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The 3rd annual Ivey Venture Forum will be held at the Metro Toronto Convention Centre  November 4th.

They are currently inviting submissions from companies in two categories to make their pitch to an audience of venture capital and private equity investors: seed stage companies (seeking $100k – $1M) and venture stage companies (seeking $500,000 – $10M).

This year’s Forum will be bigger than ever, with over 250 investors and entrepreneurs in attendance, presentations by companies seeking funding, and a discussion panel and presentations from experienced investors. Full details are at www.ivforum.ca.

The deadline for submission is Sept 20th.

The Ivey Venture Forum, a part of Global Ivey Day, is organized as a joint effort between the Toronto chapter of the Ivey Alumni Association and the Pierre L. Morrissette Institute for Entrepreneurship at the Richard Ivey School of Business.

The Forum was founded in 2008 with the intent of encouraging interaction between entrepreneurs and investors, particularly within the Ivey community.  While there is no requirement for presenting companies to have an Ivey alumnus on the management or advisory team, it is hoped that presenting companies will have the opportunity to engage with the Ivey Alumni community and benefit from the valuable management talent, advisory skills, and funding its members can offer.

In recognition of the different needs of a company throughout its life cycle, the Toronto chapter has created a Business Cycle series of events that target the startup financing phase, the growth phase, and the maturity/exit phase of a business. Visit the chapter’s website for more information on all these exciting events.

The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers pro vide a wealth of information based on their personal experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.

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By Andrew Maxwell

The four most common questions I am asked by entrepreneurs seeking to grow their businesses are:

  1. What do I need to do to get ready for external financing?
  2. How do I persuade the investor my business is viable?
  3. How much should I ask for initially?
  4. When should I ask for more?

The answers to all of these are interrelated, and I will answer each in turn.

Today I want to talk about What do I need to do to get ready for external financing?
There are two important things to do when asking for an external equity investment. First, you need to look at the opportunity from the perspective of a potential investor to see if investing makes sense. Second, you need to consider the consequences of having a long-term investor as a partner.  To look at the deal from the point of view of the investor you need to ask if they are going to make an adequate return on their investment. This requires you to persuade them that they can make a return of between 25 – 35% per annum.

Over six years, a $100,000 investment would require a return of about $380,000 (note that the average investment period for an initial investor is five – seven years). You need to show them that such a return is likely, and that there are potential exit strategies (such as an IPO or acquisition by a third part) that will realize this return. Many great opportunities fail to raise money, because there is no viable exit strategy for the investor. This is why thinking about the opportunity from the perspective of the investor is so important.

Justifying the amount the investor will receive at exit

The money the investor will receive is based on the estimated value of the business at the time, multiplied by the percentage of equity the investor owns. While the percentage of equity has other implications, which we shall discuss subsequently, it is a critical component in the investment decision.

For example, if you can justify a business valuation in the future, based on a multiplier of future profit or revenue, then it is relatively simple to calculate how much equity the investor should have. Typically, a multiplier might be one times revenue or 10 times profit (multiplier can be calculated based on industry standard multipliers on public exchanges).  A company with revenue of $1.9 million in six years could be valued at $1.9 million. Using our calculation above, that the investor would require $380,000, would mean that the investor needs 20% of the equity.

Identifying the exit strategy

In Canada, most successful exits are based on the acquisition of the business by a third-party, that believes they can manage the business for greater growth or profitability, whether directly, or by integrating it with their other business. The identification of potential third-party acquirers is thus important for the entrepreneur raising capital. It both helps the investor see a potential exit strategy, and can increase the value of the business by creating a bidding war between potential acquirers.   Acquirers are likely to be interested if:

  1. The business is large or strategic enough to impact their business
  2. They see a defensive opportunity that reduces your ability to hurt them
  3. They see an offensive opportunity to leverage both companies existing resources

Embedding potential exit strategy into the business plan can be critical. For example, if a large company only makes acquisitions of companies with greater than $10 million revenues, obtaining this level of revenue is critical. This may require the company to purse a more aggressive sales strategy, which may involve attracting a higher level of initial equity. In addition, getting your business on the “radar screen” of a potential acquirer may be important.

In fact, many acquisitions are done by companies who initially collaborate with the smaller company, for example as a supplier or channel partner.  Alternately, many acquisitions have been stimulated by an aggressive action by a small company that makes the potential acquirer take notice, for example by taking a strategic customer away from them. Importantly, the potential acquirer must be able to see how integrating your business with their own enhances shareholder value.

Reducing the investment risks

Investors are also concerned about the risks of failure and need to know there is a reasonable probability that the venture will not fail. Risks are viewed in three categories:

  1. Market risk, that customers will not want the product, or that competitor actions will inhibit your success
  2. Performance risk, that the technology does not work, or there are production or other operational issues
  3. Financial risk, that the company will run out of money, or require too much money to get the point where it can attract additional funds (revenue, debt, equity or from the government)

An entrepreneur seeking investment needs to show the potential investor that each of these risks have been identified and mitigated. We will discuss each in turn, in the next blog.

Andy is currently working at the Canadian Innovation Centre and pursuing a Ph.D. in the area of new venture creation at the University of Waterloo. In his spare time, he enjoys teaching technology entrepreneurship at UTM and the University of Waterloo.


The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers provide a wealth of information based on their personal experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.

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By Hari Venkatacharya

The Ewing Marion Kauffman Foundation is the largest private foundation in the world devoted to fostering entrepreneurship. Ewing Marion Kauffman was the founder and CEO of Marion Laboratories, headquartered in Kansas City, Missouri. At the time of its sale in 1989, the company had revenues of over $1 billion and employed over 4500 people.

I met Lesa Mitchell, Vice President of Advancing Innovation, in Bangalore in December 2008, when she and her colleague Carl Schramm, the CEO of the foundation attended the TiE Entrepreneurial Summit. What struck me immediately was their humility and willingness to learn, and always create an impact. The openness that they brought to the forum was refreshing, given that they have over $1.5 billion to invest in a myriad of programs to promote entrepreneurship!

I would encourage everyone to visit the Kaufmann website. It’s a storehouse of invaluable information about not only entrepreneurship, but also innovation, globalization, structuring and education. Their newest venture is a Charter School in Kansas City that will open in 2011.

The breadth of impactful activities that they host, in addition to the very high quality of active highly successful entrepreneurs they engage on an ongoing basis is quite staggering.

More recently, they have partnered with TiE on a number of initiatives, ranging from expanding the TiE Young Entrepreneurs program that was started in the Boston Chapter, and engages high school students in innovative business ventures, to helping take TiEQuest global. TiEQuest was founded by the Toronto Chapter, and is now the richest and most impactful business venture competition in North America.

The goals and execution capability of the Kauffman foundation are an organic, continually evolving testament to the perseverance and grand vision of its founder. I hope, one day, that Canada will also have a similarly broad ranging and impactful organization that truly embodies the nature of entrepreneurship and innovation, and has a focussed approach to creating significant impact.

Hari is a seasoned entrepreneur with over a dozen years of experience in building and exiting businesses in Canada, US and India.

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By Andrew Maxwell

In the past few months, several people have asked me about the purpose of educating entrepreneurs. They identify research that suggests entrepreneurs are born and not made, and question the purpose of education if this is the case. They point out that entrepreneurs have inherent traits that cannot be taught, and question both the approach to entrepreneurial training and its benefits.

Immersed in this issue because of my long involvement in teaching entrepreneurship, I was initially surprised by the question. However, as I thought more about it, I realized that answering it thoughtfully would both help explain how entrepreneurship should be taught, and the benefits that can be derived from training entrepreneurs.

First, lets start by identifying that there are certain traits that seem to be common to all entrepreneurs, such as the need for achievement and willingness to take risks. While these traits are both a function of DNA and family/social environment, it is evident that they affect entrepreneurial orientation and intention from an early age.

Before discussing these traits, lets discuss two other entrepreneurial characteristics that seem to be linked to an entrepreneur’s likelihood of success: relevant experience and capability. It is often said that entrepreneurship is a “contact sport”. Certainly there is significant evidence that entrepreneur’s are more likely to be successful if they have been involved in previous entrepreneurial ventures, or started ventures themselves. Entrepreneurs are also more likely to be successful if they have existing knowledge of the technology or the market in which their proposed venture will operate. Entrepreneurs, who have had the chance to learn from their own experience and the insights of others, find such experience to be very useful when faced with the many challenges of running their own venture.  One way of training entrepreneurs is to give them the chance both to gain relevant experience and reflect on it in a learning environment (a good example is the co-operative placement programme at the University of Waterloo).

While inherent capability is also something an individual is born with, many basic entrepreneurial skills can be taught. At the business development level, these skills include the development of business plans and cash flow statements, while at the personal level this can include training in time management, project planning, and making presentations.

In addition, there are some basic knowledge components, which can help increase an entrepreneur’s likelihood of success, such as how to file a patent or complete a market survey.  Most of these skills are the ones we focus on when we teach entrepreneurship courses.  While they cannot make an entrepreneur out of someone who does not have the basic traits required, they can certainly help an entrepreneur who has the required traits to increase their likelihood of success.

Finally, acknowledging there are certain inherent entrepreneurial traits suggests that education cannot modify entrepreneurial behaviors. However, there are important aspects to entrepreneurial traits where awareness can help the entrepreneur increase their likelihood of success.

Some of the most common entrepreneurial traits include: high levels of confidence, enthusiasm, and passion for the venture. There is no doubt that these are all prerequisites for entrepreneurial success. However, there is evidence that excess amounts of these same traits (such as over confidence) can reduce the objectivity of the entrepreneur’s decision-making, which can in turn reduce the likelihood of venture success.

It would seem that the same traits that are important in moderation for an entrepreneur could actually become his or her Achilles Heel. Helping an individual entrepreneur understand these potential issues is another important role for entrepreneurial training. Entrepreneur’s aware of these issue can either find individuals with complementary traits to join their venture team (as co-founders, senior managers or board members) who are able to moderate the entrepreneur’s pre-dispositions. Alternatively, the entrepreneur can try to build in some self-control (such as wait 24 hours before sending an important email), which can enable him or her to have second thoughts about important issues.

Providing some ideas into how entrepreneurship education can help entrepreneurs also answers another strategic question I was recently asked: if most entrepreneurial activities fail, what is the point of encouraging entrepreneurship through increased levels of entrepreneurial education.

I think that there are two important answers.

The first is that the impact of entrepreneurial activity on regional wealth creation is often understated. Entrepreneurs are the engine of wealth creation and are able to react quickly to new opportunities, based on market or technology changes. Entrepreneur’s who react fastest to these opportunities, often have the greatest chance of long-term success, suggesting that showing them how to identify opportunities and assemble the required resources is critical.

Second, there is no doubt that many entrepreneurial activities fail, this is not a reason to reduce the number of entrepreneurs, but a driver for increased education that teaches entrepreneurs, not about entrepreneurship, but about how to increase their likelihood of entrepreneurial success, by reducing their likelihood of failure. Enhancing entrepreneurship education, by helping entrepreneurs understand potential causes of failure, based on their own personalities as well as market and technology issues will increase the percentage who achieve success. In turn, this will stimulate more individuals with entrepreneurial traits to consider starting and growing their own ventures, and reaping the rewards.

Andy is currently working at the Canadian Innovation Centre and pursuing a Ph.D. in the area of new venture creation at the University of Waterloo. In his spare time, he enjoys teaching technology entrepreneurship at UTM and the University of Waterloo.

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By Andrew Maxwell

I constantly review the early version of business plans drawn up by potential Canadian entrepreneurs.

While the innovative ideas and opportunities are always fascinating, I am frustrated by most plans’ lack of ambition. As a result, I  am left feeling why get excited, or even why bother. I am sure this is a reaction shared by many, and often results in limiting the opportunity’s potential.

As opportunities need to create a certain critical mass before they can generate enough revenue to pay the entrepreneur a salary – this limits the potential for creating the venture in the first place.

For example, entrepreneurs often identify a market opportunity in the local geographic region or in a specific application. Yet with a little imagination and a willingness to leverage external resources, they could expand the business to be much more substantial.

An example of this was a recent plan to develop a technology for the bar industry. In the plan, the entrepreneur proposed selling 50 devices a year in the Canadian market, each with a selling price of $5,000. The market opportunity and proposed technology seemed novel, but there was no reason why the entrepreneur should limit the size of the market to 50, I think this under stated the market-size by at least a factor about 4. Clearly, an opportunity to sell 200 units starts to look interesting. But what makes this opportunity into a business is using the Canadian market as a pilot for the US (potential 2,000 units a year). This much larger number will stimulate interest among suppliers, employees and even investors.

I was always skeptical when potential investors asked entrepreneurs the question –what would you do if you had more money than you are currently asking for? I thought that at best they were just testing the entrepreneur’s ability to think outside the box. At worst, I thought they were simply trying to get the entrepreneur to accept more money and in turn give up more equity in the venture.  In reality, they were asking the question, does this investment create a big enough opportunity for potential acquirers to be worth taking over?  This reinforces the importance of developing a strong exit strategy when making a pitch to investors.

While potential investors will probably continue to ask this question, I think it’s worthwhile that entrepreneurs find ways to challenge themselves to ask the same questions. One way to do this is to work with mentors and outside advisers whose experience help raise strategic questions. I noticed that one of the reasons US firms tend to be more aggressive is because of the influence of peer pressure or experienced investors on the ambitions of the next generation of entrepreneurs. In the US, it is always acceptable to develop an ambitious business plan. In Canada, less so.

In addition it is important to ask yourself, is it worth it? Creating a business plan for an opportunity that is only going to create  $300 – $400,000  of revenue is not a worthwhile exercise. At this level of revenue, most entrepreneurs cannot afford to even draw a reasonable salary themselves, never mind provide an interesting return to a potential investor.

Don’t get me wrong, this does not mean that a business at this size is not worthwhile, it is simply means that developing a business plan is not worthwhile as  there is limited ability to use the plan to bring in additional stakeholders or investors. In many cases, the effort required by the entrepreneur to create a $500,000 business may be that required to create a $5,000,000 business (although, there may be additional stakeholders).

I hope these short thoughts challenge you to think about scaling up and set lofty goals!

Andy is currently working at the Canadian Innovation Centre and pursuing a Ph.D. in the area of new venture creation at the University of Waterloo. In his spare time, he enjoys teaching technology entrepreneurship at UTM and the University of Waterloo.

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By Jeff Bowman

Most people recognize the name Dale Carnegie from the book “How To Win Friends and Influence People” or from the courses on self-improvement that have sold millions of copies since the late 1920’s. Some more closely associate him with ‘the elevator pitch”

Carnegie’s ideas on changing other people’s behaviour by adjusting your own reaction to them still hold true today especially in the field of sales and presentations. Listening, probing and showing genuine interest in a client’s needs is the basis for relationship selling or put differently, becoming a partner with your client as opposed to a simple supplier of goods or services.

According to Carnegie

You can close more business in two months by becoming interested in other people than you can in two years by trying to get people interested in you.”

Carnegie was quite innovative in his ideas, and in understanding the needs of the common man. After a failed stint as a stage actor, he turned his attention to lecturing others in the art of self-improvement.  In the 1914, there was no one to fund his ventures, so as a successful salesperson would, he found an alternative.  He persuaded a manager of a local YMCA to let him speak, and he would keep 80% of the proceeds. He was soon earning what would be equal to about $10,000 a week, capitalizing on the fact that everyone wanted to improve themselves in some way to increase their level of confidence – a hidden need not often expressed openly even in the business world of today.

Carnegie operated on the premise that he would not fail.  As long as he put the effort into what he did, he would be successfully. A lesson not lost on entrepreneurs ever since.

Remember the old line “when fate hands you a lemon, make lemonade.”? That was him.  Always the positive thinker, and idea innovator.  Did you know that he even changed his name to capitalize on familiarity? Originally he was Dale Carnagey, however he changed to Carnegie because Andrew Carnegie the wealthy industrialist was already a household name.  Now that’s creative thinking!

Jeff Bowman is a Sales and Marketing Specialist with The Marketing Pad Inc.. Follow Jeff’s blog at Blogpad or visit www.themarketingpad.com.

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By David Crow

There’s been a lot of bitching about the state of SxSW and why it sucks!

“Too many people, not enough tech.”

Jay Baer provides the best observations about what is working, what is broken, and some general themes from the event.

  1. There is more than one SxSW
  2. Bigger Isn’t Necessarily Better
  3. The Conference isn’t that Good
  4. The Periphery Exceeds the Core

The great news is that there are fantastic opportunities for entrepreneurs in Toronto (and across Canada, but we’ll come back to that). There are a number of small focused events. MeshU and Mesh are firecode limited at MaRS to 450 attendees. They are excellent opportunities to connect with entrepreneurs, designers, developers, marketers and funders. The event is tight and there are multiple tracks, however, the core keeps getting stronger every year. The core speakers are fantastic.

MeshU is a one day event. Perfect. My attention span can’t handle 5 days (never mind the 5 nights). It is happening Monday, May 17, 2010, which is right before Mesh Conference and OCE Discovery. MeshU is the supporting event to these 2 larger events. The supporting role has allowed it to focus on delivering great value.

Education-based aka the strong core

MeshU, Toronto, ON May 17, 2010 

The mesh team has always put on a great set of events, however in 2010 they have added one speaker that will justify the entire price of the ticket for me. Sean Ellis runs Startup-Marketing.com and 12in6 Inc.


12in6 specializes in helping startups unlock their full growth potential.  Our metrics, survey and experiment-driven approach has evolved over 15 years of taking startups to market as VP marketing, interim VP marketing and as an outside advisor/consultant.  The first five startups our principal (Sean Ellis) helped take to market were:

  1. Uproar (IPO)
  2. LogMeIn (IPO)
  3. Xobni (Khosla Ventures – rapid user and revenue growth)
  4. Eventbrite (Sequoia Ventures – rapid user and revenue growth)
  5. Dropbox (Sequoia Ventures – rapid user and revenue growth)

Five projects that include two IPOs, and funding from Khosla and Sequoia Ventures. Startups that have opportunity to learn about the Customer Development methodology from one of the best executors. This session will justify the price of the MeshU ticket for most startups.

There are other fantastic speakers including Aza Raskin from Mozilla Labs, Joe Stump from Digg, and Meredith Noble from Usability Matters

David Crow is an emerging technology and start-up advocate/evangelist. At Microsoft Canada, he is responsible for helping Canadian start-ups gain access to software, support and visibility in the Microsoft ecosystem through programs like BizSpark (details at microsoft.com/bizspark). David blogs at http://davidcrow.ca/ and http://startupnorth.ca/ or follow him on Twitter @davidcrow

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