Kickstarting an industry

Last month, I was lucky enough to join about 250 other attendees at Kinnernet 2009, a “Foo-type” Internet geek camp/ un-conference held on the shores of the Sea of Galilee in Israel. Kinnernet is a by-invitation networking event hosted by Yossi Vardi. If you have never heard of Yossi, he was the founding investor of ICQ (when I met him in 1997). Yossi has invested in well over 80 tech companies – mainly young Internet companies, and has often been called the Godfather of the Israeli web industry.

Yossi has an approach to the market that I think the Canadian startup industry can learn a lot from:
    - Startups need cash, and the biggest help you can give them is cash. It is said that Vardi invests a few hundred thousand dollars in his startups, that he takes common stock with simple terms and no negotiations.
    - If someone has failed before he’s even more likely to invest - “It makes them want to win even more,” he is quoted as saying.
    - He generally invests in young entrepreneurs.
    - Yossi usually hardly looks at business plans at all, and mainly invests in the individual. My favourite Yossi quote is: “Business plans are like sausages, if you knew what went into them you wouldn't eat them.” Another unauthenticated quote: “Judge the individual over the business plan”.

From what I saw at Kinnernet, Vardi has played a major part in stimulating Israeli startups. At every turn, I met another young entrepreneur eager to tell me about their startup. Full of positive energy and drive, it was extremely energizing to meet these entrepreneurs.

In addition to financing, Vardi orchestrates events like Kinnernet where all his startups can interact with each other along with many experienced and connected people from all over the world. And he relentlessly works on business development and finding opportunities for his startups.

It would be amazing if we had a similar process in Canada. If we could find a way of kickstarting 50 (or more!) tech startups with a few hundred thousand dollars each; if we could find a way to orchestrate ways for them to work with each other; if we could help them meet people ready to advise them on lessons learned. 

We have all the ingredients – great universities, superb talent, high enthusiastic young people with ideas. Now we need a way to get the right money to the right people and we may be able to create an industry…..

Comments

[Ben Yoskovitz]

Who would be the Godfather of the Canadian web industry?

Who in Canada will invest in 80+ startups (for a few hundred thousand each)?

[David Crow]

if only there were an guy in town who had a big exit and wanted to spend time and money with young founders...

[Mark Skapinker]

There seems to be more and more government monies available, provincial and federal. 50 X $250k = $12.5m.
Seems to me it would be monies really well spent to kickstart more startups.

[Yung Wu]

Mark, very well said. I totally subscribe to yours and Yossi Vardi's comments. Early stage companies are the engine for innovation, job creation, and economic growth. Let's face it, even in the best of times, startups are typically run by entrepreneurs that wake up each morning, knowing that they must kill what they are going to eat, else their families and employees will go hungry. In the worst of times (such as we are living through right now), who else to bet on, but those that have the ability to survive and quite possibly thrive, through nuclear winter?

[Yung Wu]

One other thought, there is a real need to have re-invested entrepreneurial experience to go with that early stage cash infusion. It would be nice to see more entrepreneurs who have had successful exits (such as Yossi) invest not only capital, but their experience, energy and contacts into the next crop of high potential entrepreneurs. Instead of putting "passive" money to work, and seeing the investee companies once every 3 months for 1/2 day Board meetings, I believe more in a model where experienced successful business builders invest time on a weekly basis, to provide coaching, support, contacts, strategic guidance, and access to resources -- not just capital. This, I think, would start a virtuous cycle of success breeding further success.

[Mark Skapinker]

I would argue that weekly meetings with investors isn't a model that necessarily works - and Yossi subscribes to that too. I think it is much more important to provide tools, and a health peer network that provides help to entrepreneurs.
-MS

[Yung Wu]

I'm thinking more about a model where experienced business builders have more skin in the game than just their cash, by investing their own personal brand and time. More like a "non-executive Chairman" role, who provides a sounding board to the founder/entrepreneur with many of the inputs that are required to scale up the company. For instance, idenfitying and recruiting talent, installing management systems and measurements systems, driving strategic priorities, partnerships and securing long term strategic capital. Not rocket science once you've done it a few times, but often a bit of a "black art" to the typical founder, who has been purely focused on the IP, the product or the launch customers.

Of course, that would mean that we need successful business builders to do more than just buy their cottages/estates and retire to the Muskokas after they've achieved their exits -- perhaps by investing into the new crop of aspiring entrepreneurs -- something that we don't have enough of in Canada !! :-).