.

Bulls*%t, Next Slide…

We had an entertaining speaker at last night’s meeting of Anges Quebec. Andy Nulman of Airborne Mobile and Just for Laughs fame, spoke about his experiences as an entrepreneur and his thoughts on Angel investing. I don’t know Andy but he’s absolutely hilarious.

One funny anecdote he mentioned was pitching some VCs during the early days of Airborne and being told that their financial projections were not nearly sophisticated enough. They dutifully hired a bunch of experts to create what he described as the most beautiful set of financial projections ever created. At their next pitch to a big strategic investor, they went through their powerpoint and got to the financial projections. As soon as the investor saw the projections he said “Bullsh!t, next slide.”

Under “Lies Angels and Entrepreneurs Tell Themselves” #1 has to be that financial projections mean something. Projections are a good way to work out aspirations but they’re not good for predicting the future (in a startup). We’re investing in People right? Entrepreneurs are just as bad. When their pitch isn’t convincing they roll out excruciatingly complex financials to boost their case.

Angels and entrepreneurs should stop lying to each other. Entrepreneurs should be honest about what they don’t know (which would be refreshingly impressive) and Angels should realize that at the earliest stages they’re placing a big fat hairy bet on an individual. People who aren’t comfortable doing this probably shouldn’t be investing in startups.

Andy’s version was funnier…

June Startup Drinks + Montreal Girl Geeks

Startup Drinks has joined forces with Montreal’s Girl Geeks to bring you the networking juggernaut of the summer!

On location will be another fine installment in the Montreal Girl Geek speaker series featuring local tech entrepreneur Christine Renaud (E-180).  Christine will talk about her travels in social entrepreneurship in her talk entitled “The Good, The Lucrative and the Web Friendly”.

Here’s the deal:

The Date:

• Wednesday, June 17, 2009

The Times:

• 5pm: Montreal Girl Geeks, featuring Christine Renaud.  Check out their blog for more details! You MUST register to reserve your berth as space is limited.
• 6pm: Startup Drinks madness will kick off at 6pm until whenever with beer, networking and snacks.  Registration is recommended at techentreprise!

The Place:

• UPSTAIRS (as in, not downstairs) at Brutopia,  1219 Crescent St (south of St-Catherine), Metro Guy-Concordia

The Cost:

• Nothing, nada, zip.  Both events are free and you can come to one or other or both. As always, everyone is welcome!

Thanks to Tanya McGinnity for her collaboration on what promises to be a great night!

See you there!

Robin

Lead to Win: An Open source Business Accelerator

Here’s an interesting idea: take a city that is experiencing high-tech job loss, create a program that helps laid-off workers create startups, run it like a summer school program using local experts, charge nothing for the program and take no equity stake in the businesses. Oh, and Open Source all of the learning materials used!

It sounds too good to be true and it is, unless you live in Ottawa. Lead to Win is an accelerator program created by Dr. Tony Bailetti. Currently underway with about 50 participants, this is actually the second time such an accelerator has been run in Ottawa, the first one being in 2002 during the last tech downturn. That program created about 15 new companies, 300 new jobs and a significant amount of investment dollars. More importantly, it created a new cohort of tech entrepreneurs that have gone on to found new companies.

Here’s a taste of some of the things covered in the agenda:

• Design your business for success
• Define compelling customer and partner value propositions
• Lever ecosystems, open source projects, and open APIs
• Identify customers most likely to buy from new company
• Price and brand with confidence
• Build team and organization
• Define clear agreements, term sheets, and sales contracts
• Protect intellectual property
• As well as pitches and discussions with experts and LTW alumni
  

Since we all love to classify things, is Lead to Win a startup accelerator? Tech accelerators (remember, we don’t use the term “incubator” anymore…) are on the rise. StartupCFO has a nice post on the subject and First Ascent Ventures has probably the best early analysis of the accelerator space and guesses about early returns (Parts 1, 2, 3). We sometimes describe what we do at Flow Ventures as “acceleration” since we provide a mix of financing and operational services (though no office space!).

What is compelling about Lead to Win is its Open Source business model. It’s not only free (as in beer) but free as in all of their materials are available online. In fact, they’re encouraging other cities to follow suit. This openness allows LTW to easily partner with government, local tech organizations and the private sector. Unlike other accelerators, there is no implied goal of helping the company raise money at the end, e.g. there is no big funding pitch session for graduates. I like this because it emphasises bootstrapping and early profitability. Neither of these is friendly to VC funding models but they’re friendly to entrepreneurs and helping build products that markets need.

I would definitely call LTW an accelerator. After all, they help more people create new ventures quickly while providing some care and limited feeding along the way. Like many other accelerators, Prof. Bailetti has figured out that the most important thing entrepreneurs need is not cash but access to an ‘ecosystem‘ that can support the venture. This ecosystem can provide talent, technology, customers and financing.

Flow will be at Lead to Win later this month providing advice and feedback to entrepreneurs. I strongly recommend you check this program out and if you think this could work in your city, contact Tony Bailetti.

Competitive Analysis for Startups: Being Better, Not Just Different

In the last post I talked about the goal of competitive analysis. In this post I’ll talk about why (and when) it’s ok to compete head-on.

Let’s review why startups spend so much time showing they’re different. Anyone who’s read (and hopefully re-read) Crossing the Chasm knows that it’s important for startups to find a beachhead, i.e. a niche where they can get some traction without forcing bigger rivals to respond. This is a good strategy because it’s easier and cheaper to start generating results, and revenues, in a beachhead.

But what happens when you’re not the only player attacking a beachhead? Some investors pass on opportunities because there are already one or two funded startups in a space. Others only invest when they see that a space is heating up.

Don’t Be Afraid to Compete

You don’t convince someone you’re going to win a 100-yard sprint by talking about how you have a totally unique approach to running that involves your hands, not your feet. In other words, it’s ok to talk about areas where you and your competitor(s) will compete directly. Your job is to prove how your team, your structure and your approach will mean you’ll win. This is almost entirely overlooked in business plans (and business planning) because we’re all too busy showing why we’re Different, not why we’re Better.

Some examples:

• Funding - I hate to say it as a believer in lean startups, but in some cases more money = more ability to compete. This is true in markets where you’re already competing on price or greenfield markets where there’s a rush to grab open real estate.
• Focus - You may have the exact same product as a competitor but you may be focusing on a different aspect such as bundling/integration, customer service, ease of use etc. You need to prove how your focus translates into competitive advantage, e.g. the best buyers want the best customer service, not necessarily the most features.
• Team - This is why recruiting will always be one of the top priorities of a CEO. In head to head competition the better team (e.g. more experience, more industry contacts, more skilled) will always have a competitive advantage. If you have an A team you should be talking about it front and center.
• Speed - If your startup is built for speed then you don’t need to be first to market. Let your competitor invest in all the R&D and market education. Being a fast-follower is a great head-on competitive strategy and one that’s very well suited to lean startups. Plus it annoys the hell out of your competitors.
• Best Practices - A great way to nullify the competitive advantage of a bigger rival is to adopt industry standards. Being close to the associations that set standards means that competitors cannot say that choosing your product is risky. You won’t have an advantage over competitors but you’ll level the playing field so you can compete in other areas.

I’d like to see more startups openly talk about direct competition and how they’re designed to win that kind of competition. When you think about it, saying you’re unique is just another way of saying your R&D and product development is better than your rivals. In the end there’s a lot more direct competition than startups like to think. It’s ok to compete head-on (assuming you’ve made sure that you have real competitive advantages of course).

Competitive Analysis for Startups: The Goal

One of the hardest things for emerging companies to get a handle on is analyzing the competition. Investors grimace when we hear “there is no competition” because outside of the world of patents, it’s just not true. But on the other hand, what’s the point of starting a new company when there are lots of competitors, implying a crowded space? Entrepreneurs often get lost somewhere between “no competition” and “too much competition”. This leads to unconvincing business plans or, worse, a strategy that’s blind to real competitive threats.

What’s the goal of competitive analysis?

For most entrepreneurs trying to convince people about a new product, the goal seems to be to prove, at all costs, that what they have is unique. There’s a standard series of tricks to accomplish this, two of my favorites of which are:

Our competitive advantage is that we are at the top right

We have more checkmarks than our competition

It’s pretty easy to define your competitive analysis in such a way that you appear totally unique. The question is, are you defining criteria that your customers care about?

“Competitive Intelligence” vs. “Competitive Analysis”

Whether you’re preparing a VC pitch deck or just strategizing about your business, remember that your real goal isn’t to show that you have a competitive advantage. Why? Because you might not. The real goal is to be an expert about your competitive landscape (and a paranoid one at that). The real goal of the Competition section of your business plan is to impress the reader that you are a) an expert about your competition and b) more paranoid than the reader (since the reader isn’t the one running the business).

The bad news is that being a real expert about your competition takes more time than creating a 2X2 matrix. But the good news is that you’ll be much better prepared for conversations with customers and investors who love pointing out that “Product X already does that”.

Stop Being Afraid to Talk About Your Competition

The takeaway is that you shouldn’t be afraid to have a competitive analysis that seems to be full of competitors. Your job is to show that you have a sophisticated understanding of your industry and where you fit in. I’m always more interested in how a startup is going to compete rather than why they don’t have to.

Startup Drinks - May 27, 2009

It’s great to see so many startup enthusiasts out in force and we’re set to do it all again, as we do on the last Wednesday of every month. You are most welcome to bring friends and colleagues. We’ve been seeing 60+ people through the doors and I would love to keep the pace!

Let the drinks and networking begin at Brutopia this Wednesday, 27 May from 5:30pm until whenever.

You can register soon at techentreprise! Techentreprise helps you to connect with the people you meet and even post your own items.  But wait, there’s more! You also get a gorgeous name tag on the night and satisfaction of knowing that you’re helping us to plan the best event possible.

A Follow Up On Project Olympus

There was quite a lot of interest in our post about Project Olympus, the startup incubator at Carnegie-Mellon University. I think it’s a (good) sign that many people are trying to understand what does or doesn’t work in the university commercialization process. To further help get the information out there I’m posting a detailed follow up from Kit Needham (PDF bio) who is the Senior Business Advisor and Executive in Residence at Project Olympus:

“I am the Senior Business Adviser for Olympus.  In response to your very thoughful question, the answer is simply that we truly filled a gap.  While there were many professors at CMU who pursued commercialization of their technology that fed into our Tech Transfer system and the other organizations listed, there were many that just had not really considered commercialization.  Further, they are often not at the stage where the path to commercialization is obvious. That is where we come in. We have initial exploratory conversations with the faculty and help by providing  some preliminary market analysis, walk them through what is involved in commercialization, what their options are, etc. So were are simply creating more, better prepared ‘deal flow’ for our Tech Transfer office and the other organizations in the diagram.  For the students, there was no other incubator space where they could meet 24/7, leave their equipment and notes on a white board, and collaborate with other student team members.

Also, when Olympus was getting started and as we grew, we sat down and talked with the staff of these organizations, and explained what we were intending to do. It was clear that this was going to be a true collaboration where what we did complemented and supported what they do.   For instance, once one of our PROBEs ‘graduates’ to another agency or organization, they become the primary adviser. We stay informed but are very careful not to be giving conflicting advice. The staff of the other organizations regularly attend our events and, as mentioned earlier, when we think there is a possible fit with one of the organization’s program, we set up exploratory meetings with the faculty (and students).  Again, we help identify (and help prepare) good prospects for their programs that they otherwise may not find that connection.

To Ben’s question, we haven’t really been in operation long enough for one of our PROBEs to have crossed the finish line, although one student PROBE  is getting close.  You can go to our website (olympus.cs.cmu.edu) to see the various PROBEs, link to their websites and see recent news about them as well as see the testimonials.”

Thanks Kit for the excellent comments. One thing I find interesting is how integrated Olympus is with both professors and students who are the source of new startups, and upstream funders and mentoring organization who Olympus can “hand off” projects to. It’s not easy establishing this level of integration especially where every organization wants (and probably deserves) some credit if the project succeeds.

If other people have interesting startup incubator stories they’d like to share please contact me and I’ll post it.

Project Olympus: A University Incubator That Works

It’s rare that I come across a tech incubator that can claim any more success than the square footage they’ve rented out. It’s not that incubators can’t work, it’s that most confuse office space with synergy. Others try to do too much and end up competing with the entrepreneurial ecosystem around them, e.g. by bulking up on paid advisors and other “experts”.

Given my bias, I was pleasantly surprised to meet with Dr. Lenore Blum, founder of Project Olympus, a two-year old incubator based out of Carnegie Mellon University in Pittsburgh. With a shoestring budget that would make certain government funded incubators blush, Dr. Blum has created a model that will be of interest to anyone trying to figure out how to better commercialize university research.

Here are some key facts about Project Olympus:

• It’s embedded within the School of Computer Science, a vibrant source of research given that it is actually composed of 6 academic units (Computer Science Department, Human-Computer Interaction Inst, Institute for Software Research, Language Technologies Institute, Machine Learning Department, Robotics Institute)
• It actively generates new ventures by reaching out to professors, graduate students and researchers to help them take the first step
• It focuses on helping developing ideas with commercial potential rather than getting bogged down with university tech transfer offices (which is a later step)
• It focuses on the real problems of commercialization (bulletproofing ideas, finding target markets, team building) rather than things like office space and advisory services

Two things stand out as key to Olympus’ early success:

PROBES (Problem Oriented Explorations)

Probes are deep explorations into technologies and their potential as new ventures. Entrepreneurs work with the Project Olympus team as well as its volunteer Advisory Cabinet (which I’m very please to be a part of) to develop avenues of commercialization for the technology as well as to give entrepreneurs hands-on practical training. What impresses me about this method is that it focuses on hands-on ideation rather than business plan writing. The sooner entrepreneurs work with other people and get their feedback the better the chance of success. Regular “show and tell” sessions ensure that entrepreneurs get feedback early and often.

Integration with the Tech Ecosystem

Knowing where an incubator starts and ends is something that many incubators have struggled with. An incubator can’t duplicate or replace an entire ecosystem so “playing well with others” is very important. As the following (somewhat complicated!) diagram shows, Project Olympus has a very clear idea of where they fit. They have one foot in university research labs and the other in the area just before seed funding. This is the perfect spot for a university incubator to occupy because they are increasing the number of entrepreneurs entering the ecosystem (i.e. increasing the size of the funnel at the top).

(click to enlarge)

Once projects graduate from Olympus there are other organizations to pick them up, including Idea Foundry (a non-profit investor and incubator), Innovation Works (a state-run seed fund and support organization), The Tech Collaborative (a non-profit tech economic development org) as well as local VCs such as Meakem Becker.

Overall, this is a great example of the many pieces at play in a vibrant tech ecosystem, and a rare dose of good judgement for an incubator such as Olympus to find its ideal spot. When the ecosystem works it not only creates great companies but can build and support local communities.

I think universities, especially those outside of Silicon Valley and Boston, could learn a great deal from Project Olympus. I also think this is an important model to study for any city trying to build a functioning tech ecosystem.

What do you think? Would this model work in other universities and communities?

Reminder: Startup Drinks al fresco, Wednesday, April 29

Come on out this Wednesday, April 29 from 5:30pm to Brutopia (Crescent St, just south of Ste-Catherine) for beers and startup mayhem.  The terrasse will be in full effect!

All are welcome!

Registration is now open at TechEntreprise!

Startup Drinks April Edition: Next Wednesday

Depending on weather, next Wednesday could be the first “Patio Edition” of Startup Drinks. Hope to see you there and please spread the word!

The details: Startup Drinks at Brutopia (Crescent St, just south of Ste-Catherine), on April 29 from 5:30pm.

Register soon at TechEntreprise!