In Vancouver, everyone is waiting for the big earthquake.
“It could happen at any time,” says Boris Mann, co-founder of Bootup Labs, a technology incubator and seed fund. But the quake he is referring to is economic, not seismological.
Vancouver’s technology startup scene needs what investors refer to as a “big exit”; a ground-shaking initial public offering that leaves the founders super rich, and gives the rest of the startup community hope.
There have been smaller preshocks, the most famous being Flickr, which sold to Yahoo! Inc. for US$35million in 2005; CNN just snapped up IPad magazine Zite for about US$20million; and Adobe Systems Inc. just bought Nitobi Software, which develops software frameworks for mobile apps. But these are all acquisitions by U.S. firms, not grand-slam IPOs. The Big One hasn’t happened yet.
The ecosystem isn’t developed enough, says Ryan Holmes, founder of social media firm Hootsuite, which just landed US$3-million in Series A funding.
“We need a PayPal mafia here,” he says. “People that come back after a big exit and double down.” He’s referring to the super-rich founders of PayPal, who reinvested their money and their knowledge in the next generation.
But, like most other tech startup rock stars, they came from Silicon Valley, traditionally the breeding ground for technology startups that make it big. Consequently, when Vancouver startups need cash and connections, they take the two-hour flight to San Francisco. Many of them never come back.
Mr. Holmes says that this is changing. “We have seen over the past couple of years a big decentralization from San Francisco,” he says. “The startups can now happen elsewhere. We’re seeing a huge increase in incubation across other cities.”
Hootsuite is one of several promising companies singled out by angel investor Boris Wertz, co-founder of GrowLab, a technology incubator that launched in April. It gives up to $25,000 in funding to young startups, in a runup to a second stage of $150,000 in loan money.
” There are some young entrepreneurs that are now thinking about reinvesting their money, which is exactly the way that the valley works,” Mr. Wertz says.
One of them is Jason Bailey, a co-founder of GrowLab, who founded KITN Media, a payment platform for Facebook games, which sold for more than Flickr. Since his KITN exit, he has founded several new businesses, one of which is already producing more than $1-million a quarter in revenue, and is getting acquisition offers.
GrowLab, and Bootup before it, are a sign Vancouver is picking up on trends set by incubators such as YCombinator in San Francisco and adapting them to Canada.
They represent an alternative to traditional sources of funding, from government and associated agencies. Mr. Mann and others see the system of government-backed funding groups in Vancouver as slow to move, and bloated.
“GrowLab is changing that. We are taking VC, angel, and government money and filtering it down to the best of the best, regardless of where they are from. We are creating community,” Mr. Bailey says.
GrowLab, like Ycombinator, invests small amounts in relatively high numbers of firms.
The feedstock for GrowLab comes largely from the lean startup movement, which thrives on this sense of community. Championed by people like Jesse Heaslip, the Lean Startup movement starts companies quickly, using next to no funding, testing assumptions using cheap prototypes before “pulling the trigger” and launching into commercial development.
Heaslip uses Meetup.com to organize get-togethers for his Startup Tech CEO group. “We just ran with it, and we had a couple of events a month,” he says. “We are up to 500 members now.
Lean startups are all about agility. When Facebook launched Timeline, a service that creates a timeline from your Facebook status updates and photos, it blew Sean Sherwood’s idea for a social media timeline out of the water. Within days, the sometime restaurateur and tech startup enthusiast repositioned his service as a Facebook application focusing on checkins and personal achievements. It launches this week.
In the meantime, he has cooked up Nickler, a digital invoicing system for restaurants. Mr. Sherwood spent years running successful eateries in Vancouver and knows everyone in the business. He already has half the restaurants in the city’s Gastown signed up to Nickler, in just a few weeks.
Wilkins Chung, co-founder of A Thinking Ape, came back to Vancouver from Seattle. His company lies at the intersection of two of Vancouver’s most promising technology sectors: mobile development and gaming. He opened a subsidiary here because his co-founder had problems getting a U.S. visa.
“I used to work in Seattle, and we found a number of Canadians that got hired in the States but wanted to move back to Canada,” he says. “The problem is that Canada doesn’t have that many interesting places to work, whereas the U.S. has firms like Facebook, Google and Microsoft.”
That also means there is less competition to pull developers away when Mr. Chung recruits them.
In a world where smart people can start a company with little more than a collection of cloud-based services and a credit card, the only barrier left to starting one is community. Thanks to monied investors such as Mr. Wertz, and Mr. Bailey, and hungry outsiders such as Mr. Heaslip, that is growing quickly.
Danny Bradbury 11th October 2011