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The startup that never gets off the ground

May 16th, 2009 Chris Eben Leave a comment Go to comments

Lately, I’ve read a lot about the local community here in Toronto of tech entrepreneurs, VCs and everyone who falls somewhere in between or on the fringes. Now, I’m certainly no expert and haven’t done all the research to back up my opinions, but I am starting to believe a few things that might be worthy of discussion.

Firstly, the comparisons to the US are problematic on so many levels. While Canada looks and feels very similar to the US, speculative investing and risk taking in general is an area that has always differentiated the two countries. If it doesn’t come out of the ground, the average Canadian investor has no interest until the product is proven and the cash flow is certain. Therefore, it’s not surprising that Canadian VCs have trouble finding Limited Partners and raising substantial funds. Furthermore, the Canadian Government cannot be compared to its more business-friendly neighbour and really, always has much more pressing economic issues around industries and labour markets that need support today. Why would they want to support the privileged, white collar world of engineers and MBAs – even if future success in this area would certainly lead to better economics for the country as a whole.

All this being said, forgetting about the comparisons, what can we learn from our neighbours and our general experiences around this issue? If we recognize that the core issue in building an environment where Canadian entrepreneurs can succeed, is dealing with the question of risk and our baseline of risk tolerance, then I think we might be attacking the real crux of the problem. I was asked the other day what it would take for me to leave my current job to start my own venture and this helped me see that the “risk” of this proposition is the core problem – and that doesn’t mean that I am not a risk taker or that I don’t recognize that the profile of an entrepreneur must be someone who is willing to take on an enormous amount of risk. At the same time, an entrepreneur doesn’t have to be stupid or irresponsible with the risk they take on. This issue becomes all that more important in today’s economy which has completely moved the baseline for what is considered risky.

Because we so often see the world of startups through the stories of overwhelming public success, we get to hear how Mark Zuckerberg dropped out of Havard to make a go of Facebook or how Sergey Brin and Larry Page left their PhD programs at Stanford to take Google to the next level. While we all know that these examples are more representative of winning the lottery than examples or models for statup success, they do end up taking on a place in our minds that might consciously or subconsciously represent the profile of a tech entrepreneur. What if you have this image in your mind, but you happen to be well out of school, have a family to support and you’re just not in a position to start a company out of your parent’s garage? How many amazing products and companies have never been realized because so many of us just can’t quite take the risk, or the capability or idea came to us at a point in life when the risk is that much greater? Now, I might just sound like I’m whining and am afraid to take the startup plunge, but I am trying to get to the point…

What I’m really thinking about is what type of environment needs to exist to push this group of people to explore their ideas in a tangible way. We already have a lot of this in place with the cheap or even free access to technology and infrastructure to really bootstrap a product from concept to production. What we clearly have less of is time and the many other resources required to make a product successful. Take myself as an example. I have ideas and a strong background in technology product management with over 12 yrs of experience but, I’m not a pure engineer and can’t really develop my ideas into working code – or at least something that I think is worthy of putting in front of a customer. The fact is, I’m not a developer. Now, this shouldn’t be a problem in a world where development is becoming (if it isn’t already) a commodity. But, if you’re not in a position to fund the development yourself, where are you left? The days of investing in ideas are over and investors want to see real product, if not customers and revenue to back it up. You can’t get to customers and revenue without the product so how do you get started.

The incubators like Y Combinator are really targeting the 20-something team who have a cool idea but more to the point, are capable of developing it themselves both because they can code and, more importantly, there is nothing whatsoever in life holding them back. In my 20s, nothing would hold me back from trying something new, not getting paid, moving away. In fact I did some of this, but it’s now that I have experience and ideas that I think are worthy of taking to market.

I’m going to think on this some more. I have some ideas about how one might foster a better environment targeted at this group of people, myself included, that can’t work for free in a garage. I’d love to hear your thoughts if you’re reading and have anything to say.

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  • Brill Pappin
    I'm the developer sort. People with your skills are often missing when I (we) want to start working on something.

    I'd be very interested in your ideas on how we can take all this experience and knowledge and use it to produce something a bit more tangible, which still maintaining our families.

    It possible. The most difficult think though is getting people to really focus and commit when there is no initial money on the table.
  • Name
    You're aiming for failure by say asking "Why can't I", rather than "how can I".

    If someone with an idea can't assume the initial burden of getting it to the stage where others are interested enough to participate, then what makes you think that they are up to the challenge of doing everything else?

    This is exactly why the government should not be spending a single penny on programs like incubators. It encourages failure and punishes those who have the right attitude to succeed on their own.

    In Canada, the biggest thing the government could do to help startups is to buy their products, where applicable-- the govvy gets a new tool or service, and the startup gets a customer (plus the much needed feedback).

    P.S. If you were already in business, you would not be looking to give the Government yet another way to spend YOUR hard-earned money. Incubators | 'Programs' = taxes. No thanks.
  • ptelio
    I think this is a great idea. I would gamble on an experienced and successful intra-preneurs over an inexperienced entrepreneurs. Great to see thoughts outside the box when trying to foster and promote entrepreneurship, the backbone of a growing economy.
  • True enough. I suppose my point(s) are really more hypothetical and intended to promote some thoughts and discussion about how to foster and harvest ideas from this "group" of people, much like the younger, no risk group is supported through the YCombinator model. Other than the traditional development of an idea (biz plan, requirements, pitch, etc) and the ensuing quest for funding, I'm wondering if their is a more formal environment that can be created to help this class of entrepreneurs (or aspiring entrepreneurs) in the same spirit of the YCombinator/ExtremeU's of the world? For this "class" of folks, it might share some of the same concepts but provide slightly different resources (think pool of shared developers, designers, etc). Keep in mind that I'm simply thinking out loud at the moment, but at a high level, I think about taking the YCombinator model and flipping it around to a certain extent to better serve the older, less flexible group. Maybe that means doing it part-time (evenings and weekends) and having access to slightly different resources. I suppose one might draw some similarities to what universities have done to attract older, working students by offering accelerated part-time courses, taking into account their experience.
  • Now, I might just sound like I’m whining and am afraid to take the startup plunge, but I am trying to get to the point…

    I have ideas and a strong background in technology product management with over 12 yrs of experience but, I’m not a pure engineer and can’t really develop my ideas into working code - or at least something that I think is worthy of putting in front of a customer.


    Ideas are cheap! It's all about execution. So what have you executed against that isn't development? Business plan? Pitch? Mockups? Prototype? Sales pipeline and letters of intent? Product roadmap?

    If you have the idea, the plan, and customers lined up on nothing more than a requirements document, I'm sure somebody would fund you.
  • Very good point Dan. What about the period before you know if the venture is a success or failure? That can be a long time (maybe 3mths to > 1yr)? One still has to take at least a significant pay cut to at least attempt to find out. In my mind, this might represent more risk than the ultimate success or failure in the end. Again, I'd say that the twenty-something entrepreneur has a great advantage in this area and doesn't really take a risk through pay cut, lack of benefits, etc and only in lost potential earnings (assuming they are talented and smart and would find a good job at an established company.)
  • Dan Bowman
    An excellent assessment of the thoughts and rationale that those with kids go through when weighing these types of decisions. The nagging thought in the back of your mind is "If this fails, how does this impact the home and life I have built for my family?" This question is juxtaposed, against a similarly worded question, but the opposite end of the spectrum, "If this succeeds, what new opportunities does it create for my family?"
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