Exactly one year after Jeff Fedor and Terry Goertz started their company, ParkVu has launched its first product.

i2b is a BlackBerry application that gives users mobile access to their iTunes libraries (typically on their home computers) and automatically updates the BlackBerry so that it has all the tracks from selected iTunes playlists, which can include the most played and most recently added playlists.

So, now you can access all of your iTunes library at any time (if your home computer is on—if it isn't, i2b still makes 100 tracks available). And there's no more need for USB cables—tracks can be moved to your BlackBerry through a Wi-Fi connection or through the cellular network. Cost for the service is $2.99 a month.

Full details are available from the ParkVu website.

Gary Brock at the University of Waterloo has passed along a note about an event on Thursday, April 2 at the Accelerator Centre presented by C4—the Southwestern Ontario technology transfer network that UW belongs to:

We've organized an upcoming half-day event which will explore different models for commercializing software, with a focus on open source.  It includes a keynote address by Greg DeKoenigsberg, who is Red Hat's Senior Community Development Manager and one of the leaders of the Fedora project http://fedoraproject.org/wiki/Overview . We also have three Ontario software companies which came out of University research talking about their respective software business models.

Jonas Brandon from StartupNorth and ePresence will also be speaking, as will Maplesoft's Tom Lee and Netsweeper's Perry Roach.

Cost is $20, which includes breakfast.

More details and registration info here.

I read over all the briefings and the new CRA guide, and listened in on a conference call organized by Deloitte, and can't see how the much ballyhooed changes to the SR&ED form will have much of an effect on startups.

My conclusion was that the application form is still a pain in the neck, but no more so now than in previous years.

I've written more on my blog, but "no big woop" is an adequate three-word summary.

One of the guest speakers at our last get-together was HR consultant Michelle DeBeyer—formerly with RIM and Sybase and now working with startups at the Accelerator Centre.

Her PowerPoint is on the resource page, but I realized it doesn't include any contact information, so I asked Michelle to let everyone know what services she provides and how people can contact her:

---

Orgtech Consulting Services specializes in providing Human Resource solutions for early-stage technology entrepreneurs. Custom HR solutions are developed for companies who are not ready to have an HR staff or who simply want to outsource the HR function. Specific projects can include:

• Recruitment Activities: including Recruitment Strategy, support in Selection & Advertising, and proper procedures and documentation
• Performance Management:  support setting up policies & procedures, Annual review process set up and review, set up that links performance to compensation and stock option allocation.
• Compensation Management: support setting up equitable compensation systems for all employee groups including sales
• Policy and Procedure support and documentation.
• Management Coaching: Michelle has a great deal of experience coaching and supporting senior technical leaders in the community with difficult management and employee focused decisions. Coaching can be given that can support you in becoming a better manager of people and organizations.
• Management Training: Orgtech Consulting Services provides the Human Resources Basics Training Program designed to train leaders in the high tech industry introductory managing people skills.

Michelle DeBeyer has over 10 years experience working as an HR Business partner with local high tech companies including Sybase and Research in Motion. She has a Honours Bachelor of Arts Co-operative degree in Psychology with a minor in Human Resources Studies from the University of Waterloo; has completed The Advanced Program in Human Resources Management from the University of Toronto, Rotman School of Business; was granted her CHRP (Certified Human Resources Professional) designation from the HRPAO (Human Resources Professional Association of Ontario); and is a Certified Management Trainer (Leadership Fundamentals). As a generalist, she has a wide spectrum of knowledge of HR issues with an expertise in working directly with technology professionals.

Clients include start-up companies such as We-Create Inc., Suited Media, Sparkmatrix, Miovision etc.  Please contact Michelle DeBeyer at mdebeyer@rogers.blackberry.net or at 519-404-0096.

The JumpStart program from the BlackBerry Partners Fund can provide up to $250,000 to help launch a smartphone application development startup.

The money is provided as a convertible debenture—debt that can be converted into shares if the startup gets to a point where it raises a round of funding.

First step is to fill out an online application form that asks:

• What is your business concept?
• Who would use your product or technology? Why?
• Describe yourself and your qualifications.
• Why is your idea unique and better than existing products or technologies in the marketplace?
• How do you plan to monetize your business model?

More details at the JumpStart page.

Our next get-together is a week from tomorrow—Wednesday, November 12, 4-6pm at the Accelerator Centre, Meeting Room 2 (Google Map).

We'll be talking about building a great team—how to find and hire (and fire) people, how to get the most from your team, compensation, and any related topics you want to discuss. It's one of the key challenges that startups face—growing beyond the founding team while maintaining the positive workplace atmosphere you've been able to create.

Guest resources will be: 

• Ali Asaria, who has put together a great group of folks at Well.ca
• Michelle DeBeyer, formerly in HR at RIM and Sybase and now the HR resource at the Accelerator Centre
• Suzanne Hyatt, Tech Capital's in-house HR expert, who works with that firm's portfolio companies

Hope to see you there. If you're on our Facebook group, you can sign up there. Otherwise, just show up on the 12th!

StartupEmpire—the startup conference in Toronto—has been rejigged to a one-day event on Thursday, November 13. Cost has been reduced to a more startup-friendly $65. All the details are on the StartupEmpire website.

Deloitte is running a free webcast on November 18 at 11am on impending changes to the SR&ED program. This link should take you to the registration page, but I don't have a URL for the webcast content. Here's what it said in the e-mail notice:

If you file SR&ED claims or are thinking about it in the future, you need to be aware of significant changes to the program effective January 1, 2009. Please join us in person or via webcast to learn the details.

In November, CRA will be releasing a new T661 form, which will have a significant impact on the SR&ED claim process. The new form will be mandatory and will apply to all taxpayers for fiscal years ending after 2008. This important change will revolutionize the preparation of a technical report and disclosure of financial and technical information in a number of ways:

• No freeform technical reports

• Limited words allowed in each section

• Separate reporting for all projects (including non top 20 projects)

• Separate cost reporting for all projects

• Additional disclosure of the type of SR&ED performed, preparer’s names and documentation available to support the claim

• Other changes that will be discussed in detail at our webcast

Thank you to everyone who came out to the lunchtime accounting session yesterday.

The slides used by the PricewaterhouseCoopers presenters—optimizing SR&ED, tax planning for entrepreneurs, and the digital media tax credit—are now available from the resources page as PDF files. We've also added the PowerPoint from last month's legal bootcamp by Gowlings.

Next get-together will be on November 12 from 4-6pm and the subject will be building a good team at your startup. More details to follow.

There's a free session tomorrow for tech startups where we will look at tax credits available to your company—some of which provide needed cash in the bank.

• SR&ED (scientific research and experimental development) is the best known and has always been a favourite with tech startups
• The Ontario Interactive Digital Media Tax Credit, which could apply to any company creating interactive applications using at least two of 1) text 2) images 3) sound (which sounds like most Web apps might be eligible)
• Bill 100: the proposed legislation that would give a 10-year provincial income tax refund to startups commercializing R&D by students or professors (it's not law yet—Communitech has asked that the eligibility criteria be broadened).

It's presented by PricewaterhouseCoopers, Accelerator Centre, WatStart and Communitech.

Lunch is provided!

WHERE: Meeting Room #2, Accelerator Centre, 295 Hagey Blvd, Waterloo
WHEN: Wednesday, October 29, 2008, 11am-1pm

Hope to see you there.

Yesterday I mentioned the Entrepreneur Week event that gives you a chance to present your company as a potential partner to Microsoft, RIM, Yahoo!, and Sun.

Now you can add Google to the mix.

So that's five of the best-known names in tech all coming to town on October 8 to participate in a public event and have private one-on-one meetings with local companies.

If you're interested in meeting with any of the partner companies, see Kevin Tuer's post on the Entrepreneur Week site for details.

Just wanted to congratulate Doug Grosfield and Michael Topp for their company's ranking on this year's PROFIT HOT 50. I think they may have been at their first WatStart meeting before they even founded Xylotek Solutions in 2005, and now their IT services company has grown to $1.8 million in revenue in 2007 and $2.5 million this year with 12 employees. A great story!

We're coming up on the fourth annual Entrepreneur Week in Waterloo Region. Here's some highlights of the week—events that I think are particularly useful for tech startups. See the Entrepreneur Week site for more details and locations.

FRIDAY, OCTOBER 3
BBQ kickoff event with tech comedian Don McMillan (former engineer). I saw him at the CIO conference last year, and he was very funny. Other than that, it's just free food and a chance to meet and talk to some folks from the local tech community.

MONDAY, OCTOBER 6
Strategic Networking: A how & why session on networking and a speed dating-style session where you will get the chance to have five 8-minute one-on-one meetings with people with a wide range of expertise in working with startups. Jeff Taylor (who spoke at TLC in May) is back for another keynote—this one during lunch.

WEDNESDAY, OCTOBER 8
The next StartupCampWaterloo runs from 6-9pm and the day starts off with a partnering event with people representing RIM, Microsoft, Yahoo!, and Sun ... and there may be more to come. If you're interested in meeting with one of those companies, there are opportunities for one-on-one meetings. More details here.

THURSDAY, OCTOBER 9
There's a invitation-only Founders & Funders dinner at the end of the day, and a session on "strategic financing" in the afternoon—I believe it will be focusing on bootstrapping.

There's also a series of entrepreneur-themed films at the Princess Cinema that week, and several other events that you might be interested in.

They're coming for Entrepreneur Week—a morning session on Wednesday, October 8. In addition to a public event, they are also meeting privately with selected companies. You can ask to be one of those companies. As Kevin Tuer writes on the E-Week site:

If you are interested in meeting with one or more of the partners, please submit a one page document for each partner that you would like to meet with that outlines:·

• A brief description of your product/service
• The benefit your company could realize as a result of a partnership
• The benefit to the partner by partnering with your company

Go to the E-Week site for details.

There's a free legal bootcamp for tech startups this Wednesday:

WHERE: Accelerator Centre, Meeting Room 2, 295 Hagey Blvd, Waterloo
WHEN: Wednesday, September 17, 11am-1pm

It's meant to be an overview of many of the key legal issues that startup entrepreneurs might face, divided into five main areas: 1) employment issues (including hiring and firing employees and protection of confidential information, IP and customer relationships), 2) financing issues, 3) patent issues, 4) licensing issues (licensing, distribution and VAR arrangements), and 5) tax issues.

It's presented by Gowlings, Accelerator Centre, and WatStart. Lunch is provided!

Hope to see you there!

I mentioned in an an earlier post that you can now get free market research through a provincial program managed by MaRS in Toronto with Communitech as its local agent.

As part of the same program, your company can get up to $10,000 in funding for a project to help move your product along the path to market. The program won't pay for general business services, such as business plan consulting or marketing consulting or fundraising assistance, but will cover costs related to moving technologies from an idea to a product, such as third-party validation, testing, IP protection, certification, and licensing.

The funding can also be used to pay for market research—going beyond the prepared reports that are available through the market intelligence program.

The money has to be used to fund a project with specific deliverables. You—or the person you want to hire to do the project—will need to outline what work is going to be done, by when, what the deliverable is and how it will help your business. 

They don't pay in advance, but it's a straight grant—no repayment, no cost to you at all. You just need to get approval ... and, so far, most of what we've submitted has been given the freen light. It may not be that way forever—there's only so much money to go around and though the demand has been less than expected, it probably won't stay that way.

If you're interested in applying, or want more information, just send me an e-mail at gary@communitech.ca. If you've been working with any member of Communitech's venture services team—Ron, Kevin, or Dan—they can also give you all the information you need.

It's been a while, but the next WatStart get-together for tech startups (or people thinking of creating a startup) will be held next week—I hope to see you there!

TIME: Thursday, July 3, 4-6pm
PLACE: Accelerator Centre, Meeting Room #2
GOOGLE MAP

We'll have pizza, but the drink selection will be limited, so you might want to bring your own ... especially if room temperature water isn't your preference.

TOPICS:
Responding to a term sheet: If you're ever going to raise money from angel investors or VCs (or even through some government programs), you'll be seeing a term sheet. While you always hope things will go well between you and your investors, there can be dire consequences from common sections of a term sheet and you'll want to know what you'd like to negotiate out of the deal and what you can do to make the best of the terms you get.

Thinking through shareholder agreements: Sometimes founders don't worry about shareholder agreements and just get started on their business ... and then find out down the road that maybe it was something they should have thought about sooner.

There will also be plenty of opportunities for everyone to talk to each other, and these get-togethers are always informal and interactive, so you can participate in the discussion or just sit and listen.

RESOURCES:
Guest resources will be Geoff Taber & Chad Bayne from Osler (Toronto law firm) and Ali Asaria, founder and CEO of Well.ca. Before you write this off as yet another one of those dull seminars presented by some random lawyers (or am I the only one who gets that reaction), let me assure you that's not what this will be.

Geoff is just a scary resource for corporate law. We had him lead a discussion a couple of years ago and I've wanted to bring him back ever since. When it comes to anything related to raising funds, he's a walking encyclopedia and he won't shy away from giving you his opinion.

Chad is a UW ECE grad who worked with startups as a software developer and hardware designer. Despite graduating right in the middle of the tech boom, he decided to go into law, and probably patted himself on the back for that decision through the bust period.

Hopefully, Ali needs no introduction! He also has no trouble sharing his thoughts and experiences, and probably had more experience with terms sheets than he wanted through Well's recent round of funding.

Depending on how much time we have, Geoff may also talk briefly about what it's like to work with lawyers and what lawyers and startup founders can do to maintain a good relationship. There are often frustrations on both sides, but you're not going to get far with your startup without working with a lawyer, and Geoff can share what he's learned his experiences—both good and bad.

You can now get—or, at the very least, apply to get—market intelligence reports at no cost through the provincial Business Mentorship & Entrepreneurship Program (BMEP). The program is managed by MaRS in Toronto, which is where the research team is based, and the Communitech entrepreneur services team is the official contact point for the program within Waterloo Region.

If you're looking for market data to support a business plan or for technology validation, competitive analysis, or other purposes, it's just a matter of filling out a simple request form (which I can send you), and then I or one of our three executives-in-residence would go over it, just to make sure it looks complete and clear and then we would pass it along to the research team. They might request further clarifications, but if everything looks good to them, they will assign an analyst who will determine a search strategy and get back to you with the results.

It won't cost you anything, and they're trying to keep the turnaround time as short as possible, but that will depend on the number of requests they receive and other factors.

To use this service, just send an email to gary@communitech.ca">gary@communitech.ca and I'll send you a request form. (And, if you want to fix the glitch in our blog editor that screws up mailto links, you can let me know about that too!)

The third StartupCampWaterloo will be starting soon—kicking off with a panel discussion of "why start a startup?" Maybe some startup founders will say that they needed some convincing on that question, but I suspect that if it's something you need to have answered, then maybe creating a startup isn't the best thing for you.

It's always going to be easier being employee #57 or #5,700 where you can have your job description and be given tasks to perform—maybe in a skillful way, but within a framework that is planned and managed by others. Every two weeks, money gets deposited in your bank account, even if you've been in a rut and have only been moderately productive. Want to go to a business event? Feel too sick to work? That's fine, you still get paid your full salary—no money comes out of your pocket. On top of that, you're guaranteed a paid vacation every year and probably have at least a basic benefits package.

It's a pretty good deal and one that most people are happy to take.

Forget all of that with a startup, at least at the beginning. But that's a big part of the appeal. You don't have a job description (or, if you do, it's pretty fuzzy) and you get to do things that no one in their right mind would hire you to do—developing a lot of new skills. You don't have to write a resume and go on job interviews to be asked silly questions hoping that someone will recognize your talents. You work with people you want to work with on the products of your choosing (preferably with a lot of market input) where you get to decide the strategy and how you'll execute. And you never have to stare at the clock and wish it was 5pm.

It's not for everyone, and if your startup grows into a bigger company, some of the freedom of the early days goes away, but for many people who have been there, there's no going back to being employee #57.

Toronto lawyer Suzanne Dingwall Williams wrote a piece for the CVCA blog this week lamenting how often the startups she works with choose to seek investment from American VCs over their Canadian counterparts.

If that's the case, it sounds like another significant difference between the Toronto and Waterloo startup communities. In these parts, if you go much farther than Toronto to look for early stage capital you risk being accused of being exotic. It happens, but not often. Of the six seven-figure seed/early-stage deals we saw last year, I think only one involved a foreign investor. That seems to be consistent with the national statistics, which saw most foreign investment being put into later stage deals.

In the same post, Dingwall Williams also writes about the reputation of Canadian VCs being tarred by American brushes, but from a Waterloo perspective, I'd be shocked if one startup founder in ten here knows anything about Blackstone and Stephen Schwarzmann, to use the example she cites. Actually, my guess is that's true in Toronto as well. Some may be aware that VCs have been very well paid and that—with some exceptions—they haven't come close to delivering results consistent with that compensation. But that's made-in-Canada tar. The CVCA and others have published rates of return for Canadian VCs and the numbers don't paint a flattering portrait of the industry. There may have been an emperor-has-no-clothes epiphany on the part of LPs and entrepreneurs toward Canadian VCs but, from what I've seen, this has had more of an effect on LPs than on startup founders.

From any perspective, I don't agree with her view that startups should feel a "moral imperative" to get funding from Canadian VCs. That's straight out of "buy Canadian" campaigns that encourage you to buy products that you would otherwise avoid just because it might help keep people employed and extend the amount of time they spend making second-rate products. If that's the best pitch we can make for Canadian VCs we might as well just shut the whole industry down now. [Actually, with Canadian VCs collectively showing almost zero rates of return, from a strictly economic perspective it would have been better if we had let American VCs make those investments and put our money to more productive use. I wouldn't recommend that either. :-)]

Startup entrepreneurs should go where they can get the best deal for their companies. Fortunately, that will often be with a Canadian VC. What we do seem to be seeing, though, is that a greater percentage of startups today are companies where bootstapping or sub-VC funding are all that's needed to get a product to market, and often to get companies to a point where they are acquired (usually by American firms ... at that point you don't hear many complaints about foreign ownership). Of those six deals from 2007 I referred to, only one of them involved a VC, and even that also included angels.

For that reason, there has been the disconnect between startups and VCs that Dingwall Williams refers to. But that's okay. Not all promising startups need VC funding. That was really an artifact of the boom years. As long as companies get the funding they need, I'm not going to lament that a shrinking percentage of startups are paired with a VC.

Unfortunately for the Canadian VC industry, many of its current problems are linked to matters of history that can't be rewritten with better mission statements and promotional campaigns (although, on the subject of marketing, I think Rick Segal has done an amazing job of both getting himself over and improving the reputation of the entire Canadian VC industry). But the message from startup entrepreneurs I'm hearing in Waterloo is more that they often don't see the need to work with VCs, not that they are avoiding Canadian VCs in favour of American investors.

If you weren't able to be at the Tech Leadership Conference on May 1 and have heard enough about what a great event you missed, you can now get at least part of the experience through online videos of all the plenary sessions at Waterloo Tech TV. On the site right now are the keynote addresses by:

• Chris Anderson, author of The Long Tail and the forthcoming FREE, as well as the editor of WIRED magazine.
• Chris Sacca, former head of special initiatives at Google who is now a blogger and investor (in Twitter, among others, as he discusses here)
• Jeff Taylor, founder of Monster and now the founder and CEO of Eons, a social networking site for the baby boom generation

There is also video of the panel discussion, moderated by Mark Evans and featuring the three keynote speakers and well-known Canadian VC and blogger Rick Segal (whose firm is one of the managers of the new BlackBerry Partners Fund).

Well, I laughed:

http://hugehuge.tumblr.com/post/32663254

Congratulations to online drugstore Well.ca, which announced today that it has closed a round of funding—one that has been several months in the making. The size of the round wasn't disclosed, but the investors were Jim Estill and Toronto's Maple Leaf Angels. It's the first external funding for the company and also seems to be the first deal that Maple Leaf Angels has announced.

It's the latest in a string of angel-backed deals for local startups. As I mentioned before, we had six companies raise seven-figure seed rounds in 2007 and every one of them involved angels (although one—AideRSS—was led by VC firm Tech Capital Partners).

Through Communitech, I first talked to Well.ca founder Ali Asaria late in 2006, and the entire entrepreneur services team—and I think just about everyone else at Communitech too—has enjoyed working with Ali and his team ever since and I think he's been to all our WatStart get-togethers, so it's been fun to see his company succeed.

Tungle launched today. You can now download the beta version of the Tungle Outlook plug-in that lets you share calendars and availability across organizations.

The company is headed by Marc Gingras and Fang Yang, who have a long history as a team in Waterloo. I first met Marc eight years ago when he was heading the Kitchener-based development office of Entrade. Marc, Tungle's CEO, is now in Montreal, while Fang, the CTO, is based in Waterloo. Tungle raised $1.5 million last year from JLA Ventures and Desjardins Venture Capital, with additional funding from a U.S. based angel investor.

Marc blogged about the launch earlier today.

The Canadian Innovation Exchange (CIX) is being held in Toronto at the end of this month. If selected, a company looking for early-stage funding pays $600 to give a presentation to an audience that includes several VC firms and other potential investors.

Even though there's a Communitech logo on the site (which I had nothing to do with—I've had no contact with anyone organizing this event), and my colleague Ron Neumann is a scheduled presenter, I have mixed feelings about these kind of events.

For entrepreneurs, it certainly seems convenient to get your company in front of several investors with just one pitch. I'm sure some would say that the amount of time saved when compared to arranging individual meetings with each investor justifies the fee by itself. And there's no question that there are some good speakers scheduled for CIX.

On the other hand, these events reinforce the myth that companies need to pay intermediaries (in this case, the event organizers) to get in front of VCs, or at least that it's beneficial to do so. It's something I mostly associate with the leeches and hangers-on who try to charge startup entrepreneurs a fee for introducing them to VCs. Thankfully, there aren't as many today as there were back in the bubble era, but it still goes on.

Here's a little secret: it's not difficult to get a Canadian VC to look at your business. Getting them to invest is, but that's equally true for companies that present at VC events. They aren't hard to find and contact, and it won't cost you anything.

I know people at most Canadian VC firms (including almost all of the firms whose logos appear on the Canadian Innovation Exchange site) and can guarantee you that, if you have a good investment opportunity for them, almost all of them would be happy to come to Waterloo to hear more. You won't have to hope to be selected for some dog-and-pony show in Toronto and pay hundreds of dollars. Introductions certainly help, particularly coming from someone investors believe will filter out the junk, but you don't have to pay for them. If you have a VC-fundable business, every member of Communitech's entrepreneur services team can hook you up with VCs at no cost.

I agree with Alec Saunders, who last week compared the event to a beauty pageant and said he found a lot not to like in the model. If there had been more U.S. investors participating (there are some), I might have found it to be more valuable. There are so many of them, your degrees of separation will likely be greater than one—which won't be the case for Canadian VCs—and most will expect you to go to them, which starts getting expensive.

But to get in touch with most of the people scheduled to be at CIX, I can't say that signing up for an event would be the way I'd go about it.

One of the items included in the Ontario budget unveiled yesterday was "a 10-year Ontario income tax exemption for new corporations that commercialize intellectual property developed by qualifying Canadian universities, colleges or research institutes."

As with all budget announcements, this will be subject to refinements and revisions before it gets implemented ... if it ever does ... and an obvious first reactoon would be that few tech startups are particularly concerned about paying income tax (and provincial income tax in particular). There's usually enough losses up-front to put off paying a significant amount of income tax for a long time.

What disappointed me, though, was the distinction this announcement made between university spinoffs and other tech startups. As presented in the budget, only spinoffs would qualify for the tax exemption.

We have several university spinoff companies in the Waterloo area, but most of our tech startups are not spinoffs—certainly not in accordance with how Statistics Canada defines a spinoff. Neither are most of our largest tech companies. Some are, but most aren't.

I have an office at the Accelerator Centre at the UW Research & Technology Park, and on our floor we have spinoff companies and non-spinoff startups working side-by-side. If you weren't told which were which, you'd have a tough time separating one from the other in terms of the sophistication of the technology, market opportunity, or number of employees.

Under the budget proposal, however, we'd have the spinoff in one suite exempt from Ontario income tax  and essentially being subsidized by its neighbouring startup that isn't a spinoff and doesn't qualify for the exemption. I can't see any justification for that distinction.

In practice, it may not make much of a difference, but only because the exemption itself may have such limited applicability. If the Ontario government wants to give a tax break to new companies commercializing innovative technology, let it extend that benefit to all tech startups regardless of their starting points. If the goal is to assist in the economic development of the province, it shouldn't matter whether companies that drive our economic success are university spinoffs or not.

Going over the numbers for 2007, it looks like it was a record-setting year for startups in Waterloo Region.

We had six companies close seven-figure seed or early stage rounds (that is, pre-A-rounds) of funding in the year, which I don't think has happened before. And that's not including the $10 million in funding for RapidMind, another Waterloo Region startup.

Of those six deals, only one was announced in 2007, so even if you read every news release, every newspaper, every report from Thomson Financial, and every issue of the Ontario Securities Commission Bulletin, you wouldn't have come across any of the other five. 

Despite the tales told through the year of the imminent collapse of venture capital in Canada, data released by the Canadian Venture Capital & Private Equity Association (CVCA) last month showed no decline in activity by Canadian VC firms in 2007 and a 21% increase in VC investment in Canada, taking the total to $2.1 billion, thanks to increased participation of foreign investors, particularly U.S. VC firms.

Just over half (by dollars) of all investments went into IT firms, with $1.1 billion invested in 194 companies. That's an average deal size of $5.7 million, so obviously a lot of what's going into this total are not early-stage investments in software companies.

These numbers apparently include American Capital's announced $160 million investment in Geosign. American Capital later said that it recovered a "substantial" part of its investment after Geosign's business model collapsed shortly after the deal closed.

Canadian VC firms raised $1.2 billion in 2007, according the the CVCA, down from $1.6 billion the previous year. About 62% of the money raised in 2007 went into labour-sponsored funds. The CVCA says the drop in investment in LSIFs was much smaller than the drop in funds raised by non-LSIF funds—despite the scheduled removal of the LSIF tax credit in Ontario.

The number that might give the most reason for concern is the difference between amounts raised and invested in Ontario. According to the CVCA data, in 2007 Ontario VC firms raised less than one-third of the amount that was invested in Ontario companies.

As I've discussed before, no one really knows how much capital is invested in Canadian companies. Even the federal government doesn't know. What the CVCA data includes are the deals that were disclosed, which would provide a floor for the actual number. In another post I'll take a look at some of the numbers for Waterloo Region, which suggests that this "floor" number may not be a very good estimate of the total.

Kitchener's LoyaltyMatch is participating in the AlwaysOn/Vator.tv Venture Summit East 2008 Competition. You can listen to the company's pitch and vote for it here. At this moment, it's running in second place among the vote getters. There are lots of other pitches you can listen to on the site.

The National Angel Organization's free online book, Age Of The Angel: Best Practices For Angel Groups is a worthwhile read for entrepreneurs who expect to be dealing with angel groups, or even (although to a lesser degree) with individual angels. The appendicies with a sample term sheet and a sample shareholder's agreement are worth reading by themselves (and we hope to add other samples to the WatStart site soon).

At the same time, it's also a reminder of many of the things I can't stand about angel groups. There's more than a whiff of self-importance in the tone of the writing and the book promotes as "best practices" actions that would only strain the relationships between angels and entrepreneurs.

It encourages angels to take preferred shares, rather than common (something that even Waterloo-based VC firm Tech Capital Partners prefers not to do) and promotes the inclusion of liquidation preferences and ratchets in the term sheet.

For hubris, it's hard to beat this passage from page 69:

The other issue that Angels often run into is the false notion by founders that they, as the sellers, set the price. In reality, it's the "Golden Rule" that comes into play. He who has the gold makes the rules.

In the Waterloo area, we've been fortunate to have a very active angel community, and a core group of angels that really want to see companies succeed and entreneurs be successful. Not all of our angels are easy to work with, but I think we score pretty well compared to other centres. Thankfully, we rarely see demands for prefs and ratchets here (I never have with the angel deals I've seen, but I imagine it's happened) and it would be unfortunate if some of the less entrepreneur-friendly terms being promoted by the NAO were to find their way here.

I think it's in our favour that we don't have an angel group here. There briefly was one, in theory at least, but it quickly died. Angel activity has only increased since then. 

Jeff Fedor posted a short list of some early stage companies in Waterloo that are expanding and hiring—Miovision, Primal Fusion, AideRSS, and Covarity (you can add Tungle to the list, which is looking for someone with Java expertise). Other than Tungle, all of those companies are using the Waterloo Tech Jobs website, which seems to have improved a bit since the last time I looked at it (it's a Communitech initiative, and I work with Communitech, but it's not something I'm involved with at all).

Any local startups are certainly welcome to use the WatStart site as well—you can put company information on the wiki (under the local startups page) and make posts in the forum.

It's time again for our semi-annual social event at the Huether Hotel, and this time we're also working with the BarCampWaterloo folks to make this a joint event. If you're a startup tech entrepreneur or someone thinking about starting a tech company, we'd love to see you there.

PLACE: Huether Hotel, 59 King St N (north of Erb), Waterloo
DATE: Thursday, February 7
TIME: 5-6:30pm
GOOGLE MAP

We'll again be in the billiards area. There is no charge to attend. We'll have lots of food—wings and other munchies—and there will be a cash bar.

There are a limited number of parking spaces at the Huether, and you can park in the Marsland Centre lot, which is just a one-minute walk away. The King Street bus stops nearby, and we're within comfortable walking distance of UW and Laurier.

This is a chance to meet others in the community who have started a company or are thinking about it, and also meet some outstanding resources who—now or down the road—can help make your business a success.

It's all very informal, and we typically see everyone from students to people with many years of business experience now working in startups. Hope to see you there!

It says so right here in the official blog of the Canadian Marketing Association.

In his latest column, Celtic House's Andrew Waitman discusses how winning startups can be distinguished from losers at an early stage, or at least some of the warning signs that a startup might not be accelerating down the runway headed for takeoff.

He identifies three things to look for:

• The skills, experience and drive of the management, employees, board and advisors
  
• The company's track record in identifying and achieving goals and priorities
  
• Revenue growth

The Ontario government announced today (or re-announced, since this was part of the March 2006 budget) that it is creating a new $165 million Ontario Venture Capital Fund. OMERS, RBC Capital, BDC, and Manulife Financial are listed as partner investors, with the government providing $90 million.

Included in the government's news release is a statement from a Manulife VP that "the supply of venture capital in Ontario is less than optimal"—which is 180 degrees removed from what the government said two years ago when it announced it was putting an end to the LSIF tax credit.

The manager of the fund has not yet been announced.

Just added to the resources page is the 2007 Report on Emerging Canadian Software Companies from PricewaterhouseCoopers.

"Emerging" covers a lot of ground—some of the surveyed companies are pretty big—but 43% had between 1 and 25 employees and 15% were in a pre-revenue stage.

Some of the interpretations are a bit of a leap from the survey data (e.g. the section on boards really misrepresents the survey results), but there are interesting observations about CEOs' struggles with sales channels, international expansion and personal skills development.

This year's technology update looks at "ubiquitous participation"—enabling and encouraging user interaction and participation—and integrating that trend into business strategy.

This survey is done every year, and I believe that Ron Neumann is encouraging more early-stage Waterloo-area companies to participate in the survey for the 2008 edition.

Mark Evans finds it notable that a Toronto company closed an angel round of funding. That's interesting because, in the Waterloo area, we've seen a wave of angel deals over the last couple of years. Most of them have involved local business people, although it looks like another one might be closing soon with Toronto's Maple Leaf Angels.

It could be another example of the differences between the Waterloo and Toronto tech environments, although I wouldn't be surprised to learn that there's a lot more angel activity going on in Toronto than what we hear about. Certainly, most angel deals here never get announced.

The venture capital industry in Ontario may be in for a bit of a shakeup over the next couple of years, with challenges on the horizon to both retail and institutional funds.

At the retail level, 2008 is scheduled to be the last year for the full 15% LSIF tax credit in Ontario. The credit will then drop 5% per year, vanishing in 2011 (currently, there is also an additional 5% credit for research-oriented funds). The 15% federal tax credit has been untouched, so far, but with the historically weak returns-on-investment of LSIFs, there doesn't seem to be anyone who expects that a 15% credit will be enough to sustain the LSIF industry in Ontario. LSIFs had already been in trouble before the Ontario government announced in 2005 that it was putting an end to the provincial credit.

The LSIF industry, with the support of the CVCA, tried to turn the LSIF tax credit into an Ontario election issue, but were met with a resounding chorus of cricket chirps from all four major parties. I didn't see a single response to the two news releases issued during the campaign asking for a return of the tax credit. And with Dalton McGuinty's government returning to power so handily, it really wouldn't have mattered anyway. The only small glimmer of hope for the LSIF industry may be that finance minister Greg Sorbara has chosen not to return to cabinet, but there's been no sign from the government—or from the opposition parties—that there's any interest in reversing Sorbara's decision to kill the credit.

At the same time, the institutional pools of money that have been the backbone of our VC industry are increasingly looking to invest their money outside of Canadian VC funds. It's not surprising, given the poor return rates that VC funds as a whole have delivered. Numbers published by the CVCA show that Canadian VCs have a negative net IRR over a 10-year horizon (and these numbers were based on partial, largely voluntary, unaudited data from VC firms, which are almost certainly higher than the real numbers). While U.S. VCs and real estate and other investment options have delivered huge returns (if the reported numbers are accurate), in Canada our VC firms and their highly paid managers have collectively delivered a weaker rate of return than your penny jar, according to numbers published by their own industry association.

So now we're starting to hear some "death of VC" forecasts, usually accompanied by inaccurate statistics passed off as comprehensive surveys of the level of Canadian venture capital. Some VCs may very well die, especially those that have failed to deliver the goods to investors. Welcome to the business world, where at some point you're actually supposed to provide value to your customers. VCs have been pulling the plug on bad investments for years. Now it seems that many of them are bad investments too. Live by the market, die by the market. Seems fair.

Other VCs will be successful and continue to attract funds. And companies that present themselves as strong investment opportunities will continue to find investors. In many cases, that funding may not come from a traditional VC firm. In Waterloo Region this year, we've seen a string of financing deals close, very few of which involved a VC firm. And these are seven-figure or high six-figure deals, not just $25,000 from an angel—although they're great to see, and there have been several of those too. It's been hard to take the "death of VC" stories seriously when one company after another has been successful in raising funds (or, in some cases, in receiving funding offers that they've turned down).

There's still lots of money out there looking for good opportunities. That's not going to change. If there's money to be made, there will be investors to be found. And, as I've always said to people claiming a shortage of venture capital, name three companies that should be funded and haven't been able to get funding offers. Maybe they exist somewhere, but I sure don't see them in Waterloo.

The first StartupCampWaterloo was held last night at the Accelerator Centre with a strong turnout of about 60 people—around double the number who attended BarCampWaterloo last month.

It seemed like everyone had a good time. It was a enjoyable night with presentations and networking time to give people a chance to talk to each other. All of the presentations generated responses from the audience and led to discussions, which is the atmosphere that the event was designed to establish.

StartupCamp and BarCamp are both held in the "unconference" style where the agenda is shaped more by attendees than by an organizing group. Anyone who wants to make a presentation or an announcement, or wants to discuss a particular issue, can put it on a white board and—if there are more items than there is time (which hasn't happened in Waterloo yet)—there is a collective decision about which ones the group wants to include.

In theory, BarCamp focuses on technology and StartupCamp on the business of technology. StartupCampWaterloo got off to a great start with a presentation by Well.ca founder Ali Asaria on his experience in dealing with investors and trying to raise funds. In a very engaging talk, Ali made it clear that raising money for a startup isn't fun. As a founder making presentations to potential investors, you may find yourself being treated like a beggar by some smug, self-important people and will need to develop a thick skin. He told the story of being called "smarmy" at one meeting (and this was a group that had just been in to see me trying to get more prospects sent their way).

Ali also talked about how some investors will feign an understanding of his technology, and told the story of how he once told a VC that men and women could be distinguished by odd and even IP addresses—and that he wasn't challenged on the statement.

From talking to Ali, I know that his talk could easily have gone twice as long as it did without dragging. His experiences aren't atypical, and he presents them in a way that other founders can relate to and learn from. I wished we had the talk recorded, although Ali might be relieved that we didn't. It was definitely the highlight of the evening.

Albert Lai—best known for MyDesktop and BubbleShare—was also scheduled to give a talk, but wasn't able to make it after his flight from California was delayed. He was just in town three weeks ago for a talk during Entrepreneur Week and offered to return to make up for last night (he felt very badly about missing the event).

The rest of the night consisted with some networking breaks and a series of brief presentations, which included everyone who signed up on the white board. While it's possible to present technology and do a demo in a few minutes, it really doesn't work the same way if you're trying to present a business and get meaningful feedback. You can't understand a business without discussion of market need, target market, business model, and go-to-market strategy, and you just can't cover that in three minutes. In some cases, it seemed the presenters wouldn't have been able to say much about those issues even if they had been given all the time they wanted. So this became BarCamp Redux rather than StartupCamp. Still enjoyable—interesting to see what people are working on—but there wasn't a lot of "business" on display. That didn't stop anyone from providing feedback—some of it very emphatic.

Among the attendees were several who are creating real businesses. Along with Well.ca, other startups represented at the event included ProductWiki, AideRSS, Terapath, Suited Media, and Semacode (among others) that could all contribute to substantial discussions around making a business out of a technology and what founders have to do to go beyond the "playing around in their spare time" stage to creating a real business.

The next StartupCampWaterloo is scheduled for February.

From the 2007 Entrepreneur Week Resource Guide

There are two different documents referred to as "business plans." The only one we'll discuss here is fundamentally a marketing piece, pitching your company to an external audience—most commonly to potential investors. It's not really a plan at all, just as elevator pitches don't usually take place in elevators (which is a relief for those of us in Waterloo, where elevator rides tend to be rare and brief).

Viewed from 50,000 feet, business plans are pretty straightforward. You discuss market opportunity, technology, go-to-market strategy, competition, your management team, and a few other topics. Add some financial forecasts with accelerating sales leading to significant profits. It sounds simple, so where do things go wrong?

One of the big pitfalls, especially for first-time entrepreneurs, is not having a good enough grasp of business realities to distinguish optimism from delusion. Optimism is necessary, but I've had startup entrepreneurs—bright people and very good at the things they do best—tell me in all seriousness that they were going to go from no revenue (and no product, for that matter) to annual sales of $830 million in five years, and that this was a conservative estimate. I've seen an unknown startup forecast that 80 percent of its revenue would be going straight to the bottom line, with sales and marketing expenses equal to five percent of sales. I've seen revenue forecasts that would require the company to close five sales a day, every day through the year (with a direct sales model that requires relationship building and with no sales team in place except the CEO).

Maybe you don't see why these projections are unreasonable. They apparently seemed just fine to the entrepreneurs, and there's a good chance that you'll have something equally implausible in your plan. This is where you need to make use of expertise available to you. Show outlines of your plan to people with sales, marketing, finance, and technology backgrounds. You're probably stronger in one area than in the others and you'll want to have your plan tested from all angles. (You're welcome to contact me at gary@communitech.ca—we have a team of people with this kind of expertise available to you at no cost.)

Some quick tips:

• Don't underestimate the challenge: You're starting at (or near) zero. No customers, no name recognition, probably no sales team other than you. Potential customers will worry about how long you'll be in business, and every one of them has so far managed to run their business or live their life without your product. Inertia is one of your biggest competitors. You're going to grow one customer at a time, one sale at a time. Map out how that's going to happen.
  
  
• Don't be evasive about your competition: Unless you're dealing with very trusting or naive investors, you have two options for how they find out about your competitors. They can hear about it from you, or they'll find out for themselves. Guess which is better for your credibility.
  
  
• Choose an initial target market and product: Listing a bunch of potential applications for your technology just makes you look like you're grasping at straws. It has "come back to us in six months" written all over it. Yes, it might work if you're looking for funding to commercialize research, but investors are looking for a business opportunity. Make a decision and build a business case around it. You'll be lucky to be successful in one market. You need to focus your efforts.
  
  
• Identify your first five target customers: By name. You can't make contact with some ethereal market segment. Bring it down to earth. How are you going to reach them? What will you say? Why will they care? Get customer input early. It's much harder to create winning products working in isolation in your basement.
  
  
• Get to the point: You're not going to turn an unattractive investment opportunity into a winner with rhetorical skill but you might bury a good opportunity under so much verbiage that your message is lost. This isn't a term paper or a short story, and it's not about showing off your mastery of colourful adverbs or letting everyone know you've read a popular business book. Identify your product and market in your very first sentence.
  
  
• Make your key selling points stand out: They need to be clearly written and then you can use every typographical trick in the book to make them jump out, such as short paragraphs, bullet points, bold or underlined text, and descriptive subheadings.
  
  
• The purpose of graphics is not to make your plan "look professional": The rules for charts, photos, drawings, and so on, are the same as the rules for text. If it helps communicate your key selling points, put it in. If not, it's just a distraction.