Monday, November 10, 2014

Zero to One: Some useful insights in a sea of dross

Many people have said good things about the Peter Thiel (with Blake Masters) book Zero to One: Notes on Startups, or How to Build the Future, and there were several parts I found worthwhile, but I can't add it to the recommended reading list for startup founders.

There's nothing particularly objectionable about the major theme—have a bold vision and a plan to get there—but there's very little in Thiel's underpinning for that theme that's going to be of much value. It's heavy on personal ideology—which may be enjoyable to read if you share the same views—but not so useful as a guide for startups.

I'm sure I could pull a dozen good tweets from the book (and will do, below ... 10 of them, anyway), but I found the first half to be largely a waste of time. Thiel's recollections of the late 90s dot-com boom are very different from mine. He looks back with nostalgia at a golden era characterized by big visions that he rarely sees these days. I remember the period as being as much awash with triviality as any other era. It wasn't the visions that were big as much as the budgets, as pie-eyed investors provided millions of dollars to anyone who incorporated "online portal" into their elevator pitch.

I can't image that the "four big lessons" he claims Silicon Valley learned from the crash were actually anyone's main takeaways. If anything, "focus on product, not sales"—one of the lessons he claims—was a guiding principle of the dot-com boom. Who needed sales when you had investors lining up to give you cash? It was all about the product -- building the website and growing traffic. Revenue was something that would come in the future.

Thiel's characterization of the lean startup approach as having no plans—another of the claimed lessons—is every bit as inaccurate when he says it as when some lean proponents imply the same thing. I can't call it a strawman argument when there are self-identified lean supporters who make planning sound like some quaint artifact of an earlier time, but the lean approach really isn't anti-planning as much as an acknowledgement that—in the earliest stages—whatever your plans are, they're going to change as you start getting feedback from the market. It's about contingent planning rather than a rejection of planning—against carving plans in stone early on, when startups have little more than a vision and guesses. But Thiel doesn't appear to be a fan of contingent plans—it seems they're part of the feeble "indefinite" worldview that he criticizes in one of the chapters I didn't find very useful.

That was my view of his discussion of monopolies. If we define "monopoly" so loosely that it includes every successful business—as Thiel does—then it would also include every unsuccessful business too. If you're interested in learning about Thiel's ideology, then it might be worth a read. For building startups, though, I found little that was worthwhile, although Chapter 5—which continues the discussion of monopolies—would certainly be the source of some of those dozen good tweets.

Most of them, though, would be pulled from chapters 7 to 11—where it finally felt that the book was worth reading ... before it tailed off in the final four sections (last three chapters and the conclusion). There are a dozen other books I would suggest startup founders read ahead of this, but chapters 7 to 11 may very well be worth a read. (A minor point, but when Thiel says that "very few people take unorthodox ideas seriously today" I'm not sure he gets out of the house much—or goes on YouTube. Fluoridation, Wi-Fi, wind turbines, Illuminati, 9/11 truthers, Obama birthers, and dozens more come to mind. It may not be a majority of people, but it's definitely at cult levels, which Thiel says doesn't happen anymore.)

So here are 10 tweets I would take from the book. Not necessarily original ideas, but good ones to consider (I wouldn't take the last one as literally as he apparently does, but then again I haven't worn a suit in public since the 90s.):
  • Every startup should start with a very small market. Always err on the side of starting too small
  • Being the first mover doesn’t do you any good if someone else comes along and unseats you
  • Focus relentlessly on something you’re good at doing, but before that you must think hard about whether it will be valuable in the future
  • When you start something, the first and most crucial decision you make is whom to start it with
  • By far the worst you can do is to make your board extra large
  • As a general rule, everyone you involve with your company should be involved full-time. Sometimes you’ll have to break this rule
  • In no case should a CEO of an early-stage, venture-backed startup receive more than $150,000 per year in salary
  • The best thing I did as a manager at PayPal was to make every person in the company responsible for doing just one thing
  • The engineer’s grail is a product great enough that “it sells itself.” But anyone who would actually say this about a real product must be lying
  • Never invest in a tech CEO that wears a suit

Friday, March 07, 2014

London, Ontario and its 20 to 44-year-old population ... is it really so bad?

For its London X event this past weekend, Emerging Leaders republished some analysis from about a year ago of the 2011 Census that suggested London was doing a poor job of attracting and retaining people in the 20 to 44 age range when compared to other municipalities. At the time it was originally published, I looked it over and had some questions about whether London's numbers were really that bad, but didn't look into it more closely ... until now.

I'm going to use figures for the City of London rather than the London census metropolitan area (CMA), which includes eight municipalities, some of which are very different from London. London accounts for 77% of the population of the CMA, so there often isn't a big difference between the two, but the London CMA includes the farming-heavy communities of Adelaide Metcalfe and Southwold and the heavily working-class municipality of Strathroy-Caradoc, as well as St. Thomas. Looking at the CMA is worthwhile (and I have those numbers too), but if we're looking to draw conclusions about London, I'd rather focus on the data for London itself.

Looking at the 2011 Census numbers, for percentage of residents in the 20-44 age range, London ranks in the top five percent among all municipalities in Ontario. If we narrow that down to a somewhat arbitrarily chosen list of 58 larger municipalities and regions in the province, with a concentration on Southwestern Ontario, it looks like this:

(Some of these overlap—for example, Strathroy-Caradoc and Middlesex Centre are both part of Middlesex County. The "Essex" shown here is Essex County, not the Town of Essex.)

This is one of London's strengths. It's not in the elite 36%+ group with Toronto (37.6%), Kitchener (37.1%), Brampton (36.9%), Waterloo (36.4%) and Guelph (36.2%). But, at 34.6%, it's just slightly below Ottawa, Barrie and Kingston and ahead of a lot of Ontario's bigger cities, including Mississauga, Cambridge, Windsor, Oshawa, Hamilton, Brantford, Peterborough (which I didn't put on the chart), Burlington, and St. Catharines.

London clearly has a solid population base in the 20-44 age range, but what about growth rates? That was the focus of the Emerging Leaders analysis, and there's no question that the numbers aren't as favourable here. Still, London is far from being the worst performer and could probably be called middle-of-the-pack.

This is the change in the population aged 20-44 at the time of the 2011 Census from that at the time of the 2006 Census. London falls below the provincial average—which was pulled up by some good numbers in a few municipalities (the GTA and Waterloo Region had some strong performers). But ranking below London, you'll find Mississauga, Cambridge, Brantford, Hamilton, Barrie, Sudbury and even Waterloo, along with St. Catharines and Windsor.

Not a great result, but not notably bad either.

But there's another way to look at growth rates that I think is worthwhile. The Census is held every five years, and the number of residents is broken down into five-year age ranges. People in one age group in the 2006 Census would move into the next higher age group in the 2011 Census and the difference would come from deaths (more significant for older age ranges) and the net gains/losses from people in that age range moving in and out of the municipality. You can track those changes as that cohort moves along.

People aged 20-44 in 2011 would have been 15-39 in 2006. When you compare those two groups, you find that London actually had a gain of 2,285 people in that cohort between 2006 and 2011. That is, there were 2,285 more people aged 20-44 in London in 2011 than there were people aged 15 to 39 in 2006.

So London is attracting people in that age range, although most of the gains are in the 20-24 group. That's probably what you'd expect in a city with a university and a college. The top performers in 20-24 growth rates—Kingston, Toronto, Waterloo, Guelph, Ottawa, London—are all cities with universities. (And those same cities—with the exception of Ottawa—all place near the bottom in the growth rates for the cohort that was in their 30s in 2011. It looks like lots of people come for university and then lots of people leave over the next few years.)

A gain of 2,285 people sounds good, although it's still a middle-of-the-pack growth rate. In fact, Mississauga and Cambridge both leapfrog over London in this cohort growth ranking.

After you break it down further by age range, this is where you do find London near the bottom in some rankings. London's cohort-based growth rates for residents who went from being 25-34 in 2006 to 30-39 in 2011 were among the lowest of these selected municipalities. That would be consistent with the hypothesis that younger workers are hitting a wall in their career development and looking elsewhere, although there could be other factors involved. Waterloo's growth rates were even lower, as were Toronto's (for the group entering their late 30s, anyway), which surprised me, since I would think Toronto picks up a lot of people through immigration.

It's the suburbs that have the high growth rates for this cohort—Woolwich and Wilmot in Waterloo Region and Middlesex Centre in the London area are all at the top of the list. Middlesex County (which includes Middlesex Centre) has a strong growth rate for this cohort. That could be a useful topic for further research from Emerging Leaders.

Still, going back to the non-cohort view, even if you ignore residents in their early 20s—where London performs best—and just look at the 25-44 range, London still scores above the provincial average for its concentration of residents and just below the average for growth rate (see bar charts below).

There's certainly room for improvement. Other than Hamilton and Windsor, most of the municipalities that I think London would like to compare itself to place higher on one or both of these charts (just barely, in Waterloo's case), so it's worthwhile to look at ways to help make the numbers even stronger in 2016, 2021 and beyond. At the same time, there are plenty of municipalities in the province that would love to have London's numbers. They aren't great, but you could do a lot worse.

These charts and statistics are generated from spreadsheets that got increasingly complex as I went along, so there's always a possibility that I goofed up a formula along the way. I did some quick checks, but that's all I have time for. All the raw data for the 2006 and 2011 Censuses are available from the Statistics Canada website.

Thursday, February 27, 2014

IRAP Q3 contributions for 70 organizations across 12 regions in SWOntario

The quarter ended December 31 (Q3 FY2014) was huge for IRAP contributions across Southwestern Ontario—way too many to go through individually. The long list of recipients includes Snapsort, Miovision, Renix, Akira Systems, Ortech, Digital Extremes, TecVana, LifeLike Biotissue, Pulse Infoframe, Magnet Forensics, Thalmic, Sand Plains Aquaculture, Fehr Machine, and System-On-Chip Technologies. Communitech, Innovation Guelph and the Canadian Innovation Centre also received contributions.

A few of these actually happened in Q2 and were disclosed late, but even so, it was one of the most active periods you'll see—particularly in London, where 21 companies received contributions. As I've mentioned several times, IRAP has long been a leading supporter of the London tech community. But it wasn't just London—there were contributions in 12 different regions of Southwestern Ontario. There are innovative companies across the region in a wide range of sectors. The largest contribution was $291,076 for PEER Group in Kitchener, although it did not crack the top 50 across Canada.

Locations shown here are as listed in the IRAP disclosure.

Salt CanadaLondon$209,991
OCI Vacuum MicroengineeringLondon$88,240
Black Fly BeverageLondon$87,180
Barnes ElectricLondon$53,871
ProAble Hardware SpecialtiesLondon$50,000
Phoenix Interactive DesignLondon$50,000
Trac RailLondon$50,000
Hudson Boat WorksLondon$50,000
Akira SystemsLondon$50,000
DQE InstrumentsLondon$49,477
Ortech Data CentreLondon$46,500
Compudata SystemsLondon$41,600
Digital ExtremesLondon$39,999
HNH MachineLondon$37,080
Diagnostics Biochem CanadaLondon$30,000
LifeLike BiotissueLondon$30,000
Pulse InfoframeLondon$25,500
PEER GroupKitchener$291,076
Miovision TechnologiesKitchener$150,000
Accelerated SystemsWaterloo$119,000
Syrier PoultryElmira$96,376
Magnet ForensicsWaterloo$95,000
Thalmic LabsKitchener$50,000
System-On-Chip TechnologiesWaterloo$50,000
Deep TrekkerWaterloo$50,000
Canadian Innovation CentreWaterloo$46,000
Cambridge Metal ProductsAyr$32,000
DynamentAmherstburg  $132,000
Standard Tool & MoldWindsor$77,300
Lakeside ProduceLeamington$49,500
Policella FarmsKingsville$49,366
Sharbel GroupWindsor$48,816
Biobest CanadaLeamington$48,695
Sprucewood Shores Estate WineryAmherstburg$43,120
Strong DentalLeamington$41,781
Windsor MoldWindsor$40,300
1797472 OntarioLeamington$36,001
Brave Control SolutionsWindsor$30,000
iDream InteractiveWindsor$27,400
Hartmann CanadaBrantford$99,999
Gorilla Brake & ComponentsBrantford$50,000
Systems LogicBrantford$50,000
Rescraft Plastic ProductsParis$42,000
Gorilla Brake & ComponentsBrantford$36,000
Apogee Engineered CeramicsBrantford$29,000
RWDI AirGuelph$150,000
Innovation GuelphGuelph$95,000
Ontario Agri-Food TechnologiesGuelph$50,000
Creative Education Of CanadaSarnia$50,000
Roger H. WoodsWatford$49,800
Feher MachineSarnia$46,124
GCW Custom KitchensSt. Thomas$99,999
IGPC EthanolAylmer$50,000
Amino North AmericaSt. Thomas$50,000
Norfolk Fruit Growers' Association  Simcoe$75,585
Titan TrailersDelhi$35,065
Federal White CementEmbro$60,000
Sand Plains AquaCultureTillsonburg$47,353
AgraCity Crop & NutritionWallaceburg$44,000
Dashwood IndustriesCentralia$75,704
BTE AssemblyListowel$50,000

Tuesday, February 11, 2014

At first glance: Highlights of Budget 2014

Haven't read a lot of it yet, but these were some items that stood out from a innovation perspective ... and from a quasi-rural, living in Southwestern Ontario near the border perspective (a summary of my Tweets at the time):
  • Additional $40 million over four years to the Canada Accelerator and Incubator Program to help entrepreneurs create new companies
  • $305 million over five years to enhance access to high-speed broadband networks to a target speed of 5 Mb/s
  • Up to $30 million to IRAP to support youth internships in SMEs
  • Reallocation of $15 million annually within the Youth Employment Strategy to support up to 1,000 full-time internships at SMEs
  • $3 million over three years to the Canadian Digital Media Network for the creation of the Open Data Institute in Waterloo
  • $15 million over three years, starting in 2014–15, to support the Institute for Quantum Computing in Waterloo
  • Create the Canada First Research Excellence Fund with $1.5 billion in funding over the next decade
  • Additional $15 million per year to the Natural Sciences and Engineering Research Council
  • Additional $500 million over two years to the Automotive Innovation Fund
  • $8 million over two years to Mitacs to expand its support for industrial research and training of postdoctoral fellows
  • $10 million over two years in support of social innovation research projects at colleges and polytechnics
  • A new Immigrant Investor Venture Capital Fund "will require immigrants to make a real and significant investment in the Canadian economy"
  • "A plan to introduce legislation to prohibit unjustified cross-border price discrimination"

Monday, December 16, 2013

Leamington`s challenge: bouncing back despite low educational attainment

There have been a lot of plant closures announced lately, including several in the food processing sector, which municipalities across Southwestern Ontario promote as one of their strengths.

Leamington was particularly hard hit by news that Heinz is shutting down its plant there, where it is both the largest employer and taxpayer. Although there are many places in Ontario that have more people working in the food processing/manufacturing sector, Leamington has—by far— the highest concentration of those workers (NHS 2011) and Heinz was the foundation of the local industry.

Leamington is also notable for having Ontario's lowest percentage of residents with any university or college degree, diploma or certificate, at least among the more populated parts of the province. And, again, it's by a noticeably wide margin:

(On the chart, "SSPerth" is the combined Stratford-St. Marys-Perth County area, "Big26" is the 26 most populated municipalities in Ontario, "SWO" is Southwestern Ontario, from Wellington County west, not including the Hamilton-Niagara region, "SCOR" is the South Central Ontario Region, comprised of Norfolk, Brant, Oxford, Middlesex and Elgin, "NotTorontoCMA" is all of Ontario outside of the Toronto CMA, "MiddlesexNR" and "LambtonNR" include the Native reserves in the areas. I think the rest are all clear.)

As the chart shows, while the City of Waterloo scores very well for post-secondary educational achievement, and Guelph and London/Middlesex Centre do okay, as do LaSalle and Tecumseh in the Windsor metro area, the other parts of Southwestern Ontario fall below the provincial average, and in many cases well below. My municipality—Strathroy-Caradoc—just misses the bottom ten (or the top 10, as shown in reverse order above).

But even among Southwestern Ontario municipalities, Leamington is at the bottom of the list, which will present some special challenges as the community rebounds from the Heinz closure.

Friday, November 29, 2013

Rebellion Media tops IRAP Q2 contributions in SWOntario

Waterloo's Rebellion Media was awarded the largest IRAP contribution in the country—$500,000 —in the quarter ended September 30 (Q2 1014), according to NRC's disclosures. Other companies in Southwestern Ontario that received IRAP funding included London's Big Blue Bubble and Kitchener's Miovision. Contributions were awarded to organizations in Waterloo Region, London, Middlesex, Windsor, Essex, Guelph, Chatham-Kent, Grey, Bruce, Norfolk, and Brant.

Among organizations in Ontario supporting innovation, MaRS, Invest Ottawa, VentureLab, Communitech and OCE all were awarded contributions of $250,000 or more.

Q2 IRAP contributions to Southwestern Ontario-based organizations:

Rebellion MediaWaterloo$500,000
Whitfield WeldingOldcastle$312,000
Concours MoldLakeshore$150,000
Eclipse AutomationCambridge$99,999
Sport Systems UnlimitedWaterloo$99,000
HNH MachineLondon$98,393
Pavaco PlasticsGuelph$80,857
WEtech AllianceWindsor$70,000
Big Blue BubbleLondon$54,620
Miovision TechnologiesKitchener$50,000
Ontario Aerospace Council (OAC)Kitchener$50,000
Excellence In Manufacturing Consortium  Owen Sound  $50,000
Bluewater Wood AllianceWalkerton$50,000
Southern Ontario Water ConsortiumWaterloo$50,000
Advanced Machining ServicesWindsor$49,000
Great Lakes GreenhousesLeamington$48,990
Bluewater Wood AllianceWalkerton$47,927
Canadian Tooling And Machining AssocCambridge$44,000
The Sanderson Harold CompanyParis$34,200
Bluestreak EquipmentDelhi$30,000
21310439 Ontario Leamington$29,232

Some notable contributions to organizations across the province supporting innovation:

MaRS Discovery DistrictToronto$400,000
Invest OttawaOttawa$350,000
Ontario Centres Of ExcellenceToronto$250,000
Canadian Youth Business FoundationToronto$248,000
Northwestern Ontario Innovation CentreThunder Bay$150,000
Niagara CollegeNiagara-OTL$100,000
Sault Ste. Marie Innovation CentreSault Ste. Marie  $100,000
George Brown CollegeToronto$100,000
Mohawk College InstituteHamilton$85,000
RIC CentreMississauga$80,000
Innovation FactoryHamilton$75,000
University Of Toronto - RotmanToronto$75,000
Spark CentreWhitby$75,000
WEtech AllianceWindsor$70,000
Angel One NetworkOakville$60,000
Southern Ontario Water ConsortiumWaterloo$50,000
Innovation Initiatives Ontario NorthNorth Bay$49,048
Launch LabKingston$40,000
Maple Leaf AngelsToronto$35,000
Biomass Innovation Centre (NipissingU)  North Bay$30,000

Wednesday, September 18, 2013

RIM was the Beatles of Waterloo's tech sector, but not its foundation

A few weeks ago, I mentioned that—according to the recently-released 2011 National Household Survey—the Kitchener-Cambridge-Waterloo census metro area (CMA) had passed the Ottawa CMA for percentage of residents working in software & IT & computer and communications manufacturing. I noted that a lot of that was due to RIM/BlackBerry, and that becomes clear if you back out the communications equipment manufacturing component.

According to the NHS, KCW (not exactly the same as Waterloo Region, but close) had 40% of all communications equipment manufacturing workers in Ontario—that is, people working in any role for companies in the communications equipment manufacturing sector.

That's really an amazing number. There are very few sectors where the Toronto CMA wasn't in top place for total numbers, which is what you'd expect from a region that comprises 44% of Ontario's population. It was even number one among CMAs and CAs for farm workers. But not only was communications equipment manufacturing an exception, KCW dominated the category, far ahead of Toronto's 29% and Ottawa's 13%.

Not only did the number dominate other regions, it also dominated KCW's tech sector. NHS figures showed KCW with nearly 50% more people working in communications equipment manufacturing than in the software/IT sector. Not all of that was due to RIM (these are 2011 numbers, remember), but that was by far the biggest chunk.

At the most granular, four-digit NAICS level of analysis, communications equipment manufacturing was the second biggest employer in all KCW in 2011, behind only elementary and secondary schools and ahead of insurance, universities, and grocery stores (the next three on the list).

When you look just at software and IT companies, KCW drops to third place behind the Ottawa CMA and the Toronto CMA for percentage of the workforce in those industries. It was also third in total numbers, with the Toronto CMA home to more than three-fifths of all people working for software/IT companies in Ontario.

Third isn't as nice as first, but when you consider that this is discounting any contribution from RIM, that's not too bad. KCW runs well ahead of the larger Hamilton CMA and has double the numbers of the similarly-sized London CMA.

These numbers provide some perspective on recent discussions around BlackBerry and its place in the Waterloo tech sector.

For years, Waterloo's tech rep was built around UW. Then RIM became the standard bearer and Waterloo's rep soared to new heights. RIM's success created a halo effect around the entire region's tech sector and, as I wrote last year, "thanks to RIM, people were ready to believe that a lot more was going on in Waterloo than was really the case for many years. We put that belief to good use, attracting the resources needed to help the reality catch up to the belief."

But it was only Waterloo's rep that was build around RIM, not its tech sector. I spent years working in the Waterloo startup community and hardly had any contact with RIM and very limited contact with ex-RIMers doing startups (there was Ali Asaria, Dave Kruis, Ian Russell, and undoubtedly some others I no longer think of as RIM guys, but it wasn't many). There's more of them now, but RIM wasn't a feeder system for Waterloo tech companies and was only a major customer or partner for a tiny number of the area's tech companies. Waterloo Region's tech community wasn't built upon RIM and RIM was certainly not the foundation of the startup community.

We may now be in the homestretch of BlackBerry's run as a standalone company. That's led to a lot of things being written about Waterloo Region over the last year, ranging from is-Waterloo-the-next-Detroit (no) to pfft, we've-got-hundreds-of-tech-companies. And Waterloo Region does have hundreds of tech companies—and the regional tech sector is one of the biggest in Ontario (and Canada) even with NO contribution from RIM. At the same time, there's only been one RIM and we may never see another one in our lifetime.

For years, I said that people in Waterloo asking who their next RIM was going to be was like people in Liverpool asking who their next Beatles were going to be. I think it's okay to acknowledge that RIM was the Beatles of Waterloo's tech scene, while accepting that this doesn't mean that Waterloo's tech sector is on the verge of collapse or that there will be any fewer companies launching and growing in the years ahead.

We've already seen evidence of how strong and diverse the Waterloo Region tech community is. According to the National Angel Capital Organization, GTAN was the most active angel group in Canada last year (by dollars invested). When FedDev Ontario ran its Investing in Business Innovation program in 2011-12, it placed more than $16 million in 20 high-potential companies in the area in just a 15-month period. I believe that only the Toronto area had more companies funded, and most other comparable communities didn't come close (Ottawa did well too, Hamilton had one company receive IBI funding, London had none). None of the funded companies was related to RIM and this level of activity suggests that Waterloo Region's tech sector will continue to be strong, with or without RIM.

It's highly unlikely that any of them will ever be what RIM was, and it was good for Waterloo's tech rep to be able to cycle in the draft created by RIM. But the community used that time well and is well-positioned for whatever comes next.