10 Things Founders Can Do for the Startup Ecosystem

A few months ago, I wrote a blog post about why the ecosystem is important for startup founders. In it, I described some of the reasons your local startup ecosystem can affect you personally and your company’s success. If there is a healthy network of investors, companies, and service providers in an area, everyone benefits.

But what can founders can do to help their local ecosystem flourish?Especially on a startup schedule (and budget), it can be hard to dedicate time or resources to enhancing the common good. Nobody running a new company can afford to be a one-person Chamber of Commerce on the side.

The good news is that it doesn’t have to be that hard. Keeping the local ecosystem in mind when you’re making everyday decisions can help both your company and the startup market in your city grow and prosper.

So here’s a list of things founders can do for their ecosystems, for their companies, and for their own careers.

  1. Stay put. Outside investors and some other entrepreneurs will encourage you to move to the Valley, to New York, or somewhere else. You need to do what’s best for your company, but it’s best for the ecosystem if you stay where you are.
  2. Stay in touch. Being a visible part of the local community keeps the fabric of the community together. People will point at you and say, “See? There are startups in this town.” Go to events, meet other founders, give talks, blog, tweet.
  3. Don’t hide your location. There’s a temptation to hide where your company is, so you’re not stigmatized for it. Avoid that temptation. Most of your real customers don’t care where you are, and those people who do — investors and potential partners — are going to find out anyways. Fly the flag proudly.
  4. Use local products. If another local startup launches a product, use it — visibly. Give feedback to the company. Give it the benefit of the doubt.
  5. Partner with local startups. If you can, find a way to put your company’s prestige behind other local startups. Do they have a widget or some other tool you could put on every user page, say? Try to find synergies that work.
  6. Build a local team. Sure, virtual workgroups work. You want the best, and your company deserves it — even if that team is thousands of miles apart. But if you can, try to find people locally who can do the job as well. If possible, try to convince your remote team members to move to your city. The more talented people there are in your city, the more robust the community becomes.
  7. Be a sponsor. Local events are usually cheap to sponsor. They help to galvanize the community and give it visibility. They also help make talented developers or others feel like there’s “something going on” in your city. There are other things to sponsor: blogs, clubs, hackerspaces.
  8. Mentor. You don’t have to have 4 exits and a global business network to be a mentor. No matter how early you are in the startup process, there are others who are behind you. Give them the benefit of your experience. Even in the most robust ecosystems, there are at most a few dozen people who’ve gone through what you have recently. That experience is like gold to other founders.
  9. Make introductions. Investors need to meet founders, and founders need to meet investors. If you can make an introduction, it may be a key factor in getting someone funded. But that’s not the only introduction that matters: introducing employees, other founders, the press, government officials strengthens the web of connections that forms an ecosystem. It takes a few seconds, but can make a big difference.
  10. Invest. If you have an exit with a decent cash-out, you can help significantly in the local ecosystem by investing (re-investing?) that money in new startups. You don’t have to be a billionaire or carry an entire Series A by yourself — just a $10K seed investment can make the difference between life and death for a new team. Combining your funds with other founders in seed funds or angel groups can stretch your influence.

As I said before, founders have to put their companies first – ahead of other factors like ecosystem. But that doesn’t mean that the interests of your region and of your company can’t be aligned.

For more information about healthy network of investors. Click here.

AppDirect Brings Web-based Software to Small Businesses

At the end of April, AppDirect announced a $3.25 million financing roundled by iNovia Capital. The founders, Daniel Saks and Nicolas Desmarais, are both Montrealers but the company is based in San Francisco.

AppDirect is a free and private Application Network that allows businesses to find, buy, and use web-based software. With one seamless interface, businesses can subscribe to applications, assign colleagues to multiple apps, and pay just one monthly bill for all their subscriptions. Through its network of branded Marketplaces, AppDirect provides Application Developers with a single point of integration to reach millions of businesses across the globe. For Channel Partners, AppDirect is the fastest and most economical way to launch a branded web-based business application marketplace.

NextMontreal: What are your backgrounds?

Daniel: Nick holds a BA in Economics and Political Science from Amherst College. Prior to founding AppDirect, Nicolas worked at Bain & Company as a management consultant. At AppDirect, Nicolas oversees product development, channel development, and investor relations.

I graduated with a BA from McGill University and a Masters of Liberal Arts in Management from Harvard University. I have experience in investment banking at Viant Group in San Francisco and in wealth management from RBC in Toronto. I oversee sales & marketing, vendor & channel relations and HR.

NextMontreal: Is this your first startup?

Daniel: We’ve been passionate about entrepreneurship since childhood. Nicolas started a driveway sealing company for a summer. I had created the “Fallsview Tourist Center” providing tourists to Niagara Falls with packaged bus tours of the area. When at McGill, I also arranged a bus trip to Tremblant with a few friends which later went on to become Campus Vacations; a leader in student travel across North America.

NextMontreal: What have you learned so far?

Daniel: One of the most interesting things we’ve learned is just how much demand there is for web-based software among small businesses, but how nascent the industry is at the same time. A recent Microsoft study estimated that 80% of businesses will be using web-based applications by 2014, but although hundreds of developers are creating apps, very few companies have emerged to help meet the needs of the users of these applications. For example, we conducted a survey with Bell last year that showed that a majority of small business owners want features like single-sign on, access management, and unified billing. However, as of today, AppDirect is the only company creating marketplaces that provide all of these features.

NextMontreal: Why San Francisco and not Montreal?

Daniel: Both Nicolas and I were working in San Francisco prior to starting the company. It made sense to keep the company in California.

Canada is an incredible country with a growing start-up community. There are incredibly successful companies in our space such as Shopify, Freshbooks, Hootsuite, Tungle and Rypple, that are still based in Canada. I would certainly encourage Canadian start-ups to visit the Bay area and bring home some of the best-practices in building a start-up community. However, it is not imperative to move to San Francisco.

NextMontreal: It looks like you provide both a destination site at AppDirect.com but also a whitelabel service, such as the one with Bell?

Daniel: We view ourselves as having three different groups of customers: channel distributors, businesses, and applications developers. AppDirect.com is designed for businesses who want to test out the features of our marketplace. Our white-label service meets the needs of all three groups. Below, we’ve provided a breakdown of the basic value proposition our white-label service provides to each group:

For channel distributors, like our partners at Bell Canada, AppDirect provides the fastest and most economical way to launch a branded business application marketplace.

When businesses sign up to an AppDirect marketplace, they can get the appropriate applications through our recommendation engine, assign colleagues to the apps they need, and pay one monthly bill for all subscriptions.

Application developers can reach millions of businesses across the globe through a single point of integration within the AppDirect network.

NextMontreal: How did you pick the 30 or so apps that go into the marketplace to start? How many more will you add? How do you select those?

Daniel: We select apps based on a rigorous, four-step process. We begin by selecting apps that are best-suited to the needs of the customer bases of our channels. Next, we evaluate the applications to ensure they meet our high standards for security and customer support. Then, we contract the applications. Finally, we deliver the apps to our marketplaces with unified billing and provisioning, single-sign-on, and access management. Using this process, we expect to syndicate somewhere between 100-150 additional applications.

NextMontreal: The Bell Business App store just launched – what’s reaction been like so far?

Daniel: The reaction has been very positive. It’s clear that there’s a lot of interest in the Canadian business community around web-based software. Our main focus this year has been to generate even more interest and use that interest to motivate business owners to educate themselves about the benefits of web-based software. The more people know about web-based software, the more they are going to be willing to purchase applications in the future. Particularly in comparison to old legacy systems, this new model just makes so much more sense economically.

NextMontreal: The marketplace you provide also provides additional functionality – user management and administration across all apps – correct? What other functionality is managed through the app store vs. individual apps?

Daniel: We are really seeking to provide a seamless, end-to-end user experience to meet the expressed needs of the rapidly growing community of SaaS users. As I mentioned above, we conducted an extensive survey to determine what those needs were, and we found that the majority of businesses were seeking a place to find, buy, and use their applications in one location. So, we have created a recommendation engine to guide users to the best apps, and we have provided all the information users need to make an informed purchase decision on the app profile. Once an app is purchased, administrators can provision apps to users and pay for their subscriptions on one monthly bill. Best of all, users can sign-in to all of their applications with in one place with one set of login credentials.

For more information about destination site at AppDirect.com. Click here.

Are Canada’s tax incentives causing startups more harm than good?

The person above, who didn’t want to be named, is referring to one of the government programs that fund R&D activity in Canada. Programs with alphabet soup names like SR&ED and IRAP can repay up to 85% of your developers’ salaries. (Yes, 85%)

Fred Lalonde, an experienced entrepreneur and founder of Hopper Travel, recently said these programs are the devil. And I think he was being nice. Here’s why:

  • These programs create bureaucracy. The government hires technical “experts” to audit companies and decide whether the work they’ve done is innovative enough. To navigate through their requirements and make sure you use the right buzzwords, startups hire consultants (some of them previously employed as the aforementioned government auditors) to prepare their claims. All of this costs money.
  • They’re a distraction. None of the people above add any value to your business. Every minute you spend dealing with them is a minute you could be spending learning about your customers/users, getting to product/market fit or gaining market traction.
  • They create incentives to misalign resources. This is dangerous because it’s insidious. When you’re getting back 85% of your engineering salaries, it’s easy to just throw more engineers at your problems. As a result, Canadian startups have world class engineering teams, but often fall short on the product and user experience side.

I’ve spoken to a several Canadian startup entrepreneurs in the past few weeks about these programs and there is clearly a lot of frustration regarding them. Yet at the same time, there is a reluctancy to discuss the issue publicly for fear of biting the hand that feeds them given the already limited pool of capital available to early stage startups here.

I’ve come to the conclusion that these programs do more harm than good, and it’s time we have an honest conversation about getting rid of them.

But wait, you say, how will our tech industry continue to exist? You can argue it’s time to just drop the crutches and learn to walk. After all, these programs don’t exist in Silicon Valley, yet they seem to be doing just fine.

Or, the government can take that capital and redeploy it in other ways, such as:

  • Investing in venture capital. You don’t want the government investing directly in startups, but they can act as a catalyst by acting as a limited partner in funds managed by people with operational experience. This model has worked in Israel, and Quebec has taken some big steps in this direction recently with the creation of the Teralys Capital fund of funds as well as investing in Real Ventures.
  • Invest in infrastructure that creates conditions for innovation and risk-taking, from universities to places like Notman House in Montreal or MaRS in Toronto.
  • Creating startup friendly tax policies. We give tax holidays to foreign “specialists”; why not do the same for entrepreneurs, or early employees who decide to take the risk on a startup, or angels who invest in them?

What has your experience been with these R&D programs? Should we keep them or replace them, and if so, with what? Let’s get a discussion going in the comments below.

George Favvas is a serial entrepeneur and founder of SmartHippo, a social comparison shopping platform for financial products. This post was republished with permission from George’s blog.

For more information about Canada’s tax incentives. Click here.