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Today we wished JS Cournoyer, partner at Real Ventures, a very happy birthday. Hip hip! Hooray!

Today John Elton from iNovia Capital stopped by for lunch and spoke to the teams about mergers and acquisitions. Here are a few things he shared with us:

First off, he knew what we were thinking: “Why would I talk to early-stage entrepreneurs about planning an exit? You guys have bigger fish to fry right now. But I think it’s useful to discuss right now [...] Ron Conway says if you can’t name ten companies in ten seconds that would potentially acquire a company then he wouldn’t invest.” – That’s why it’s important to think about exits from the get go. 

The fundamental question is “What’s your goal? [...] Do you want to hit a home run, raise a lot of venture capital? [...] Are you really looking to build a business that’s looking to fulfill some of your own individual goals? [...] Or are you trying to do a quick flip?”

“So one of the things I always hear when entrepreneurs pitch is “This is either going to be huge or it’s going to be nothing.” And the reality is that it’s neither. Most exits happen around $74 million, and the numbers are skewed by the larger numbers. Most outcomes are small [...] We [investors] don’t necessarily want to swing for the fences every time, we want to have a profitable fund with smaller outcomes.” 

“New trends: secondary markets are a new thing [...] Founder liquidity [...] Financial investors, later stage fund, hedge funds, private equity firms [...] other characters that traditionally haven’t been in this market.”

M&A: “A lot of it comes down to ego. It’s still very much a people-driven enterprise where someone falls in love with an opportunity [...] and wants to make it happen, to own the company. Or there’s some sort of necessity that there’s companies laying in their tracks that they need to acquire to keep going.”

“My advice to you guys [...] is to keep your options open. The best way to combat some of the inertia is to be capital efficient, getting profitable, really building value to your business, and making the right decisions early.”

Just under three weeks until Demo Day and the teams are working harder than ever. Today they took the time to listen to StartupCFO and Real Ventures partner, Mark MacLeod, on getting investor ready.

He gave them lots of insight, including views from both sides of the fence. Not only did the teams come away from the talk with lots of notes and great tips, but also with a better idea of how to approach investors and the whole financing process. Here’s a few things that he shared with us during the class: 

Here are his 4 “Ps” to being investor ready:
- plan and set your strategy
- prepare your documents
- prepare to do the pitch
- party afterwards

“The plan’s pretty simple. You’ve got to decide first of all, do you want to bootstrap? [If not, and] you do want to raise, then you’ve got to decide if you’re truly ready to raise, and that really comes down to status of the product, status of the story, and are you truly venture ready. If you’re not, then even if you want to raise, you’ve got no choice to bootstrap.”

What’s investor readiness? “It’s pretty simple. It means you know exactly how much you want to raise, what you’re going to achieve with that, and who you’re going to raise from (angels vs. VC’s). It also means that you have the basic set of investor documents: an executive summary, a pitch deck, a very basic financial model, you’ve got your deal team assembled and a pipeline of investors that you’re ready to go after.”

“The exec summary has one purpose. It’s to get you a meeting.”

“Get all the documents ready, and then you hit everyone at once. You don’t run in series, you run in parallel.”

“[Build] relationships with potential investors before you start asking them to invest in your company. This is particularly important for VC’s because it’s the potential for much more capital, it’s a longer relationship, and we need to get to know each other.”

“You need to target the right investors. You need to understand who is investing in this space, at this stage, investing the dollar amounts that you’re trying to raise […] You’ve got to target people who are known to invest in your geography, your sector, at your stage.”

 ”It really is all about traction. […] we’re skeptical, and the thing that gets us over the hump is actual traction.”

“This is a two way relationship, it’s a long term relationship, and you absolutely have to choose the right investors. [...] Above all you want to make sure there is mutual respect and trust […] This is the kind of person you would go on a flight to Asia with. If not, then don’t take their money. It’s going to suck.”

And here is Mark’s presentation:

Brad Feld took the time today to talk to our 11 CEOs about prepping for Demo Day. Here are three questions that were asked and the answers that Brad had to share with the teams. Lots of insightful information as the teams charge towards Demo Day! Thanks, Brad! 

Q: “Teams will take 6-9 months to raise, typically, after a Demo Day. And that you shouldn’t necessarily be expecting to get a Terms Sheet right off the bat, that there’s still a lot to be done, that Demo Day is just a starting point. Can you talk about that a bit?”

A: “I think that it’s really important to recognize that the financing process is a continual process….the value of Demo Day is that it gives you the chance to be in the spotlight for a very focused period of time, and your goal on Demo Day should not be necessarily to get everybody in the room to have a meeting with you. Your goal should be to figure out how to get a set of people in the room to have a meeting with you to start a more engaged process when you’re raising money…what your goal should be coming out of Demo Day is to try to figure out how to have real conversations with a half a dozen or so potential leads…”

Q: “How do you recognize leaders and followers?”

A: “It’s mostly reputational…the nice thing is you can find out easily on the web what people are investing in….do your research. Don’t be bashful about asking about the last couple of financings they did…You have to hustle; go find the information…ask “was he the first one to write a check or did he hang around?”

Q: “What are some do’s and do not’s on Demo Day?”

A: “Thing #1 is practice your presentation fifty times. Recognize that the first 10-15 times you give your presentation, it’s going to completely suck. It’s going to take you 10-15 times to get comfortable with your presentation and you’ll be tuning it. And it’s probably another 10 times before you finally feel comfortable with the final presentation [...] Be as obsessive with the presentation as [you are] with the product [...] Don’t undersell yourself. Really own it. #2 is show, don’t tell…If you can show somebody what your product does [...] the progress that you’re making [...] that’s so much more powerful than if you just assert it or tell them. [...] The last is have a clear ask at the end. Be explicit versus passive.”

“Good luck on Demo Day!”

Today Randy Smerik from Osunatech stopped by to give a FounderFuel Master Class on preparing your company like a product — for it to be bought. His talk focused on exiting being an integral part of your business planning and foresight, since most companies go on to take part in mergers and acquisitions. He gave the facts, numbers, and spoke from his own experiences, and the timing of his talk was pivotal in its effect on the teams. Before he came in though, Randy answered a few questions for us. Here’s what he had to say!

You are a serial entrepreneur. What started your journey on the road to startups?

I just love working with a tight focused team and creating things from scratch – it’s a thrill!

What was the biggest challenge you faced during your early days in the startup space? How did you overcome it?

Dealing with the constant uncertainty and maintaining confidence that you can overcome anything thrown your way.

What, in general, do you think is the biggest mistake early stage startups make these days?

Assuming that it will be easy. They read about quick and huge exits all the time, and you rarely read about the many many failures.

Any last words of advice for the cohort as they prepare for Demo Day? 

Just remember the “big three” points to communicate:
- why is the idea kick-ass
- why is the team amazing
- and what exactly are the “value creation milestones” that will be achieved with the funding being sought.

Check out some photos from his talk! 

Today, Notman’s own Real Ventures partner and FounderFuel mentor John Stokes talked to the teams about how to pitch for a seed round. The idea behind his class: “Attention, insight, implication, greed, capability, awareness, moving, ask, greed.” That’s his basic outline for how to pitch on Demo Day, which he went through in great detail and insight during his hour-long class. He also took the time to ask the teams for their insights, implications, capabilities, and the like, in order to bring the talk into perspective. John answered a few questions for us before coming in, which are just below, and we’ve included some insightful quotes from his talk below the interview. Comment if you have tips on how to pitch for a seed round! 

On Day 2 of the program (Show and Tell #1), you told the teams that it was your job to make them cry, only to then make them laugh even harder. What effects have you noticed the “tough love” approach has on startups and their founders?

We owe it to entrepreneurs to be honest with them. Being honest doesn’t mean being right, but it does force them to either a) change their views or approach or b) improve the messaging they use to deliver the story. One of these two things often has to change in order for an entrepreneur to succeed, but they aren’t going to go through the process of finding out which one it is unless they are challenged.

What role does being torn down and then picked up again play in an accelerator program?

Entrepreneurs have to focus intensely on their business in order to succeed. This does mean that they can often end up focusing inward and believing that “their” world is “the” world. They have spent so much time in their world it becomes “warm and comfortable” – they can become protected by their bubble – until they run out of oxygen in their bubble. Tough love is meant to pop that bubble ! Popping the bubble is uncomfortable for many, but it means that they can see beyond it, grow beyond it and most importantly, scale beyond it.

You have over 15 years of experience as a founder and investor in early stage startups. What was the first startup you ever played a role in?

The first one I founded was called Forte Communications and the product was called Bulletin.net. It was a great experience. We bootstrapped the company quite successfully and sold it in the late 90′s.

Is that what got you hooked?

I had always been hooked on the idea of building a business but having success certainly poured fuel on the fire.

You’re a citizen of both the UK and New Zealand. How did you end up in Montreal?

I met my now wife in Tokyo and she is a native Montrealaise – she sold me on the place !

What do you think the Montreal startup space has to offer that others don’t?

It has the essential ingredients that I think all startup environments need – close-knit community, good number of passionate entrepreneurs, willing mentors and a reasonable amount of venture capital.

You’re going to be talking to the teams about how to pitch for a seed round. What is the biggest mistake you think that startups make when pitching for a seed round, and how do you recommend they might fix this mistake?

Biggest mistake is thinking that your product is your business. Presentations that are all about features, roadmaps and generic industry growth charts miss the point. Entrepreneurs need to base their pitch on the key insight that drives their thinking, explain why this insight gives them an edge, and explain how this edge will place the company in a winning position.

What, for you, is the most rewarding part of being a mentor for FounderFuel and so involved in the program?

Seeing the change between day 1 and demo day and knowing that you have had some impact on that change.

Any words of advice for the cohort as they catapult themselves towards Demo Day?

Be unrealistic in what you think you can achieve by DemoDay – and then achieve it !

Here are some quotes and photos from his talk: 

“[Think] about it from an opportunity, rather than a problem point of view […] The problem matters to the person that might buy your product. The opportunity matters to the investor [...] I am not going to buy your product. I am going to invest in you so that others buy your product.”

“The more you can boil it down to that key insight, the more chance you have of creating a unique story about how you’re going to take ownership of this space … [you need to] really peel back the layers to understand what the insight is that drives your business.”

“Give a sense that the train is leaving the station and people need to jump on it. No one wants to get on a train that is not moving.”

“It’s not a snapshot, it’s a video. The video that you’re [showing] people is not just a video from day 1 to day 90, Demo Day, but it’s also then panning out and giving a sense of where it’s going to go in the future.”

You want them to say “‘They’ve had three months and shit, look what they’ve done.’ If it’s ‘Look, they’ve done shit,’ you’ve got a problem.”

“I don’t believe investors add much to a success story, so minimizing their impact is a great strategy when you are onto something that is working.” – a quote from Chamath Palihapitiya

“You have to be the eternal optimist because if you’re not, nobody else is going to believe in you.” - Ashkan Karbasfrooshan

“Yes, writing is risky, but so is eating shellfish. get over it.” - Ashkan Karbasfrooshan

“If information is frictionless, then what we’re missing is attention [...] Attention is the only sustainable competitive advantage.” - Alistair Croll

“Market like a pickup artist – if you can market like a pickup artist, you’re golden [...] find a way to create small connections with people.” (The Game) - Alistair Croll

Ashkan Karbasfrooshan is welebrity. A web celebrity. So it’s no surprise that he stopped by to talk to the teams about leveraging blogs and social media to get press coverage–and gave them some great tips (and told some great stories). Before he came in, Ash took the time to answer some questions about his own experiences in startups and media. Read on to hear what he had to say! 

You’ve created several companies that have gone on to experience great success. What were some of the biggest challenges you faced launching your own startups?

Thanks. With regards to launching, I’d say balancing speed with preparation. Once in a while being the first to market is key, but oftentimes even the first to scale doesn’t win in the long term (ie. Friendster, MySpace and Facebook). So I would say before diving into a company, take the time to really think things through, but then once you launch don’t wait for perfection. Online it’s better to launch and then improve.

Your previous company sold to a big news corporation. Your current company bootstrapped to get to where it is today. How did you make the choice to follow each financial path? What were some challenges you faced in each?

Neither one is easy. Bootstrapping is very challenging: you have a foot in the grave and another on the gas pedal, but you get to do things your way and treat people the way you want to be treated. Conversely, investors may not necessarily share your passion, they want to make money and will introduce a level of discipline and accountability that some entrepreneurs can’t embrace.

But scarcity brings clarity; throwing money at every problem you have tends to lead to more problems.

As per my past:

I joined AskMen after they had raised $500K from an angel investor in 2000 but then the market tanked and it wasn’t until 2004 that we would get the odd email from a new prospective investor. Around the same time IGN offered to buy us, and I think the founders wanted out. I was a minority shareholder but as the head of sales I had made a decent amount over the years so when IGN bought us I was just happy for my partners, what I made was icing on the cake.

I used that money to invest in WatchMojo, I never “had to” raise capital. However, a lot of entrepreneurs tend to lie and say they’re not raising money or looking to sell their company. I’m pretty candid in saying that I have always been open to raising money but content wasn’t in vogue until Aol’s acquisitions of 5Min, Huffington Post and TechCrunch, to be perfectly honest. Then things changed. Now we get more interest, but VCs still aren’t that comfortable with content, and content is a very different breed of company than technology… maybe if I “had to” raise capital I would think differently.

I’d say as a VC-backed company you focus on revenues, as a bootstrapped company you focus on profits.

You are a contributor for various big websites. How did it feel when you first contributed to a website that you read regularly?

When readers of a site like MediaPost and Techcrunch click on an article they are initially very cynical, reluctant to trust you – especially if you are an executive at a company. However, if you enjoy writing and have something to offer – be it lessons, tips, advice, anecdotal experiences etc. – then they open up quickly.

What’s great about online publishing is that while there’s a lot of noise on comments and social media, they do add to the article. I think you can’t let the praise get to your head nor should you let the trolls get under your skin.

You host the webshow HipMojo. Who has been your favourite person to interview so far?

Well, throughout my life I have interviewed prominent celebrities and newsmakers like Joe Montana, Hugh Hefner etc., but many of those were via telephone (I did interview DJ Carl Cox in his hotel room in his bathrobe – don’t ask). For HipMojo, we had Kevin O’Leary come in to the studio and that was fun.

You’re going to be talking to the teams about how to leverage blogs and social media to get press coverage. What, to you, is the key to this process?

Some entrepreneurs are coders, others are salespeople, some are creative and can write in a prolific manner. I think you have to approach it in a way that feels natural, plays to your strengths and isn’t disruptive to your main priority, which is to grow the value of your business. 

Thanks Ash! Check back for quotes from this week’s Master Classes soon! 

Today Alistair Croll stopped by Notman House to speak to the teams about Lean Analytics in a talk that gets summed up in “Coefficients of friction: How the lubrication of almost everything fundamentally changes business.” A great speaker and a huge part in Montreal’s startup space, Alistair’s insights were soaked up by the audience just like water by a sponge. Before he came in, I got to ask Alistair some questions. Here’s what he had to say about his own experience with startups and some tricks of the trade he’s picked up on the way. 

So, to get started, I must say that you’ve got one heck of a resume! You’re so involved in startups and the tech community across the world. What got you hooked on startups in the first place?

I’ve always found inventing things was fun. As a kid at boarding school in England I remember launching a game where everyone threw weighted parachutes into the air and saw whose landed last, which was a combination of force (how hard you could throw) and engineering (how well you could turn a napkin, a rock, and some string into a thing that stayed aloft.) These things tended to get out of hand—this particular competition caught on, and eventually one of the other kids—whose dad ran the air force for a middle-eastern country!—came to school with a parachute that was hopelessly better than anything we could cobble together.

At the time, I sulked at having my invention “stolen.” But I learned a bunch of lessons from that. First, a simple thing with very few rules can take off on its own. Second, there’s always someone else with an unfair advantage.

Later, my mom bought me a second hand Apple][ clone, and I wrote and ran a BBS on it, a precursor to today’s web. It was a great sandbox to try out different things and see how people changed their behaviour. Beside proving that I was a creepy control freak at an early age, it taught me a lot about iteration and what got people’s attention.

And in university at Dal, I managed a student-run licensed bar on campus, which was run entirely by volunteers. From that, I learned a ton about managing and motivating teams through non-financial means.

I’d say those three formative things really informed how I look at problems and businesses:

Make something interesting, then let it go

Know that there’s someone bigger than you right around the corner, but do it anyway

Worry about attention, iteration, and understanding your customers

Look for “alternate currencies” to motivate and compete (a corollary to 2)

You’ve founded and co-founded two programs to help startups on their way (Rednod and Y1L)–what, in your opinion, is the biggest challenge most startups face (any examples from your experience in Rednod and Y1L)? Any tricks to help them overcome this hurdle?

Before Year One Labs, I thought it was execution. But that was an amazing learning experience. I kind of assumed anyone can be a founder, which isn’t true. It takes a certain mix of personality, talent, and opportunity. I wrote about the four roles founders need here: http://solveforinteresting.com/hacker-hustler-designer-analyst/

Rednod was more about me helping companies, but it really reinforced that a successful startup needs three things: a great team; a good idea; and an unfair advantage. At most, an accelerator can bolster one of the three. So a good team with a good idea can get an unfair advantage through its accelerator; and an accelerator can help assemble a good team around a good idea with an unfair advantage. But there’s no way to manufacture more than one of the three.

The number one challenge right now is attention. We live in a world where we’re overloaded, and app fatigue is a huge issue. Look at any industry, and there are simply too many organizations competing for mindshare. A secondary obstacle is an inability to be data-driven. I work with some companies who absolutely refuse to get good analytics into their product. As the saying goes, you can’t improve what you can’t measure, so if they’re successful, it’s by accident.

This article on Wooga is a must-read for modern entrepreneurs. http://www.wired.co.uk/magazine/archive/2012/01/features/test-test-test?page=all

You’re also a founding partner at Startupfestival. That’s awesome! It’s coming up in just a few months now. What’s on the cards for this year’s festival? Which part of the festival do you enjoy the most?

I don’t want to steal Phil Telio‘s thunder, but this year we’re focusing on startups that matter. Too often, we see startups looking to get acquhired, or flip quickly. But the really big companies made a long bet, and didn’t sell out. They changed the world by surfing the big waves. So we’re going to look at that stuff a lot—what it takes to build a big, sustainable company that can ride the tectonic shifts.

You recently joined Decibel Music and Culture Festival as a conference co-chair. You’re helping them put together an awesome event this fall at the Decibel Festival, an international festival of electronic music performance, visual art and new media. Are you a fan of electronic music? Any recommendations for our readers?

I am. In another life where I had more talent, I’d be making music. As it is, I settle for being a DJ. Sean Power, with whom I wrote Complete Web Monitoring for O’Reilly, is the other content chair. He’s amazingly talented and I jumped at the opportunity to get involved in the event. Sean Horton, who started the festival, is a force of nature in the music industry, and he’s managed to steer the event without jumping the shark or selling out.

Not sure I want to get into dumping my playlist, but it’s pretty big. Mostly electronic, without words. My live sets are at www.soundcloud.com/acroll; but while you’re there, you should check out Real Ventures‘ very own Mark Macleod, who, unlike me, has some real talent: http://soundcloud.com/user3210428

Finally, do you have any words of advice for our cohort as they charge full-force towards Demo Day on May 23rd?

Sure:

Empathy matters. Your audience won’t be as familiar with what you do, and they can’t parse anything more detailed than a golf score. (That’s not true; they’re mostly smart, but your ability to simplify something and put it in audience terms shows you can get the word out.) The book Made To Stick spends much of its time on beating this problem.

Cover competitors. Last year, the final presentations didn’t talk about competitors enough, and I knew that several of the presenters had left out big, better-funded competitors. You need to show the audience what your unfair advantage is, so they know why you’ll win against them.

Take risks. The Big, Hairy, Audacious statement gets attention; the alternative is to suffer the fate of the almost-awesome presenter. Put a big stake in the ground, then defend it. You’re not going to close follow-on funding from the stage; you’re there to explain what you do and have the room lining up to hear more afterwards.