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Justs came home from my third democamp and again, feel inspired and enthusiastic about the tech/entrepreneur/startup ecosystem that appears the be alive and growing in Toronto.

Firstly, a quick roundup of the democamp 22 presenters:

1.  Converstation with Yossi Vardi and Mark Skapinker – Yossi is a seriously accomplished tech investor who likely has an infinite amount of knowledge and experience from over 40 years of starting and investing in businesses.  Still, it was clear that the only way to tap into that knowledge in a meaningful way would be in a small social setting, through story telling (funny stories to be sure).  Clear and concise presentations don’t seem to be his strong point but he is certainly an entertainer.  Both Mark Skapinker and David Crow attempted to ask the question:  What do we need to do in Canada to invigorate the startup community?  I’ll get back to this later…

2. Agilebuddy – A Brightspark company with a tool to enable agile development and project management using an intuitive, web 2.0 interface and offered on a subscription SaaS basis.

3. Assetize – An ExtremeU graduate building an advertising platform to monetize your twitter profile.

4. iStopOver – Another Brightspark venture allowing peer-to-peer renting of space in people’s homes as an alternative to hotels and hostels.  Starting to do the same with office space.

5. Locationary – Very ambitious project to free data and make it available on commercial websites and products with location specific context.

6. Thoora – A Rogers venture and participant at TechCrunch50 last week – they are indexing the blogosphere, twitter and media sites to bubble up the most popular and relevant information, using what appears to be a pretty cool indexing algorithm that can find blogs and information that are relevant, regardless of the number of links to that information.

7. Uken Games -Another ExtremeU graduate and creator of a facebook game called Superheroes Alliance that is image-based and lets you fight, create missions and kill other super heroes, using your facebook network.  They have 50,000 active players and are cash-flow positive.

Find a more detailed account of these companies and presentations at Thomas Purves’ blog or at the democamp site.

I want to get back to the core question that was asked of Yossi and not really answered, perhaps because no one knows the answer.  How do we find and make available the capital necessary to fund innovation and startups in Canada?

Yossi is probably right in that this type of community is supported by creating the right culture.  I find this depressing though, because I’m not sure that culture is an easy thing to change.  I’ve said it before on this blog – Canadians are conservative investors and, to repeat what David Crow said tonight, are only willing to take on serious risk when it involves drilling into the ground.  The VC industry in Canada is largely dead, with the few funds that exist winding down and no sign of raising new funds.  Not for lack of trying I’m sure, but it’s likely too hard to raise any significant or meaningful funds in this country at this point.  To blame the economy is fair but the VC industry in the US is still alive, along with a much larger Angel community and that economy has been much harder hit than Canada.  Again, this points to a significant cultural difference.

There are certainly people and organizations out there doing good and supportive things in Canada but we need more, otherwise our best and brightest will go elsewhere to find the real money.

So where do we go from here?  Thoughts?  Ideas?  Perhaps we need to take the collective energy spent on new and innovative ideas for startups and pour it into a fix for this fundamental problem.

I started writing this post a month ago after reading an article on Paul Graham and Y Combinator in Inc. Magazine.  I left it and got busy with life and only now, while on holiday on the beautiful Gulf Coast of Florida, have I found the time and inclination to come back to it.

As with one of my previous posts, after reading this magazine article, I am left wondering if there isn’t a different incubator model that doesn’t require what Graham refers to as “ramen profitability,” in reference to the cup-a-noodles the Y Combinator attendees live on under his tutelage.  Here’s where I left off when I started this last month…

Reading Inc. Magazine’s article this month on Paul Graham and Y Combinator got me thinking about the topic of these incubator models… again!

Cheap meals are, in a strange way, part of Y Combinator’s formula for start-up success. Graham wants founders to spend as little money as possible. Live cheaply enough, he believes, and you can become cash-flow positive without going on a lot of sales calls or spending too much time talking to investors. Graham calls this “ramen profitability” and says it allows companies to say no to bad investment terms and forces them to think about long-term viability. It also ensures that most Y Combinator founders are in their 20s — or, for the few who happen to be older, that they are capable of living in dormlike conditions. “That culture of frugality and discipline is really important for the Y Combinator mindset,” says Sam Altman, founder of Loopt, a graduate of Y Combinator’s first class. “The start-ups that do well are the ones that are working all the time.”

In reference to my previous post on this topic, it is clear that Y Combinator and similar models are no place for entrepreneurs with children, mortgages, debt… you know, your average thirty-something professional who hasn’t cashed in on their first startup success and doesn’t necessarily have a spouse/partner/family who can pick up the slack while they give it a go.  Enough with my apparent whining on this matter – I already did that before.  I’m more interested in getting some discussion on the development of another model that might be entirely different from the incubators out there today.

From the perspective of capital, this likely calls for a return to the earlier days of VC funding where substantial series A funds could be raised without product/customers/revenue/etc.  Given that VCs cannot, or don’t need to follow that approach anymore, then the investment comes from the angel community.  This is fine, although I believe it is in the amount of money raised through this investment group (for the most part and especially in Canada) that is the problem for the thirty-something founder.  He/she might need enough capital to build product and give it a real go over the course of 12-18mths, not the 3mths that Y Combinator provides.  This longer period and subsequently larger investment both speaks to what might be required to really get something going and what it takes to motivate the entrepreneur who won’t leave their stable, well paying job to take a chance with funding that covers them for 3-6mths, and at a greatly reduced salary (if they are any good in their current job).

I appreciate that a lot of money was wasted in the initial dot.com boom where VCs and their LPs lost billions by pouring too much money into ideas and businesses that were never going anywhere.  Still, rather than completely changing the model, perhaps we can learn from those mistakes and simply be more prudent in our investments.  Instead, the investment community has simply said, let’s invest a lot less until the idea is fully proved out and then everyone will race to get in and at much higher valuations.  Personally, I think this might leave a lot of good ideas on the table that never get funded and we’ve left the world of tech innovation to the twenty-something, recent-grad crowd and the small group of previously successful entrepreneurs.  In today’s economy, I’d like to think that there are some creative ideas out there to figure out how to motivate and capitalize on the creativity and drive (maybe not the ramen-eating drive) of the large thirty-something crowd who have ideas and experience to go along with their kids, mortgages, student debts and who knows what else.

Just to reiterate my intentions here… Please do not take this as a whole lot of whining and very little action but rather, a call to all those that care about developing a stronger entrepreneurial community, to start discussing ways to motivate and support a group that I refer to as the thirty-something group (which really means anyone who has good ideas and experience but cannot eat cup-a-noodles and leave their families for 3mths to do a startup – I really need a proper name for this demographic!).  Please start discussing here and anywhere else where there are people to discuss!

I can’t believe it’s taken me so long to find such a vibrant tech community in Toronto, supporting entrepreneurs and startups through various forums, including Democamp – periodic events to demo new and exciting products and ignites to pitch startups. This is a fantastic, event for promoting your ideas, getting feedback, networking, improving presentation skills and having a good time. And there’s beer and pizza!

I found this community through some trolling on local blogs and sites, such as:

• startupnorth
• democamp
• Toronto Events Calendar
• OCE (Ontario Centres of Excellence)
• Barcamp/Torcamp

And some personal blog sites – in particular, the organizers and central figures of this specific community:

• David Crow
• Jevon Macdonald
• Jay Goldman
• Joey DeVilla
• Leila Boujnane

Following these people and some of the people around them on twitter has helped immensely to quickly integrate myself into the Toronto tech community and, while I’ve only just met a few of them the other night at democamp, I quickly feel as though my finger is on the pulse and I will meet many more interesting people in the near future.

For detailed info and analysis of democamp 20, search twitter via #democamp and/or #dct20.  I number of people have covered all the details in their personal blogs.

Thanks for a great event and looking forward to future events and getting involved with this great and supportive community of people.

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.

This year’s web 2.0 expo in San Francisco was all about twitter – not literally, but you certainly couldn’t ignore twitter this year whereas it was relatively insignificant at last year’s event.

As a recent twitter user (have had an account since last year’s expo but only started using it in the last couple of months), I find that I use it primarily to follow interesting information but it has absolutely no “social” value for me at this point. Largely because I do not have a network of friends who use it – at least for now. As a result, I would say I’m 99.9% information consumer and 0.1% contributor. I do actually post frequent updates but it’s unclear to me at this point if anyone reads them and, for the most part, they are not tweets that would be classified as useful. Still, much like this blog, I think that it’s important for me to take part to be involved in the technology and possibly even find new and different social interactions.

While I continue to play around with twitter on a day-to-day basis, it was at web 2.0 expo that I saw the value of twitter in a conference setting. By using the search feature, I continually tracked all tweets tagged as #w2e which gave me a real-time insight into the all the various goings on and commentary at and around the conference. Furthermore, most speakers used twitter along with a keyword/tag to take questions in real-time during their presentations. Of course this went further then simply questions and allowed people (including myself) to post supplementary information about a given topic to other attendees and/or make comments throughout. I found this to be extremely valuable and it allowed me to “virtually” attend certain sessions that I couldn’t get to.

The twitter eco-system is certainly evolving rapidly. It will be interesting to see where it goes. Will twitter become the facebook of 2006 in Toronto where, in a matter of weeks, the entire “connected” city opened accounts 2 years ago? in 2009, I believe the value and long-term viability of facebook is still unclear. Will twitter take the same uncertain path?