Founding & Funding in Canada

Presented to RampUp Manitoba as a general overview of relevant issues for web tech founders & funders.

Transcript

1. FULL STACK • http://fullstack.ca Winter is coming: Founding & Funding in Canada Winnipeg, December 2013 Boris Mann, Managing Partner, Full Stack Boris Mann • December 2013
2. FULL STACK • http://fullstack.ca Full Stack • Full Stack invests in early-stage web tech companies • Based in Vancouver, BC • 6 investments in 2013 – typical check size of $150K • Lance Tracey & Boris Mann Boris Mann • December 2013
3. FULL STACK • http://fullstack.ca Boris Mann, @bmann • BSc. Computer Science, University of Victoria • Co-founded first commercial Drupal company, Bryght • Co-founded first Canadian accelerator, Bootup Labs • Future of the web, open source / open data, software eating the world, startup ecosystems Boris Mann • December 2013
4. FULL STACK • http://fullstack.ca FOUNDING Boris Mann • December 2013
5. FULL STACK • http://fullstack.ca Big Hairy Audacious Goal • You need a BHAG • Vision and purpose that form core passion & “true north” for the company & team • You also need an execution plan: • What can you build and sell today? • Prove you can ship • Charge money so you don’t die in the short term Boris Mann • December 2013
6. FULL STACK • http://fullstack.ca Lean • “Launch” with no code • Wufoo forms, Unbounce landing pages • Paper prototypes, Slide mockups • Do customer interviews & surveys • 10+ questions you ask all potential customers • Ship • A shipping product gives you an excuse to tell a story & talk to (more) customers Boris Mann • December 2013
7. FULL STACK • http://fullstack.ca Get Great at Product • Marketing • Top of funnel traffic, customer conversion • Product • User engagement, business value, prioritization • Development • Product features, look & feel, bugs (none!), asking for validation Boris Mann • December 2013 M D P
8. FULL STACK • http://fullstack.ca Distribution is Everything • Assumption: Target market exists, pain has been identified, and you’ve built a (technology) solution • Distribution: how do you (repeatedly) reach potential customers & convert them? • Are you a technology company or a sales & marketing organization? Boris Mann • December 2013
9. FULL STACK • http://fullstack.ca No One Knows Anything • Impostor syndrome! • “I’m going to hire a marketing person / CEO / unicorn…” • Double-down on strengths • Outsource + work with pros • You’re still going to have to understand a little about a lot • Learn by doing – you’re going to get good at some of it Boris Mann • December 2013
10. FULL STACK • http://fullstack.ca Lots of SaaS • Think of SaaS products as extra team members • Lots of discounts for startups / small teams • Pay for good tools • Opportunity cost: you can usually pay for a year of a SaaS service vs. a couple of hours of dev team time Boris Mann • December 2013
11. FULL STACK • http://fullstack.ca Intercom • Saves you 50+ developer hours in building a customer dashboard that the DBG can use • Add custom data about your product’s KPIs • Turn-key drip email • Best tool for customer engagement: support, feedback, segmentation Boris Mann • December 2013
12. FULL STACK • http://fullstack.ca Tapstream • If you’re shipping a mobile app, you have no data on where your installs are coming from • Use Tapstream! Like bit.ly for mobile • Honourable mention: Apptentive for in-app customer support Boris Mann • December 2013
13. FULL STACK • http://fullstack.ca Always Have an Ask • Customers • Team • Advisors • Investors Boris Mann • December 2013
14. FULL STACK • http://fullstack.ca Startup Ecosystems • Entrepreneur-led organizations • Talent • Hackers & Hustlers • Lawyers & Accountants • Investors & Advisors • Rallying cry – people & places • Web-tech can succeed anywhere Boris Mann • December 2013
15. –Johnny Appleseed “If you want to go fast, go alone. If you want to go far, go together.”
16. FULL STACK • http://fullstack.ca FUNDING Boris Mann • December 2013
17. FULL STACK • http://fullstack.ca Bootstrapping • Not all companies are right for the venture funded path • Recurring revenue SaaS companies are a great fit to grow organically • Some angels are a good fit • Early bootstrapping can still lead to later venture funding Boris Mann • December 2013
18. FULL STACK • http://fullstack.ca Investor Education • New generation of web tech, ex-operator angels just emerging • Even non-web tech businesses are being impacted by lean, software, etc. • Limited awareness of “common” deals • Get them on Angel List! Boris Mann • December 2013
19. FULL STACK • http://fullstack.ca Early Stage Funding • Seed 1: < $500K • Working code & customers • Seed 2: > $500K to $1.x M • Paying customers or significant traction • Series A: $1M++ • At least one known, repeatable sales channel / distribution model Boris Mann • December 2013 Day job F&F $30K prototype Cofounder Accelerators CYBF Consulting
20. FULL STACK • http://fullstack.ca What Investors Want • Investment Deck • Team / Market / Solution (+ Proprietary Tech or Distribution) • Use of Proceeds (aka Budget for 12 months) • Hiring plan, sales & marketing “hypotheses” • User Model • Bottom up growth model • Cap Table • including scenario for next round Boris Mann • December 2013
21. FULL STACK • http://fullstack.ca Love your Cap Table • Equity is like sh*t – keep it piled in one place and it stinks, spread it around and good things grow • Reward advisors, early employees • Use your cap table to plan where you need to get to in terms of team, traction & timing • 20% - 30% dilution at each stage Boris Mann • December 2013
22. FULL STACK • http://fullstack.ca Apply to Accelerators • Think of an accelerator as a (short) MBA • Goals • Grow your network • Close on some of your asks: advisors, customers, investors • Close a seed round (Seed1 or Seed2) • Apply to ALL the accelerators (yes, that means US ones) Boris Mann • December 2013
23. FULL STACK • http://fullstack.ca Money Chases Talent • Build a great product with customers and traction, and money will find you • Investments are now borderless: more seed & angels in Canada & the US willing to do investments anywhere • Get on the road, meet people, ask for intros Boris Mann • December 2013
24. FULL STACK • http://fullstack.ca Winter is coming • Startups are hard • Small businesses – including web tech startups – are to be celebrated • Canada is coming for you #mooseblood Boris Mann • December 2013
25. FULL STACK • http://fullstack.ca Thanks! http://fullstack.ca/contact/ @bmann • @FullStackDotCa Boris Mann • December 2013
26. FULL STACK • http://fullstack.ca fullstack.ca/tools • Cap Table & Valuation Presentation • Budgie - use of proceeds, budget planning • Favourite tool for engagement, drip email, and customer dashboard is Intercom http://intercom.io Boris Mann • December 2013
27. FULL STACK • http://fullstack.ca Data Driven Basics • Google Analytics • Traffic sources, keywords, conversion • Key Performance Indicator (KPI) • Custom to your product • Customer Engagement • aka “talking to customers” • Turn this “soft” data into decisions by structuring feedback – i.e. 5 customers have asked for feature X Boris Mann • December 2013
28. FULL STACK • http://fullstack.ca Update your Supporters • Angel List • Blog posts & tweets • Monthly Email Update • Good / Bad / Ugly + Asks Boris Mann • December 2013
29. FULL STACK • http://fullstack.ca I have an idea! • I won’t take you seriously unless you have: • Website + Email Collection • Social Media Checkmarks • Angel List, Twitter, Facebook page • Blog • Founder blog or customer-focused community building Boris Mann • December 2013
30. FULL STACK • http://fullstack.ca Funding Mechanics • Equity, Common Shares • If you can agree on valuation – do it! Aligns early investors & founders • Convertible Note • 20% discount, 8% interest, $3M cap, 18 - 24month term Boris Mann • December 2013
31. FULL STACK • http://fullstack.ca I was told there would be no math… • $300K Seed 1 Round (Common Equity) • $25K / month burn x 12 months (or 6 months at $40K) • 25% dilution target == $900K Pre / $1.2M post • $800K Seed 2 Round (Convertible Note) • $60K / month burn x 12 months • $1.5M Series A (Pref Shares) • $120K / month burn x 12 months • 25% dilution target == 7.7M pre / $9.2M post Boris Mann • December 2013
32. FULL STACK • http://fullstack.ca The New Hack Stack • Your code is on Github • You’re building API first • Avoid servers, start with PaaS • Heroku, Azure, App Engine • Moving on up should mean VPS • Digital Ocean, AWS, SoftLayer, Linode, Rackspace, Joyent, etc. • Need Canadian hosting? Talk to GossamerThreads gt.net • Pivotal Tracker or Sprint.ly for product / dev task iterations Boris Mann • December 2013