Let the Sparks Fly!

iStopOver – The next chapter

We launched the first version of iStopOver earlier this year. The basis of this internet business was straightforward: Some people have excess capacity in their home and office, and others are looking for short-term space. iStopOver connects people and provides a simple way to directly rent space.
To date, iStopOver has focused on the home rental market – a market we dubbed as Hometel = Home + Hotel.  Homeowners list their B&B style accommodations on iStopOver and travelers rent these accommodations directly on the site, iStopOver for Home Rentals. 

Now, we have launched iStopOver for Office Rentals. That means you can directly rent short term office/ business space. By business space, we mean an office, a desk, a meeting room, a boardroom, a warehouse, a studio or even a parking space.  No agents, no long-term commitment – directly rent over the Internet. 

We have reacted very quickly to the marketplace. Our customers told us that they really like the concept of peer-to-peer rental of excess space, but asked if we could expand the concept to business space – a marketplace that is virtually untapped.

So, if you have some spare office space, here is your chance to rent it out on a short-term basis really easily. You simply go to www.istopover.com/office , register on the site and post your listing. Our online wizard makes it easy – you tell the system what you are renting, how much to charge, upload some photos, and tell it when the space is available. iStopOver will find you renters (we call them guests), help manage the communication with guests and take payments from the guests providing you monthly payments. Go for it – rent out that spare meeting room, your extra parking spot, or even your boardroom when you aren’t using it.

And if you need short term office space, iStopOver is where you will find it. Next time you are travelling and need a meeting room, office or boardroom – iStopOver for Office Rentals is where you will find what you are looking for. Stays can be as short as half a day, or as long as you need the available space. If you work at home, and just need an occasional office, find it now on iStopOver.
We are very excited about this offering. It is part of our focus on creating Internet businesses that are right for the market and offer what people really need. The market has told us that the peer-to-peer market for excess capacity makes sense to Hosts and Guests (especially in the current economic climate). We are focused on building the bridge between Guests and Hosts and we are fanatical about customer service.

Please check out the site.  www.istopover.com/office  Remember that it is new so there may not be too many listings at first – check out Toronto for some good example listings. If you have any comments, suggestions or thoughts, please email us at info@istopover.com

We are busy! You will see our site change and improve as we learn more and customers tell us exactly what they want on the site.  Oh, and stand by for our next Chapter of iStopOver in the next short while……

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…..

Living back in Startup-Heaven

I have been spending a lot of time over the last few weeks and months on our new Internet business iStopOver.   www.istopover.com

What a nice change! It has been an incredibly creative experience.

I will post other blog entries regarding the business itself, and why we are so excited about the opportunity, but this is all about reliving in a startup.

As I described in a tweet last week, it sometimes feels like being a sculptor molding clay. Everything is immediate – you make a decision, and then you implement it, and then you see the result. It is all so “right-now”.

I have been reminded by what we always describe as the difference between a startup and an established company. In a startup, you have the luxury of immediate reaction and implementation. And in a later stage company, you don’t wonder how you can possibly do everything that has to be done.

We slipstreamed the launch of the site last week, and already we have modified the home page based on feedback. If you have a chance, please go to www.istopover.com and give us any input you can. In the near future, we will have a full launch.

This is the time to put all of our experience to work. For us, it is like second nature to do everything that has to be done – we have done it so many times in the past. Build, test, launch, market, legals, business dev, sales, customers, graphics, PR, marketing, SEO, listen carefully to all input, zig, zag; and then do it all a second time build, test, launch, market. Focus on details. Adapt, learn, experiment…

A lot has changed since the 90’s when we launched retail software. Take QA for example – in those days, you tested and then sent the product to manufacture. “OK – build and dupe 10,000 copies of WinFax. Copy 50,000 diskettes”. And if there was a small bug, it meant recalls, tech support headaches (and cost) – after we shipped, we sometimes never heard from our customers. What a nice change this is – launch a product on the Internet – make a change – and everyone sees the change next time they log in! Whew, some things do get better.

The marketing terminology has changed – now, it is all about social networks and social media, SEO and analytics. But fundamentally, marketing is still all about understanding market needs and offering value that people really need.

It has been awesome providing a product that is so right for these market conditions. It is so amazing focusing on a world-class service rather than bitching about the pathetic state of the market.

I wouldn’t swap this job for anything! And, please just do me a favour – tell 10 people about iStopoOver so that they can each tell 10 more…

Its enough whining and complaining, lets focus on opportunity

Counting myself amongst the whiners and complainers, quite a few of us have been bemoaning the state of the technology industry in Canada for quite long now without achieving any results. I’m done with whining and complaining. It’s enough with looking backwards. Instead, we really need to capitalize on new opportunities.

At Brightspark, we’ve been spending time focusing on how to create value in this market. New approaches – with low spend, businesses that generate cashflow, and Internet businesses that cater to the current marketplace.

It’s all about positive energy. Instead of bemoaning how bad the market is, how the Canadian tech market is in trouble, how the new budget snubbed the hi-tech industry – it is far more productive to focus on where the new opportunities are, how new markets are being created and how best to function in this market.

Using this approach on refocused energy, in the last few months we launched Collectionbuddy, Brightspark Studios, our first iPhone app called “My Golf Swing”, and Agilebuddy with our fifth Internet business launching in the next month.

In the next few blog posts, I hope to write about how we are doing this, what we are focusing on, what lessons we have learned and keep reporting back what we are now learning.

More "Bill Gateses", not more graduates

The press in Canada has been full of articles about how Bill Gates thinks that if Canada and the US want to stay ahead, they should "focus on improving the quality of education and expanding the number of young people who study math and science in school". He wants us to create new computer scientists, engineers and researchers.

Academics like Roger Martin answered him in the Globe and Mail by saying that North America has its lead because of our great MBA schools (like The Rotman School of Business where he is Dean) and management studies and the creation of more managers.

And the debate rages about how we need more scientists, management students and other graduates. Even the politicians have been getting into the act by agreeing or disagreeing with Mr. Gates about how far behind we are or aren't, and how many more students we need.

I think that they are all wrong. What we really need is more Bill Gateses. We need entrepreneurs who are willing to "go for it", start new companies and create startups like Microsoft was not so long ago. Can you imagine if we could find the formula to create more people like Bill Gates?

As far as I remember, Mr. Gates dropped out of university. He was not a product of any MBA school or school of engineering. He did what he did because of his own drive to succeed, and a market environment that let a Microsoft be created.

Let's create an environment that lets entrepreneurs thrive. Let's help them however we can to get started.

On the other hand, if Mr. Gates succeeds in convincing us that we need more "scientists, engineers and researchers", imagine how many more copies of Windows he could sell...

Startup Crisis

So, when do you panic? As an investor in many startups, we are always dealing with a major crisis in one of our companies. 

The reality of startups is that it is actually part of the normal process to have an occasional crisis. In fact, I use “crisis measurement” as one way of monitoring startups. 

Without over-generalizing, I think it is normal for a startup to have one crisis about every six months. Within a couple of years, it may go down to once yearly. More than one crisis every six months probably means that the company is being too aggressive/ too reckless and less than one crisis every six months probably means that the company is not taking enough risks/ pushing the envelope hard enough. 

The type of crisis I am referring to can range from market or customer issues all the way to existential crises where the company needs to completely question the path it is taking.

The success of a startup often depends on just how well the team, CEO, investors, board and employees manage the crisis. The worst way to manage any one of these crises is to ignore them or hope they go away. They don’t go away. They just get worse. The sooner you deal with issues and face them head on, the better your chance of recovery. 

I keep reminding myself and our startups that one of the biggest advantages startups have over “real companies” is their ability to make changes easily and quickly. Big companies cannot change very fast or very easily – they have to worry about existing customers and previous products. Startups can redefine themselves quickly and easily. In fact, they need to keep reminding themselves that they can make these changes easily. 

The best startups keep testing their assumptions. They put stakes in the ground. They take big bets. BUT, they make sure that they can a) keep evaluating these bets and b) they create a corporate culture and infrastructure that lets them change direction easily when they need to. 

I never think our startups are failing when they have a major crisis. I never think our startups are failing when they make some huge zigs and zags. I do think our startups are failing when they can’t easily adapt to changes in the marketplace or the realization that the facts have changed. I think they have failed when they keep going down a road that they know is the wrong one, but feel that they have an obligation to “finish what they have started”. 

There are lots of factors that cannot be controlled in the startup environment. Making change in the face of these factors can be controlled. Anyone founding a company, investing in a startup or working in a startup has to be comfortable with change. Otherwise, don’t dabble with startups.

VC Industry Lessons

I have recently returned from a 10 day trip to Israel with my partners at Brightspark. We were busy the entire trip with meetings every day including some touring as well. It was a wonderful opportunity to see the Israeli VC industry “in action”. We met with a number of VCs, especially early stage VCs, software companies – early and later stage, angel investors, operating companies, incubators, and investment bankers. We were treated very well, and we learned a lot – now to get rid of the jet lag...
Instead of composing a long blog post, I am composing a few smaller entries with some thoughts and ideas after our travels.

Trying to compare the Canadian and Israeli VC software markets – not much to compare

I have been fortunate to participate in the Israeli and Canadian software industries over the last twenty five years. My first programming jobs were on Data General computers in Israel in the early 80’s when hardware was so expensive that we battled to squeeze business software on to underpowered hardware. Soon thereafter, I came into contact with the software publishing industry when Ontario, Canada led the market (with Atari and Commodore software). By the early 90’s, we had some major software companies in Canada when Delrina, Corel and other led their marketplaces.

Ten years ago, the Canadian and Israeli VC marketplaces were poised to take off from a leveled starting point. The Internet was emerging; both markets had some of the best computer science universities in the world; governments were trying to figure out how to help. When I founded a software company called Balisoft in 1997, we created a software company that had early leading VCs from both countries - Sofinov (CDP) and J.L. Albright from Canada, and Gemini from Israel with government assistance via CIIRDF.

Fast-forward 10 years to 2006. Canada has a VC based software industry that I would describe as quite unhealthy, and the Israeli industry has created huge momentum that seems to be driving an entire economy. The contrasts are amazing. During our trip to Israel, we spent four days traveling from hi-tech area to hi-tech area. We kept saying to each other that we could easily have been in Silicon Valley. And we never even got close to visiting any meaningful proportion of the industry – we mainly visited just the North Tel Aviv Area. We found an industry with more than 60 private VC firms, with exits taking place regularly on a weekly basis, established government programs in place that are driving innovation, and a new presence from the major US VC firms.

Contrast that with the Canadian industry. We seem to have fewer VC’s in existence each year. At the seed and early stage, outside of Quebec we have very, very few funds. It seems to me that the Quebec government is doing something right because they are attracting outside VCs and new activity. But outside of that one glimmer, we seem to have an industry where the best talent moves quickly to the USA, we have very few repeat entrepreneurs, very little momentum in creating success stories; and while we keep hearing about new potential new government programs, there seems to be almost no visible success from these programs.

Sadly for the Canadian software industry, we find that if Israel and Canada were at the same place in the VC industry 10 years ago, we now find Canada very far behind.

We can find excuses and explanations, and there are no simple solutions, but it is interesting to look at what I think are some of the reasons for the difference and what can be done about it. This will be the topic of other blogs posts, but I believe that well focused government programs have been a huge contributing factor to the success of the Israeli industry, and that Canada should learn from this success.

Fortunately, it’s not too late to fix...

Corporate culture is what gets it all done

This week, we had a reunion in Toronto for the company that I co-founded in the 80s/90s called Delrina.  (For some history, see wikipedia).  Amazingly, close to 200 ex-Delrina employees attended (see photos here at Flickr),  but more amazingly this was more than 10 years since we exited the company.  Most people at the reunion had not worked for Delrina for at least 10 years, but still came out to meet their old colleagues.

As we all know, 10 years in this industry is a lifetime.  Yet, people were genuinely interested in catching-up with others that they seemed to really care about.  And most people felt a strong connection with others.  I was amazed how many people came up to me and told me what an incredible experience working at Delrina was and how it formed a strong basis for what they have done since.

I think that a lot of what people experienced in those days was the opportunity for young, inexperienced employees to be empowered.  (A quote from an email I received afterwards: "I wanted to say that working under your leadership gave me the confidence and inspiration to be an entrepreneur.  I run a successful manufacturing business and the basic "think on your feet" management style you had is one that I have used on a daily basis in the complex world of business.")

I got to thinking about what it was that allowed us to be so successful with a team that had lots of expertise and not a lot of experience.  And what was it that has kept people connected all these years later?  I am convinced that it is commonality of purpose and a strong corporate culture.  From the beginning, we were all focused on one thing - winning.  Coming second was not an option, losing was not an option, mediocrity was not an option.

We started Delrina in 1988 and I remember being turned down by VCs in Toronto, Boston and Silicon Valley.  They all said, "You guys have never done this before, and you are based in Toronto, Canada for goodness sake".  (Yes, I have been on the "other side of the table" many times).  We were determined to prove ourselves and were driven to succeed and we found financing from other sources.  Over the next 8 years, we were constantly told how we could not succeed at this from Canada, how our products would not be competitive and why we would not succeed.  But instead, we drove sales to nearly $150M annually, sold more than 30 million copies of WinFax and then sold the company for more than $550M.

The glue that held this together was a strong corporate culture.  A culture of working together, empowerment, trust, respect and caring about the people you work with, and an executive team made up of complementary talents with common goals.  We were a community that was a bit of an island.  There weren't many (any?) other companies like us in Toronto and once we started becoming successful, we started getting noticed.  The more the focus on us being unique, the more the focus on us being public in Toronto and Nasdaq, the more our team worked together and achieved.  This same culture permeated throughout our offices in California and Europe.

I am convinced that this is the "secret sauce" that every startup needs to succeed.  When people look at our successes at Delrina such as our OEM strategy of giving away/selling cheaply WinFax Lite and upgrading people to WinFax PRO, it is often attributed to good timing or good luck.  Yes, luck helps, but before we ended out with that strategy, we tried 30 other strategies.  As a startup, the only luxury you have is to reinvent yourself at every opportunity and your competitive edge is to be able to easily make zigs and zags with ease.  And then, when something works, you need a team that can execute well and capitalize on the proven strategy.  We made this happen with a culture of "No Fear" (I still have my No Fear Delrina t-shirt), a culture of not being afraid to test out new ideas - all held together with a culture of winning.

Now I keep looking for the next Delrina to invest in...

When to Say No

We want to see lots of deals, but the challenge is to meet expectations. Given the volume of deals that we see on a weekly basis, we consistently need to be selective in determining which deals we will pursue and which deals we will pass on.  When I look back at our process, the “No” response often falls into 3 categories:

 

1. No because this does not fit our investment criteria

 

These deals are the easiest to say no to.  These are usually opportunities where we don’t see a domain expert, strong intellectual property or a large addressable market. We are disciplined about these three criteria. (At the same time, as early/seed investors we initially place far less attention to stuff that traditional VCs look at like financial projections, sales forecasts, etc).

 

2. No because we can’t add value

 

These deals are tougher to say no to because while the entrepreneur may convincingly make the case for their business, the opportunity is usually so specialized that we struggle to understand how we can add value in the process because it is so outside of our focus area.  As investors, our goal is to actively work with the team to capitalize on an identified market.  If we’re merely going to get in the way, or can’t leverage our past experience to help in the business-building process, then we are better off to stay out of the way of the entrepreneur.  We regularly meet entrepreneurs in this category that we like, but we know our own limits.

 

3. No because this isn’t a VC business

 

These deals are also tough to say no to because we regularly meet impressive entrepreneurs who have built strong businesses.  They have often started with little and have built a good cash-flow positive business.  While we’re greatly impressed by this accomplishment, we struggle to see the opportunity as being a high growth business or having strong intellectual property.  This certainly doesn’t mean that it’s a bad company or doesn’t deserve outside investment, it just means that it’s not a VC-type investment opportunity.  A VC-type investment opportunity means that we can share a vision in a great exit within a reasonable period of time. These deals are tough to say no to because often the entrepreneur has built their business in the face of much criticism and doubt.  This process builds great character and it’s always nice to see these types of people succeed.  While we can’t invest, we’ll try our best to help in other ways, as best we can.

 

Having been in this industry for some time, I’ve learned that it’s best to be direct and quick with our decision.  The last thing I want is to waste the entrepreneur’s valuable time with a passive aggressive approach.  This certainly helps no one.   A quick "No" is much better for everyone than a long "Maybe" leading to a "No".  (And "No" doesn’t always mean no forever. We have been known to revisit opportunities when conditions change and then make an investment).

 

Evaluating deals is at the core of our business so I always encourage entrepreneurs to submit their opportunities. This allows us to start a dialogue, explore partnership opportunities and maybe say "Yes" to many great ideas.

Web 2.0. It may be 2.0 but it's not new

When we lived through the early years of the Internet, the huge revelation was realizing that we would be able to change everything. We could only dream of the application, and it was all because the network would connect everything. 

I remember the “aha” moments of the day in about 1994. Some of the realization was quite liberating – this industry is changing from a hobbyist 80 million PC market into complete mainstream. We were going to experience a seismic shift that would change the way people would communicate, the way people would access information, the way people would do business and would interact. Our imagination soared with the possibilities. (And some of it was a little daunting, especially if you were tied up in the precursor to email known as fax, but that’s a story for another day). 

Email would be used by everyone. The web would be the window to every company via the browser. All information would be immediately available and accessible because everything was now online. Media would all be changing – one to one marketing, personalized access would change newspapers, tv, movies. Internet packets would replace phone lines, ecommerce would replace shopping malls, advertising would change, business would shift to marketplaces and one-to-one would replace many-to-one. 

Within a couple of years, it did become mainstream, but then unfortunately it got a little ahead of itself. A lot of people were trying to get the dream to speed up. The stock market was rewarding those who could speed up the dream. And those that got ahead of reality started getting the biggest rewards. And, to those of us who were trying to “tame the beast”, it felt like the hucksters and the bankers were taking charge. Of course it came tumbling down. Hard. The market crashed, the hucksters and the bankers ran away as fast as they could to other markets and businesses. And the industry was left trying to recover. 

We all allowed it to get ahead of itself. We all became allured by the size of it and the opportunity. Someone compared it well to the cartoon character that runs off the edge of the cliff and keeps running. It was only when we looked down that we realized there was nothing beneath us and we all fell. 

Those of who did not run away had to start putting the pieces together. We had to try and deal with an investor market that wanted nothing more to do with this dream anymore. Entrepreneurs moved on. Consumers moved on, business moved on. 

But we knew that, like in every technology market, the disappointment wave is part of the cycle. And we knew that after the disappointment wave, the market delivers what it should have been in the first place. This is not unique to the Web, this is often true for technology – the cell phone, the database market, the mp3 player, digital cameras, Bluetooth – to mention a few examples that immediately come to mind. 

Since 2001, the web has been growing organically. In fact it has been growing really fast and pretty well. Broadband is finally a reality, computers are everywhere, and the platform is much more mature. 

And the dream is coming true. Email is everywhere, every company has a web site, we all use the internet for research at every level – travel, purchases, even romance. E-commerce is huge, marketplaces are real, communities are being used. Advertising is creating massive revenue and the Web is taking over from newspapers and TV. And it really is everywhere. 

And now that it works, new companies are delivering on the dreams. The market is delivering on the dream. 

But why call it Web 2.0? This is not something new. This is not anything more than the same dream that we have had since the early 90s. This is the way technology change works. We knew it in 2001. That’s why we hung in. that’s why we didn’t go to banking or real estate (or the beach) and why we’ve stuck with software and the Internet. This time it would take longer to deliver, but the bubble and the crash were bigger that ever before.   

It’s all part of the cycle. If Web 2.0 is the “second version” where you deliver the product that you originally promised, then Yes it is Web 2.0. But this is not something that we didn’t expect after the crash. We knew this was coming - and now the best news is that it has just begun. 

New communities are being created, citizen reporting is real, camera phones real. We are about to see mobile expand rapidly as that promise gets delivered. Standard devices with massive bandwidth, readable screens and decent input methods will open up another dream delivery. VoIP really works now and we’re about to see the promise of reliable, very cheap voice communication to be delivered. And then, standards will drive the home consumer market to delivery, automobile technology will flourish, new generations of PCs and laptops will flourish. 

And the traditional investors? The smart players won’t miss out because they have figured out that this time it is real. 

This is not a new phenomenon. It is the delivery of the dream.