engineering school that I attended, Waterloo, Jim’s story is well known in our city — starting from selling computer parts from the back of a truck to what is now one of North America’s largest computer distributors. But beyond his entrepreneurial accolades (and something you will see in each of our hand-picked investors), is that Jim Estill is a great guy. He’s been a supporter of Well.ca for a long time now, and from the very first day I met him in his office, he’s been a trusted advisor.

On the Maple Leaf Angel side, we have a group of some of the best names from Toronto’s tech Angel community. Colin Webster is joining our board — he is behind some of the big startups you’ve heard in Toronto: Truition, First Coverage, and many more. He’s caring, he’s smart, and I consider him a true friend. All of the men and women joining Well.ca as investors today are warm, good hearted people with integrity. They are also all successful members of the Canadian business world, and Well.ca will benefit from their experience and advice. We’re proud to call them all friends.

We’ve had a great experience working with the Maple Leaf Angels (MLA), especially Rob Koturbash, the Managing Director. The MLA is a great asset to the Canadian startup community.

What’s in Store for Well.ca?

Although we’ve achieved a lot in the last year, in our minds, we haven’t built half of what we dream for the site.

We have some exciting new technologies under wraps that we can’t wait to release. We have great plans for making our site more enjoyable to shop at.

You can bet we’re hunting down new products, constantly improving our software, and have a few fun plans in store for the future.

Truly, though, we’re not planning on changing our approach. We’ve always had one way of building things at our company: we listen to our customers and build what they ask for. We’re going to keep doing that.

And as you can imagine, we’re hiring.

If you’re ever in Guelph, come visit us any time.

Thank you to our new friend-vestors, Suzanne Dingwall-Williams (best lawyer ever), and our families and loved ones that supported us before anyone else.

Link: Why There Aren’t More Googles

from Why There Aren’t More Googles by Paul Graham:

[On VC's:] The most surprising thing I’ve learned is how conservative they are. VC firms present an image of boldly encouraging innovation. Only a handful actually do, and even they are more conservative in reality than you’d guess from reading their sites.I used to think of VCs as piratical: bold but unscrupulous. On closer acquaintance they turn out to be more like bureaucrats. They’re more upstanding than I used to think (the good ones, at least), but less bold. Maybe the VC industry has changed. Maybe they used to be bolder. But I suspect it’s the startup world that has changed, not them. The low cost of starting a startup means the average good bet is a riskier one, but most existing VC firms still operate as if they were investing in hardware startups in 1985.

Graham communicates a sentiment that is very common in the startup world today. Read the article. I am excited to be able to meet Paul Graham in person this weekend — I am listening to him speak and was invited to a dinner at the Y Combinator.

Sometimes I wonder, when startups complain about the way VCs are stuck in an old model of investing, if it’s we, the startups, that are at fault. The Internet, even Web 2.0, is becoming an established industry that doesn’t operate under the old business models — so maybe VCs need to move on to the next, next thing.

What is that? Well I am working on building a microwave oven that works in reverse, you set it for 30 seconds, and it makes your food colder. Now accepting investors.

Company vs. Me, The Customer

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Update to this post:

At around 3pm  on the 15th of April, the company I complain about below responded to my complaint. They were nice, making me feel bad for being whiny. For an example of good customer support, read their response to my post in the comments section of of this post.

—-

There is an unwritten rule about startups that we never say anything bad about other startups. So I’ll be nice. In that light, I edited this so I don’t say the company’s name, but my hint is that it rhymes with Schmobivox.

I received the following email from Canadian Telephony startup, M____x, about 20 days ago:

Subject: M____X – Please make a call, we do not want you to lose your credits

Hi Ali

Thank you for using M____X.

Our records indicate that you are at risk of losing your M____X credits. Unfortunately, our accountants told us that we have to expire inactive credit balances if the account is not used for 180 days. We do not want you to lose your credits, so please make at least one paid call within the next 30 days and your credits will extend for another 180 days. To make a call, dial your local access number, say the name of who you want to talk to or dial their number. It’s that simple!

Your account details:

Balance: US $ 14.43

Expire date: 2008-04-23

To check your account balance, your call history or change your profile, go to www.m____x.com/login.

To ensure you do not lose your remaining balance, we will remind you again 7 days, as well as 72 hours, before your credits expire.

We are always available to answer any questions you have, and interested in hearing what you have to say. So, if there is anything we can do (or do better), do not hesitate to email us at support@m____x.com.

The M____X team

www.m____x.com

I think this is absurd. I know they were trying to be polite when they said “our accounts told us …. We do not want…” but I read it as being facetious. Your accountants told you? I don’t buy it: I think this is a decision you made. So I think you’re lying to me. That offends me as a customer.

When you work on the Internet, the old adage of “the customer is always right” never works. Take it from me, people have crazy, unreasonable demands. At Well.ca we set our standard to “what would a reasonable person who didn’t know about what happens behinds the scenes at our company expect?” We use that as our gold standard. It’s a corollary of the golden rule: do unto others as you would have them do unto you. For example, just today, someone called because they wanted us to ship a new order to them — their original order is on route back to us because the customer supplied a wrong address. We pay shipping twice when packages are returned to us in these cases, and to ship again, we’ll have to pay shipping a third time. But from the customer’s perspective, nothing happened – so we’ll send new products to them, at no cost, because that’s what a reasonable customer who doesn’t understand our shipping process would expect.

When I bought M____x credits, I expected them to last for years (actually, indefinitely). In fairness, there is precedent for M____x’s kind of behaviour: Aeroplan, for example, recently started expiring unused cards after 1 year (from 3 years).

But even those were points that I didn’t pay for — here, M____x, you’re just going to take my money. Your accountants told you to, eh? Can I talk to them?

Of course, when I tried to use M____x today, the site and phone lines didn’t work (it said they were busy, but since your site was down, I am guesing nothing was working). You could provide us a way to say “I am still here” without making me use credits — if you really want to be able to account for stale credits. Or you could give me more time. And if your “accountants” are really scared about money sitting on the books, you can mail it back to me, or donate it to a charity of my choice, or…

Look, I don’t to be mean, but I do request, M____x, (and all other customer-facing startups) that you try and apply the golden standard for customer care.

Otherwise, you’re sending me a message: Your definition of a customer is as a means to an end — you don’t care about my view from the outside-in (If you respond to me by saying “it was in the fine print,” I will…).

Will this affect your bottom line? I dunno, but I don’t want to use your service again because I have a bad taste. If you take my money, I promise I will never use M____x. So you might be able to make an argument that using the golden standard affects sales — but at Well.ca, we use the golden standard because we never wanted to be a part of a business that did anything but help it’s customers. Our customers are our family, our friends — we serve them..

Anyone want to make a long distance call? I have unused, about to expire credits. Message me.

M____x is a cool idea, and I have met some of the people who are behind it. I think they’re all smart people. I will edit this post with a response from M____x if they reply to my email or this post. I also reserve the right to edit this post and make it nicer cuz I feel really bad saying mean things about another Canadian startup because you’re all my buddies and lots of love and don’t hate me and yeah.

Farm Animals Slowing Us Down

We’re working extra hard to get orders out today (Mondays are always busy).

Just got a message from our shipping department (aka Kiela and Chad) explaining why:

Me and Well.ca Featured in the Guelph Mercury

There was a story published about Well.ca and myself in the Guelph Mercury.

A nice quotation from Iain Klugman, the President of Communitech:

Asaria has “a really strong customer focus and market awareness that is going to lead to his success,” said Iain Klugman, president of Communitech, an industry group in Waterloo that supports startups like Well.ca drugstore.

Thanks, Iain — we’re thankful for the support we’ve received from the community and Communitech in particular.

Link to story.

Idée Inc. Office Visit

I’ve been wanting for a long time to visit the Idée office.

Yesterday I got the chance to interrupt the always gracious Leila Boujnane and get a tour of the office.

Leila was kind to explain a bit about how the business works and I was amazed.

People who work at Idée: you’re all very lucky people!

I will write more, but this morning is a busy day so I’ll just post a link to the photos and hopefully say more later.

Thank you again, Leila and the rest of the Idée team!

Product Photos With Reflections — Improvment for Well.ca

Box with product photos before (click to expand):

Box with product photos with my new algorithm that crops each photo, makes a copy, reflects and adds an opacity gradient (click to expand):

You like?

These newest changes will propagate to our live site in the next update (a week or so).

We want our e-commerce site to look nice. But one of the things we don’t have complete control over are the manufacturer supplied product photos.

Yes, we could photoshop each photo one-by-one. But when you have 10K products, even 5 minutes of post-processing per photo is too time-consuming.

But the photos are so ugly and they’re making our site ugly.

So, yeah, it takes a little a lot of extra work to make things look pretty acceptable.

Explaining Employee Stock Options

We startup people often tell potential hires: “Plus we give options” — but we seldom explain what that means.

You’re welcome to ask.

Here’s an email I might send to an applicant if I worked at a typical startup and was asked about the meaning of options:

Some links to read:

http://www.genuinevc.com/archiv…

http://www.burningdoor.com/ask…

http://www.askthevc.com/blog/…

http://www.payne.org/index.ph…
(but if you actually ask the questions from this last article, don’t expect a reply ;) )

My advice to people joining is always to NEVER think about stocks as a way to buttress salaries because it’s such a gamble and it’s so indeterminate. It’s more a treat — and definitely not a smart way to get rich.

First we’re trained to scare people: more than 50% of startups fail.

In an article by the CEO of Redfin, he says:

“…an engineer said the only thing he remembered from his interview was our saying the most likely outcome for Redfin–or any startup–was bankruptcy, but that he should join us anyway. It’s odd but the more we’ve tried to warn people about the risks, the more they seem to ignore them. And since you have to keep taking risks, you have to keep telling people about them.”

A startup company will often dole out options to new employees with a current value of about $XXXXX but the idea is that as a startup, and being a newly invested thing with the first issue of options, values of stocks are expected (read: hoped) to grow at multiples of 3X, 4X or 5X up to 10X by exit or IPO (if there is a planned exit or IPO). Investors come in because they are hoping for numbers like this. But this is something that we never say explicitly — why, because this is a terrible thing to count on — it’s better that employees take options (at this stage) more for the fun “we’re in this ride together — if things go well, we all get a big cheque”.

The other variable to think about is that options have vesting terms — usually this means that employees get the first 1/4 of their options converted to stocks only after year 1, the second quarter by year 2, etc.

It’s important to ask these questions — let me know if you have any others or if I was unclear. I am learning about all this stuff myself.

[options, of course, come with a bunch of legal info -- this email is not a substitute for that, it's just general, off-the-top-of-my-head advice -- consult your lawyer, blah blah blah]

-ali

If you apply to work for a larger, later stage startup, you might be able to guess at the potential value for options, along with the estimated risk. For early stage companies, no honest CEO can predict that — there are just too many variables.

So:

Early, early, early stage employee stock options are for one thing. They are a message to employees. “We consider you to be so valuable, that we want you to to own a part of the company.” They are a perk and they are symbolic, but they can’t justifiably be considered compensation (not yet).

Cuz who knows.

But between you and me, yeah, these options are going to be worth a bajillion dollars. You can write that down. A bajillion and a half, maybe.