We’re announcing the launch of Scalability Inc. a spin-off from Flow Ventures. Scalability has one goal: to take away all the hassles business owners go through to run the administrative side of their business. This includes bookkeeping, accounting, government filings, payroll, record keeping, and human resources. Remember, as your business scales, so does the complexity of your back office.

How are most companies managing their back office today? The more organized companies spend a lot of money on admin staff, bookkeepers, accountants and consultants. This is costly and the responsibility to keep on top of everything still falls on management.

Less organized companies simply let things fall through the cracks: taxes get filed late, it takes longer to get paid, your staff suffer because everything is disorganized. Worst of all, as a business owner you just don’t feel you have visibility into what’s happening in your business.

Why you need Scalability Inc.
We are back office experts and startup experts. We not only take care of your admin tasks, we monitor your business so things are taken care of before problems arise. We get excited about best practices in administration, seriously!

Scalability Inc. operates remotely and in the cloud. Every file is archived digitally. Every transaction is logged. We’ll even open and scan your mail if you want us to. Best of all, you always have a human being you can talk to with any questions or special requests.

We offer flat-rate subscriptions so you can plan your cash flow effectively rather than be unpleasantly surprised when you receive an hourly-rate bill. We have packages for each stage of your business and we’re rolling out premium services that you can order on an ad hoc basis.

Getting Started
Check out our packages at www.scalability.ca. Or just contact us directly to learn more. We’d love to hear your feedback and we offer a free evaluation of your current back office so you know where you stand.

Also follow us on Twitter: @scalabilitycainc and join our Facebook page.

A client of ours has some extra office space they’d like to sublet. They’re perfect for startups: renovated, furnished, located right downtown and only requiring a one-year commitment. Each space has both closed offices and plenty of open space.

Take a look and contact me if you are interested.

460 Ste Catherine Street West, Montreal – 8th Floor #1

1400 sq ft, $17/sq ft, 12 month lease

Move-in ready, washroom, closed offices and open space, newly renovated, furniture (desk, chairs, cubicles) can be included for a small fee, cabled for Ethernet

I’ve spent a lot of time thinking about incubators. Creating one, mentoring at others, visiting lots and being skeptical of several (I’m not saying which). You can decide for yourself if you think there is an incubator bandwagon being jumped on, but one incubator that marches to its own distinct drumbeat is The Founder Institute.

Here are two examples: 1) they don’t give you money and charge a nominal tuition fee, and 2) all founders who go through The Founder Institute get a share in a common equity pool. That’s pretty innovative.

Entrepreneurs already know Adeo Ressi, who is the founder of The Founder Insitute, as the man behind TheFunded.com. He’s also behind a bunch of other successful startups and is a bit of a renaissance man.

I spoke to Adeo recently about what makes The Founder Institute so different, why it works, and why Canada needs the Founder Institute. I think it’s a great model for talented Canadian entrepreneurs who don’t necessarily fit the ‘mould’ of the TechStars/YC genome. At the end of the post I’m going to ask for people to step forward if they would be interested in talking about getting The Founder Institute in their Canadian city. I know Adeo is interested, and so am I.

Here’s the interview:

You’ve built 8 startups, 4 of which were acquired. What’s the secret to your success?
Perseverance. No matter how bad things appeared, we struggled through the adversity to find the magic. Building a company from nothing to a few hundred or a thousand employees in a few years time is an immense challenge. The moment that you master one phase of growth, you are already onto the next. It takes a high degree of self awareness and perseverance to succeed. There is this meme that failure is acceptable. I prefer to triumph over adversity.

Your last two startups, TheFunded.com and Founder Institute, are about helping entrepreneurs. Is this philanthropy or business (or both)?
Entreprenurship is becoming harder, and I want to give back to the craft of entrepreneurship. A strong philanthropic mission can only endure with a solid business underpinning, so the Founder Institute is a for profit entity. I am turning over the for profit company stock to a long-term trust to guarantee the philanthropic mission for at least 100 years.

As I became more successful as an entrepreneur over the last 18 years, it became easier to build amazing products and harder to build great companies. When I started in 1994, about 1 in 100 companies were successful. Now, less than 1 in 1,000 companies are meaningful. The Founder Institute was designed to invert the startup failure rate, and our goal is to create 1,000 meaningful and enduring technology companies per year. We expect to hit this goal in 2012, less than 3 years after being incorporated ourselves.
There are a lot of incubators out there. What is different about the Founder Institute?
I am a huge fan of the programs being launched to help entrepreneurs. There is a renaissance going on. Most other programs help entrepreneurs that have a company, a team and traction. The Founder Institute looks for passionate people with a dream, and we help them create a meaningful and enduring technology company. I like to say that we mine diamonds, while others make jewelry.

We have chosen the most challenging segment, inception. Everyone involved in the Institute is a founder, and we create an equity pool that shares the upside created from the companies among everyone. So, if you graduate from the program and fail while a peer goes on to succeed, you will also see a return from your peer’s success.

Who should (and who should not) attend Founder Institute?
Everyone who has a dream to start a company should apply. We have absolutely no gender, race or idea biases, which also separates us from various other programs. The average age of applicants is 34 years old, and we have a 21% female graduation rate. Just due to our scale, the Institute is the largest female incubator in the world. I would eventually like to see our graduation demographics resemble the demographics of the working population.

What’s the greatest success of the Founder Institute to date, and why?
The greatest success of the Founder Institute is are helping thousands of people pursue their dream. We survey all enrolled Founders around the world, and nearly everyone would proactively recommend the Founder Institute. Some semesters are better than others and some locations have a stronger ecosystem, but the survey results are universally consistent.

What do you think Founder institute can do for Canadian startups?
The Founder Institute is a great asset for a burgeoning entrepreneurial ecosystem, like in Canada. We encourage successful entrepreneurs to help the next generation of companies and give them economic upside from the results. We help local Founders to launch meaningful and enduring companies. We provide a high quality stream of companies for other incubators, for investors and for various vendors. Ultimately, we are a value added player in the ecosystem, and we get along with everyone else.

You’re on the Board of the X Prize. Why are you so passionate about private space travel?
I am passionate about models to inspire innovation, and I believe that prizes are effective. As Chairman of the Strategic Committee when the Ansari X Prize was won in 2004, I pushed the foundation to expand the prize model into other categories, such as genomics, automative, medicine, etc.

There’s a great picture of you with President Clinton (http://www.adeoressi.com/about/). Seriously, how cool is he? What about Hillary?
In the photo, I am standing next Jeff Dachis as well, the Co-founder of Razorfish. I find that Founders are a much better bunch of people to spend time with than politicians, and I look forward to traveling around the world to meet aspiring Founders.

THE ASK

I think The Founder Institute would work really well in Canada. I think there are a lot more entrepreneurs than available spots at incubators and Adeo has really focused on what’s important for idea-stage startups. They’ve launched 415 companies in 20+ cities around the world.

I’m looking for interested parties to step forward if you’re interested in starting, running, mentoring or hosting The Founder Institute in Canada. Leave a comment or contact me directly.

The ancient Greek aphorism “Know thyself” is very relevant to entrepreneurs. Most founders don’t give much thought to how their own personality type influences how well they run their startup. Remember, your reality distortion field distorts yourself too.

The good news is that for the first time since I’ve been building companies, entrepreneurs share a common framework for guiding their startups: the Lean startup. Sure, some people don’t use the right vocabulary and misunderstand Lean. But I find that Lean thinking has permeated the entrepreneurial community, so much so that some founders are following the principles without knowing the term “lean startup” at all.

The bad news is that there’s still a huge gap between the understanding of lean startups and the practice. It’s frustrating to see and I think one reason is founders don’t take into account how their own personalities influence the process. I haven’t seen anyone ask: “How is my own personality getting in the way of being lean?”

To help answer that question, I’ve created a list of the top 5 personality archetypes I come across, as well as some things to watch out for if you recognize yourself in one (or more than one) of them:

• “Smartypants” – You’re very knowledgeable and you want people to know it. You love complexity. You believe that superior intellect and knowledge will close the sale, investment etc.
• Watch out: you’ll ignore the simple solution (which is often the best one) in favour of something more impressive. You’ll discount what customers say because they aren’t smart enough. You’ll be attracted to innovation vs execution.
• “Intelligent Architect” – Most engineers have this personality type. You like to build machines and you like it when they work as planned. You like the design phase of projects because there are no customers in the design phase…
• Watch out: you’re going to be very uncomfortable when your startup is trying to find a business model vs building a product. You can’t architect a solution when you don’t know what the problem is yet. Pivots will drive you crazy because there’s nothing wrong with the code.

• “The Advocate” – Most sales people (and almost all entrepreneurs) are strong when it comes to selling their vision or advocating what they believe in. In a meeting, especially a brainstorm, you talk rather than listen.
• Watch out: when you’re trying to find product-market fit, you’d better hone your shutting up skills. You can’t hear your customers’ voices when you’re still talking. You already know your own position, it’s time to listen to others.

• “The Dreamer” – I saw a pitch deck recently for a hyper-local startup. Great deck, nice screenshots, but within 5 minutes the entrepreneur admitted he probably would never use the product, nor did he think anyone else would. It’s easy to envision success IF everyone used your product. It’s harder to make it so.
• Watch out: you get excited about building an empire but you have a blind spot when it comes to actual customers and their problems. You’ll overestimate how well your product solves their problems.

• “Mom and Pop” – One great thing about Lean startups is that founders are getting in close proximity to customers to validate their businesses. Most people start with people they know in their community. If you’re a natural hustler, you’ve probably walked down Main Street knocking on doors and signing up beta customers.
• Watch out: You’ll hold as proof of your business the fact you signed up 10 restaurants in your neighbourhood. Instead of using (and possibly abusing) them to test your hypotheses, you’ll want to make them happy and get pulled in many directions. Be careful you don’t lose sight of the goal. You’re trying to build a scalable business, not a local consulting company.

Spend a bit of time thinking about who you are. Better yet, ask the people around you and make sure there are no sharp objects close by. There’s no value judgment here. There are no “good” or “bad” personality types. But the sooner you recognize your own personality type(s) the sooner you can get out of your own way.

nosce te ipsum

I was having coffee with a founder the other day and we started talking about his hiring plans. Since he’s a non-technical founder (which Ben Yoskovitz claims is a dead-end to begin with) he had several top coders in mind, all of whom were earning big bucks with larger companies.

“I’m paying them a little bit of money but they’ll join full time once I can raise money,” said the founder. It’s something I hear a lot, especially from non-techie founders.

I went back to review some blog posts on Lean hiring, and I came across Eric’s post “Lean Hiring Tips” and Mark MacLeod’s “Fat Hiring for Lean Startups“. Both are worth your time. But I think they’re also written for startups that are already up and running and need to expand. I’m interested in very early stage hiring, e.g. when you’re one person looking for a co-founder or you’re two people looking for your core team.

Companies always take on the characteristics of their founders and in the rush to scale, I find many startups don’t stop to consider how they’re establishing the DNA of their company. The first few hires are the most important ones you’ll make.

• Hire for an experimental mindset – Look for people who enjoy encountering problems, designing ways to solve them, and finding proof of success or failure. Skill at building, whether it’s software or a marketing plan or a sales funnel, is irrelevant at this point. You need people who will volunteer to scrap their plans, not fight you when you want to change course.

How? Join a hackathon, Lean Machine or just create your own (laptop + Starbucks = hackathon). Give your (potential) team a crazy challenge and see who exhibits the right behaviours.

• Hire generalists – A lot of people will disagree with this advice. If you can find the best Python developer in the country go for it. But only if she’s also willing to cold call customers, crank out some Web site copy and help you whiteboard the business model. Your #1 focus is to find a business model that works. The latent technical talent on your bench won’t help you unless you graduate from this first phase

How? Again, hackathons are great practical tests. No matter what their skillset, look for passion about your business model and solving customer problems.

• Prioritize UX over development – This is easier said than done since there’s a shortage of UX talent. But it’s better to have a kick-ass UX person and a mediocre developer than the other way around. UX will help you find your business model and most (good) UX people already have an experimental mindset and generalist attitude

How? Actively seek out UX people, not just developers. You may need to work at a distance if you can’t find local talent. Consider working with less experienced people if they can prove themselves through testing.

• Get skin in the game – Leaving a six figure job to join your startup for a paycut is not skin in the game, or not enough in my books. Hire those people later when you’ve found your business model, have money in the bank, and need to scale. Skin in the game means working full time, just like you are. It means putting their reputation on the line, raising Ramen funding from friends/family/spouses and saying “I’m going to see this through until we fail.”

How? Stop feeling like you’re a poor startup that can’t afford to pay top salaries. Those aren’t the droids you’re looking for. Think of finding your co-founders like raising your first round. You need to get them excited to invest in your business.

I know this advice seems to apply better to “Web” startups than general technology startups, which is a common criticism of Lean startups in general. But I think it applies more broadly. If you hire for the right attitude, you not only solve the critical product-market fit problem, but you set the DNA of your business right from the start. I guess I haven’t seen too many examples of startups failing because they lacked a specific technical skill. They probably think they failed because of it though.

In the end, I guess “hiring” is the wrong word to begin with. You’re looking for people to co-found a business with you. You aren’t buying their skills, you’re asking them to invest in helping you shape the course of your business from the very beginning. Maybe not all of them (including yourself) will be able to scale up with the business. That’s a problem for another day.

It’s a positive development that startups have figured out that metrics need to be at the core of their business and their pitch. Thanks to the Lean Startup, Dave McClure’s “Startup Metrics for Pirates” and investors who are asking for a dose of proof with your passion.

I find that startup founders are more at ease with acquisition funnels, the viral coefficient, and cohort analysis. But many are getting lost in the weeds and losing sight of the big picture. You have a 3D cohort analysis graph (you know who you are…) but I have no idea what it means.

When you’re launching a new product, I think all of your key metrics can be derived from asking three simple questions:

1. What is your core value proposition?
2. How do you know people care?
3. What’s the proof you’re delivering on your value proposition?

A shockingly large number of people still can’t define their value proposition in simple terms. E.g. we do A for B. The problem is, if you can’t even describe the core promise of your business, you can’t focus your product development, or market effectively, or measure your performance.

Customer acquisition is the time to test the promise of your business before actually having to deliver anything. This is where the fake “Buy” button works. If no one clicks on it, you don’t need to build anything. If your Facebook ads get no click throughs and no one makes it through your sign-up form, that’s the market telling you they don’t want what you’re promising and they don’t care if you can deliver it.

“Once I build my product I’ll be able to prove that customers want it.”

          – misguided entrepreneur

If you’re able to acquire customers that’s great news. But now you need to create metrics that prove that users are engaging in your product in a way that demonstrates value creation. This could be daily active use, amount of user-generated content, referrals to other friends or, obviously, spending money.

But you need to avoid the temptation to create vanity metrics that paint a rosy picture. You can’t build a business on 100k tire kickers from TechCrunch. But if you can find a few users that are truly engaged and truly getting value, you can probably find more of them. Make sure you set a high bar for what constitutes an “active user”. It doesn’t jive to say you’re disrupting an industry while making active user = “logs in at least once per week”.

Many products have more than one type of user. Not just “average users” and “whales” but people who derive different types of value from your product. In a marketplace product (real estate for example) you have buyers, sellers and brokers. All define value differently and need to be measured differently. The point is, you’ll probably have more than one metric that constitutes proof that you’re creating value overall.

Some Plain English Metrics

First, write down a 1-2 sentence value proposition. Seriously, stop avoiding it and do it.

1. What acquisition metrics indicate a positive reception to your value proposition? Eg. effectiveness of paid and organic users; virality; activation rate.
2. What is your definition of an “active user” and does this absolutely prove that you’re delivering on your value proposition? More clicks can be due to high engagement or bad UX… This is the toughest metric to design.
3. Are engaged users maintaining or increasing their engagement over time? If not, how come?
4. What % of acquired users never become active? Why?
5. What % of engaged users drop-off? Why?

The most difficult metric to gather is why people stop using your product. By definition, these people are hard to talk to. Bend over backwards to talk to these people: offer them incentives or a personal email from the CEO or a compromising photo of the CEO. The data you get will be qualitative but you’ll be able to spot trends and make changes.

Answering the above five questions isn’t easy. One word of advice is not to worry about getting real-time data (you don’t need it) or perfectly accurate data (which you can’t get). You’ll probably have to throw in some qualitative data and wild guesses. That’s ok because at the beginning you’re looking for big obvious things. You’ll have plenty of time to optimize later.

Also, it’s expected that many of your metrics will suck. You’ll be trending down, not up. This is information you can use to change, fix, and pivot your way to success, or at least the next release.

Conclusion

Get back to basics by defining some plain English metrics for your business. If they’re well designed and information gathering isn’t crazily difficult, you’ll not only have a better view of your business but you’ll find it much easier to create meaningful projections. You’ll be able to have more intelligent conversations with your team and your investors, which hopefully are also taking place in plain English.

SREDFacts (www.sredfacts.com)is a new blog that delves into all aspects of SRED, from determining eligibility to claiming expenses to living through an audit. It’s a useful blog for startups, technology companies and anyone else interested in learning more about this tricky program.

Flow is looking to hire an experienced SRED Writer in Montreal, Ottawa or Toronto to work with us on a contractual basis, possibly leading to a permanent position. Your role would be to help us take raw data and information to help us create R&D technical documentation for SRED claims as well as other government grants and subsidies that Flow prepares for our clients.

Responsibilities include:

• Translating raw data into key concepts to create content for technical documentation

• Writing technical documents for SRED claims

• Writing and filling in government forms for grants and subsidies.

Skills and experiences required:

• Previous experience with SRED

• Exceptional English writing skills

• Capable to write creative and well structured documents

• Previous experience in software development

• Deep understanding of web based & internet technologies

• Ability to work independently

• Excellent interpersonal skills

• Meticulous attention to detail

Please send your CV to pbailey@flowventures.com

Please note that only qualified candidates will be contacted

There’s never been a better time to be an entrepreneur. Building a product is cheap and fast thanks to Open Source frameworks and the Cloud. Getting to market is easier than ever with app stores and affiliate programs. Super Angels and VCs are stepping on each other’s toes getting into early stage deals! Early exits are on the rise offering lower risk (but life changing) ‘outs’ for entrepreneurs.

But what I’m most excited about is that we’re beginning to have a set of best practices, thanks to the Lean Startup. Yes you need to have passion and vision (equally true whether you’re an Evil Genius or an entrepreneur). What’s been missing is a way for entrepreneurs to know what questions to ask and how to interpret the answers, especially when they don’t conform to the original vision. This is a lot tougher than it sounds.

That’s why we created Year One Labs with Ben Yoskovitz, Alistair Croll and Ian Rae. We want to help you realize your (huge) vision of the future by focusing on achieving the important things in your first year. Things like finding out who your customers are and building a product that solves a problem they care about. You’re not building a business (yet). You’re searching for a repeatable and scalable business model. We’ll do whatever it takes to get you there including getting you in front of the right customers, helping you build your product, and being brutally honest when your metrics don’t agree with your vision.

So what are we looking for?

1. Passion – You love solving big huge problems (not just creating big huge companies, or Evil Empires)
2. Ability – You have incredible knowledge and skills, and you can just get sh*t done
3. Focus – Nothing distracts you from your goal, certainly not failure

The best way to ‘pitch’ Y1L  is to sit down with us face to face and talk about the problem you’re going to solve. Ideally without Powerpoint. Oh, and you should read Four Steps to the Epiphany and everything in Eric Ries’ blog.