500 Startups gets active in Toronto

As a result of a sea change in Silicon Valley, Selcuk Atli, entrepreneur in residence of one of the Bay Area’s most successful and prolific accelerators, said that 500 Startups is getting active in Toronto. Why should you care?

Things are changing in Silicon Valley. Atli says there are so many startups and fast-growing companies with traction that, “the Holy Land (Silicon Valley) is a little dry right now. Talent is distributed on too many things. We pay $250,000 for an engineer — and they pay all that in rent… San Francisco is one of the best places to grow companies post maturity but it is the worst place in the world to start a company right now.”

500 Startups is reaching out to many cities, including Toronto. Two 500 Startups projects you will see in Toronto are Distro Dojo and 500 Labs.

Growth hacking a Canadian startup to improve traction.
Growth hacking a Canadian startup to improve traction.

Distro Dojo. Atli says it’s for companies that have raised a seed round, have built a product that’s generating steady growth and need to raise a strong Series A. “What you need is not only money,” says Atli. “You need to figure out your marketing strategy and build your growth engine.”

Atli says Distro Dojo is a 5-week boot camp for about 8 to 10 companies. “We fly in some of the best growth marketers in the Valley to come in and help these companies …. day to day during this 5-week period, to figure out their marketing strategy and grow their companies. And help them figure out what they need to do over the next 12 months.

“We’re going to invest $250,000 in each of these companies. We withhold $50,000 for program fees… As a result, you have $200,000 to spend on growth. And you’re going to get to know what you need to work on to hit your growth numbers. (Distro Dojo is) a vehicle that helps us to invest and to grow startups to the next level.”

500 Labs. Atli says this is a venture studio, “a platform where we… test many, many ideas, do a lot of experiments, kill the ones that don’t work, no zombies, and double down on the experiments that are successful. And if they’re more successful we spin out those companies with the teams that built them.”

Atli says he is cofounding 500 Labs with 500 Startups colleague Dominic Coryell. “We decided to set up shop here in Toronto and Waterloo. Because there’s really awesome raw talent…

“We’re not doing outsourcing sweatshop stuff. We’re trying to find people who are going to run experiments with us and become co-founders and founding members of companies.

“For the talent we think it’s going to be awesome. What we see is some really awesome engineers and designers. They have two choices. They can join this big company like Facebook or Uber. They don’t learn as much…

“On the other hand you try to build a company without a lot of experience. It’s a good way but it’s an expensive lesson.

“So, what if there was a platform where you could get a good competitive salary and failure is totally fine because it’s part of the process? You’re supposed to fail. We know most of our experiments are going to fail. And then once you have a hit you become a founding team member and you’re off to the races. You build a company with experienced people in Silicon Valley.

“We’re not going to move these people to Silicon Valley. It’s about building Silicon Valley companies right here in Toronto.”

I’ve criticized the so-so results of accelerators. To be fair, things have been moving in the right direction and we’re up against a tough ecosystem challenge. We have a talent gap. We are short of go-to-market talent, the people with skills and experience in sales, marketing, product management, operations and finance for global growth companies. A big reason we have so many premature exits is that the depth of go-to-market talent doesn’t match the engineering talent pool. Imagine: go-to-market skills are more important than engineering.

A little dose of Valley go-to-market expertise and culture is a good thing.

And if some of the 500 Startups aggressiveness rubs off here, that’s good too. Since Dave McClure founded 500 Startups in 2010 it has backed over 1,500 companies. All that activity has produced results. McClure, with typical humility, wrote on Quora that the exits of 35 or so of 500 Startups alum have generated $4.3 billion. That’s cash, not valuations.

More good news is coming. Steve Tam of Indiegogo will be in Toronto February 2 to talk crowdfunding.

For hardware guys like me this is fabulous news. The success of software startups has made hardware startups even more challenging. It costs more to validate the markets of hardware startups and scale them, so investment has shifted to software. Crowdfunding has collapsed the cost of market validation for hardware startups. Healed Achilles’ heel. Indiegogo is not the only crowdfunding site on the planet but it’s the biggest.

If you are working on a hardware startup you need to meet Steve Tam.

Geoff Foulds
Geoff Foulds
What fascinates me are the edges. And nowhere are the edges edgier… the stakes higher… than startups. There are plenty of sources of friction, compression and tension among founders and financiers, engineers and marketeers. How do you mesh all the edges so they transmit power even when loads are heavy? That’s what I write about.

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Jim Love, Chief Content Officer, IT World Canada

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