Toronto Entrepreneur

I’ve recently researched the rules and resources of looking for funding for a startup in Toronto and Canada. I haven’t yet raised any funding, but I thought I’d share my findings with you.

There are a few rules you should know about. There are always exceptions though. Raising capital is usually broken down to 4 different categories. 1) Raising from the 3 Fs; Friends, Family and Fools. 2) Raising from Angel investors. 3) Raising from Venture Capitals (VC). The 4th source is usually neglected most of the times; Government grants and loans.

If your startup can go without funding, then don’t spend time on it, because it can take a while. Also when you look for funding you should look for “smart money”. Smart money is when the investor not only brings their money, but they also bring 2 more things; their expertise and more importantly their connections.

Which of the above sources you go to, really depends at what stage of your startup you are at and sometimes on how much money you need. I’ll try to break each source down blow:

1. The 3 Fs: At the very early stages. This is also referred to as “love money”, which comes from people who know you and care about you and your success. You cannot really put a number on how much such people would invest but it could be anywhere from $500 - $15,000 or more if you’re from a wealthier family. Here’s a list of some private investors across Canada if you’re not surrounded by rich people
https://strategis.ic.gc.ca/app/scr/srcsFncng/instRgstrtn/Srch?lang=eng&stg=1&type=F&instTyp=P

2. Angel investors: These are generally wealthy individuals who most of the times acquired their wealth through their own startups. They are full-time investors, which means their job is to read business plans all day and decide whom they’d like to invest in. Angels usually come into play during or pre revenue generation. They usually come in when you have a product or you are very close to having one. You should approach angel investors if you’re looking for $100,000 - $500,000 of investment.

Angels are usually invested in 5-10 startups at a time. They don’t usually work alone and are part of an “Angel Group”, where maybe 30-50 angels work together. So if your startup’s application gets approved, you would have to give a 20-30 minute presentation to all those investors in one sitting. Let’s say out of 40 investors in one angel group, 5-10 of them are interested in your idea. Then you’ll get a second meeting which is about 3 hours long. You go through more details of your business with those interested investors and see if they’d like to take on your project. If everything goes well, then those investors will collectively invest in your startup. Each investor usually invests around $50,000 and expects a 10x return over 5-7 years. The most important thing to angels about your startup is your team. You need people who can cover many aspects of the business if not all.

3. VCs: From my research, you’d usually like to avoid them. They’re known to be very harsh. I’ve spoken to founders and some said “I’d rather work twice as hard, and not have a VC on my ass”. Others have said, when such and such guy (the VC) is not in the office, it means everything is good :). You usually go to VCs at a much later stage of your startup, where you’re looking for an investment of $1 million or more. If you raised fundings from angels, they usually help you find VCs and raise money from them.

4. The Government: From my research apparently many people underestimate this source (at least in Canada). I have some really interesting tips on how you should go about approaching these government departments that I can share with whomever is interested. I’m not putting them here because this post is already too long :). But here’s a great database of many government programs for startups: https://strategis.ic.gc.ca/app/scr/srcsFncng/instRgstrtn/Srch?lang=eng&stg=1&type=F&instTyp=G

Please make sure you do two things. If you have any other tips, leave them as comments and also if any of the above tips works for you, please let everyone know. Thanks.

Rokham Fard

So when should you start your startup and why?

I recently met with a few friends back from school because two of my friends work outside of Canada. One works in the Valley and the other works in London, England. After I chatted with them for an hour or so, this is what they told me. One said “We’ve had two batches of layoffs so far and I’m worried that I’ll be in the next batch.” Now this guys is really smart and really good at what he does. He’s responsible and he’s got great inter personal skills. He’s a fresh graduate (so his salary is probably lower than some of the more seniors in the company and he’s still worried).

The other guy told me that they’ve had some layoffs lately and the company had warned their team that they’re next if the order comes in. Now these guys wouldn’t be layed off, it was worse. They were to be relocated to another department under the same company to a different city. Now each one of these cities were in a different country (New York, Toronto, some place in Singapore).

Another thing I did 3 days ago was post a job posting to craigslist looking for a PHP developer. I received 10-12 replies in less than 24 hours. 3 were spams. 2 or 3 hadn’t read the post properly and were applying to work from a different country. We picked 3 to interview from the rest. One thing I noticed as I was going through the resumes, I realized some people had finished their last job in the last 1-2 months or they had started a part time gig 2-3 months ago. Now that’s a sign that the wave of recession has started hitting the tech industry too and perhaps there are more layoffs to come. Plus it’s January and many companies freeze their hires for another 2-3 months, because 4th quarter of 2008 wasn’t so gloomy for them.

So to answer the first question, if you are thinking of starting a startup, START NOW. To answer the second question, read the above 3 paragraphs. You don’t have to dedicate all your time to it at this stage. Start small and go forward. If you have an idea that you believe in, start researching it. Then start building a really really simple version of it. Something that I would look at for 30 seconds and know exactly what it did. If you don’t have any ideas, look around you. See what your former companies were missing. Try to be creative and change the way things are done. Look at your friends and see what bothers them a lot at work, or in their life. There are a lot of niche markets that you can find a technical solution or improvement to. If you need motivation, read Netscape time. If you need fuel for creativity follow Tim Ferris’ blog. This man is really creative and thinks outside the box. When you’re trying to be creative, don’t think money or cool. Think what are some problems and how you can solve it.

Start small and you will be surprised how the wheels of motivation start rolling in you

Rokham Fard

If a startup has more than 1 founder, it needs an office. It needs a place with a short commute, where you can talk (not scream). You obviously need comfortable furniture with free reliable wireless internet. The place should also allow for cell-phone reception. And finally you need somewhere that you can spend long hours, without having to constantly buy something (like a coffee shop).  In Toronto’s case specifically, since it’s so damn cold, you’d really want to be near the subway station. If that matches your needs, then read on, because we have found this place in Toronto.

We have had several offices in the past year. We started off at one of my partner’s apartment and after about 1-2 months, and not really having comfortable furniture we decided to move the operation. My other partner’s parents had kindly accepted to give us one of their rooms in their basement. We worked there for another 2-3 months but the basement had several problems. The commute was long, we had a tiny little window and the lighting wasn’t enough. The cell-phone reception wasn’t that great either. We finally decided to move the operation once again and this time we found the right place. North York reference library, 4th floor.

The reference library is fantastic for many reasons. They have good furniture (if the chairs were more like Yonge & Bloor’s reference library it would be much better). We have an amazingly large window looking out at Mel Lastman square. It’s right out of the subway station and there are several coffee shops, eateries and a food court. You’ll never have to step into the cold if you want something. I strongly recommend Cafe Supreme (they have great, healthy food for both breakfast and lunch). There are also areas on the 4th floor where you can go and talk. The beauty of those areas is that you can talk but you cannot scream. Yes you will end up screaming many times when you get involved in heated conversations. We literally spend 10 hours every day at the library and we get a lot of work done. Oh by the way you can bring food and/or drinks into the library as well. If you find the location somewhat inconvenient or you rather sacrifice the view for better chairs, then I’d recommend the Yonge & Bloor reference library.

One quick note. You’ll notice that I have added several buttons to each post, which allows you to share them through your favorite bookmarking or social networking channels. Please kindly share them, so that more people can give me feedback. More feedback will really help me get better at writing what you’d care for.

Yours truly,

Rokham Fard

I’ve been involved in the Toronto startup community and I’ve realized just like any other profession, entrepreneurs should be connected with each other. It’s fundamental for entrepreneurs to see beyond their own projects and ambitions and see what other entrepreneurs are spending their time and efforts on around the world.

I’ve made it my mission to get connected to entrepreneurs across the world and I’m calling out for your help. Whether you’re an entrepreneur yourself, or you work for one, or even if you know someone who is an entrepreneur, please kindly leave either their name, twitter, blog, or facebook etc. account for me as a comment so that I could connect with them.

I am hoping not only will I be connected to these great people all over the world but perhaps I could be a connecting point where many of them would meet each other. So please be kind and do me 2 huge favors:

1. Leave the info of any entrepreneurs you know as a comment.

2. Forward this post through your channels so that I could find more like-minded people.

Your help is much appreciated.

Rokham Fard

If you’re in an academic environment, you probably have wondered from time to time whether more IQ would help you along the way. It obviously depends a lot on the discipline you’re in but there are many cases where you’re right and having a higher IQ would help. A startup is different.

Having a better IQ will definitely help in a startup and is crucial if your startup relies on sophisticated algorithms such as Idee, a Toronto based startup which specializes in image recognition. Idee has recently come up with TinEye, a search engine for images online. Not every startup’s technology is as sophisticated as Idee’s though and technically speaking, you can get smarter over time but you cannot really increase your IQ. Increase your EQ instead.

I believe if you’re starting a startup, having a better EQ over an IQ will really go a longer way. Understanding social relations and being able to connect to people will really take you a long way in the startup world. Being able to think on your feet, will help you take long leaps. Those who can think well on their feet can close a deal a lot better and convince someone to join their team a lot easier. I have just started reading How to win friends and influence people but this book has been recommended to me by over 5 people and it definitely is a fantastic start to getting better at social relations. You can increase your EQ.

The beauty of EQ is that you can definitely increase it over time. If you like to increase your EQ, try to be more sociable and make this a mission for yourself. Every time you find someone new and interesting try to figure out their strengths and make sure when you walk away from them you can at least name one thing that they could be really good at. More importantly keep in touch with people who impress you and try to get to know them better. I am against keeping in touch with someone who might be of some use to you at some point in your life. I think there are enough interesting people out there that you can find people who are actually someone you’d like to be around, so try to keep them close. Remember every social interaction you have, is an opportunity to build a relationship and increase your EQ so target your efforts towards your goal. Email, tweet, status update on facebook, photo update on flickr, blog post, comment on a blog post are all various forms of social interaction these days. Never lose sight of your objective and use these tools to reach your goals.

Be the dumbest person in the circle of your friends. You definitely aren’t dumb, but you don’t want to be the smartest person in your circles of friends. Surround yourself with people who are smarter than you and learn from them. Don’t hate, appreciate. It’s not always that easy to be surrounded by people who are smarter than you. You might feel inferior and not up to par with them. A trick that I have learned over time to make myself interesting to the rest of the people is to learn something from one friend and apply my learnings to another friend. When people see you do something that impresses them, they usually associate that quality to you and therefore you look smart to them. And the beauty of this exercise is that you’re not immitating anyone, you actually have learned that skill. Having older friends is usually very helpful as well.

If you have an older friend or sibling, try to spend more time with them. Try to be part of their circle of friends. You can learn a lot from their mistakes and if they’re kind enough, they can give you a lot of priceless advise. Let them know what you’re planning to do and ask for their advise. People in this country are dying to give you their opinion and if you listen hard enough, you can learn good pointers. Don’t forget though, whichever of the above approaches you take, never lose sight of your objective; starting the next big Canadian startup

Yours truly,

Rokham Fard

Many people believe sharing your idea with people will result in great feedback and no one is out there to steal your idea. WRONG! They promote that thought in university courses and there are people who evangelize this. Sharing is great but you have to choose who you share your idea with. Sure many people are not out there to steal your idea, but there is one or two people. Also maybe someone will tell your idea to someone else and they might find it interesting and take it away from you.

So I’m going to tell you a real story that our startup went through to show you what I mean. In this story I will keep the person and the company involved anonymous for privacy reasons. So we were at a specific stage of our startup that we needed to hire a contractor to do a little piece of our work. The project was literally a 2 week project and required a certain skill that we didn’t have. So we started putting out ads and asking around among “friends”. Finally a “friend” who I’d known for about 3 years and I knew had the skills came through. I was very happy about that person because the nature of the project was so that we were forced to expose a lot of our business to them. So we ran my friend through the idea of our project briefly. We needed to get some work done before we were able to outsource the little piece to my friend. So things didn’t work as scheduled on our end and we missed our deadline by two weeks. I called my friend and asked if we could meet up to go through the details of the project and start working on it. My friend had accepted a position at a startup by then and was unable to take on the project. I wasn’t told about the company or what the company did.

We, just like any other startup were constantly keeping an eye on our competition and one day a little google alert appeared in my gmail account. It was a job posting by one of our competitors, which I’m not going to name. What really grabbed my attention was the URL the job was posted at. It was on UofT’s job forum (which I was familiar with), so I clicked the link and read the job posting. At the end of the posting I came across a user name which was very familiar to me. The user name was part of the email of my “friend”. I couldn’t believe my eyes. So I double checked the email and I was right. But that wasn’t enough proof so I had to log into my student account at UofT (my user name was g6camus after my favourite writer Albert Camus — If you are looking for one of the best existential novels of twentieth century, check out The Fall) and `finger` that user name. Guess who? Yes it was my “friend”.

I was really shocked. My friend knew what our project was about and was supposed to work on it with us. Now my friend was on the opposite team? That was a scary moment. So I did some further investigation and realized that my friend was part of a startup which is funded by the same company, funding our competition. Scary enough if you ask me.

So lesson learned is that if “friends” or people you know can do things like that, believe me there are strangers who would do worse. This doesn’t mean you shouldn’t share your idea with anyone because that is plain wrong and will not let you grow. You just need to be careful whom you share your idea with. Share it with those who have a high potential of being useful in your company. They at least might worth the risk.

Yours truly,

Rokhm Fard

Don’t get boggled down with the details, they consume your time and don’t give you anything in return. Once you find your idea, stop yourself from going into too many details. Don’t try to define every single feature that comes to your head. You know all those moments you say “wouldn’t it be cool if…..”, the answer is NO, it wouldn’t. The more features you try to include, the more you have to argue over these features with your partners.

Keep the idea simple, and try to sketch the MAIN pages on paper. Again don’t go into the details when you sketch. Don’t sketch every single page/tab/button or option. This helps you stay focused and keep your eye on the ball. The more detailed you get, the more problems you have to deal with.

Once the sketch is done, try to research the market. The sketch is supposed to remind you what your business is all about and to help you stay focused when you research the market. If your business idea has to do with assisting travelers and somewhere in between your research you find a very nice gallery on pictures from Italy, don’t start watching those pictures. That’s not research that’s what we call “going to the sand box” (a Persian expression for people who get sidetracked).

Good research prevents later surprises and gives you plenty of guidelines. Research has many advantages. It tells you about your competitors, it shows you some of the obstacles your business has to deal with later on. It shows you some solutions that your competition has chosen to overcome those obstacles and of course it gives you a great idea on the scope of your problem. Don’t underestimate the time research takes. It took us a good two months to get a descent idea about our market. Build tangible stuff.

If after your research, you know you still want to go on with your initial idea, then you need to get to work. You have spent a good 5-6 months by now and not only you’re not making any revenue, you don’t even have a product. So now you have to decide whether you need some angel investment down the road or not. You have to know if the 2, 3 or however many founders there are, are able to overcome all the obstacles the business foresees in the future or not. Does your business require sales people. Does it need more than just 2,3 developers to speed things up. Does your business depend on other businesses? If you don’t think you don’t REALLY need investment, then delve into building your product and your business model. If you only have a strong technical background, be ready to learn about marketing, sales, pricing, positioning, branding and all those fun sides of business. I mean it, they are really fun but you need to spend time on it to learn it. If you need angel investors, then you need a demo.

Demos are great, since they are visual. Your demo should only cover the core of your business, no bells and whistles whatsoever. Investors need to understand the core of your business and the more you add, the less they understand. You can put together either a flash demo or a plain html/css/javascript demo. Whichever you think is easier for you and more powerful to the investor. Don’t spend too much time on the details of the demo. It will consume your time without you noticing it. Design is a hell of a time consumer.

I will talk more about angel investors, the first version of your product, learning more about the business side of things and putting together a business plan later.

Yours truly,

Rokham Fard