To Serve Man

I was recently asked to participate in a panel on the topic of “What is Web 3.0?”.  My first reaction was “Happy to do it”; my second reaction was “What the heck is Web 3.0?”.  So I turned to my trusted source for inspiration – my colleague, Bram Sugarman.  We were bouncing off ideas when I had a rare moment of clarity.

An episode of the Twilight Zone, brilliantly parodied by The Simpsons, epitomized what Web 3.0 is to me – “To Serve Man”.  In the episode, aliens landed on earth, bringing with them a book entitled To Serve Man.  As the human population rejoiced with their new, friendly visitors, it turned out that the book was a cookbook, serving up delicious recipes in which humans were the main ingredient.

I wondered if, since the introduction of the web age in the mid-1990s, the promises of the web would truly begin to serve mankind with the promised productivity gains or, instead, will technology continue to devour mankind?  Web 3.0 might just be what we have been waiting for … almost 20 years later.

Web 1.0 commenced around the birth of Netscape in the mid-1990s.  It provided the consumer with access to information through the personal computer – the information superhighway.  Web 2.0 commenced approximately 8-10 years later, characterized by the launches of Google, eBay, and then Facebook.  It focused on organizing such information in order to search, buy and share.  I believe we have already commenced the Web 3.0 age with the likes of Pinterest and Spotify.  Web 3.0, in its simplest form, is the curation of information.

Web 3.0 promises to truly (finally!?) give the consumer what they want, when they want it, and how they want it.  Why now?  The combined technological forces of mobile, cloud and social have intersected at the same time and will enable Web 3.0 to deliver what was promised almost 20 years ago when the web crossed the chasm.

• The “what” is curation – using the social graph and big data analytics.
• The “when” is brought to you by virtue of the cloud – scalable, always on and accessible from anywhere.
• The “how” is mobility – simply and elegantly architected and also consumed in the enterprise.

I am excited to be entering the age of Web 3.0.  I am excited at the prospect of technology truly making our lives more productive.  If I am wrong, I guess I will make a good bouillabaisse.

John Ruffolo

How sweet it is! OMERS Ventures invests in Sweet Tooth

Omers Ventures excited to announce our investment in Sweet Tooth.  Sweet Tooth is an early stage technology company based in Waterloo that enables merchants to offer unique and effective customer loyalty programs for their customers. Sweet Tooth is the world’s easiest to use customer loyalty software; it allows for optimization of any loyalty program to perfectly engage a particular customer base or target market.

Read more at http://ow.ly/aK79c

When does a secondary investment make sense for a VC to consider? One VC’s opinion

Over the years I have had many a debate with entrepreneurs and partners about whether it is the right strategy to provide liquidity to founders and/or early investors.  I don’t believe there is an easy or right answer. 

The answer is, it depends. Depends on what?

I am going to take it as a given that the company has a huge market opportunity, world-class product or platform idea with frictionless ideas for scale and a spectacular team. So now it comes down to how best to make certain your world-class team is motivated to go all the way and build the next $1 billion dollar company. 

If the founders are already wealthy from previous exit (s) then I would argue the best way to align with your founders is to have them invest a “meaningful” percentage their net-worth along with you.  Meaningful is vague I realize but it really does depend on entrepreneur. The amount is what you think makes sense.

If the founders have not yet created the wealth to allow them to “swing for the fences” and/or co-invest with you then you need to consider the idea of buying some of their equity in a secondary.  Buying some of their shares will give them, and their families, the security and confidence to say no when the first, second and third offers to buy the company come along.  Those offers will come for the best companies and teams, they always do. 

The decision to make a secondary investment is much easier to make when a company is generating it’s own cash but gets much, much, harder prior. In my opinion it’s the right investor strategy when you believe that you have found that unique mix of market opportunity, product or platform, and team.  If you truly believe, do it every time.

Contributed by Derek Smyth

MaRS announces JOLT: New technology accelerator will combine creative design and business expertise to build growth companies

JOLT will select up to 15 high-potential startups annually, providing them with space, seed financing and mentorship, as well as access to partners and some of the top angel and venture capital investors in the industry.

The goal of the program is to accelerate market validation and, in turn, help these companies secure the capital and talent necessary to scale efficiently.

To help support and guide startups to market entry, JOLT has attracted more than 70 experienced entrepreneurs and executives from many of Canada’s leading startups, and venture capital, technology and entertainment companies, including: Polar Mobile, Spark59, Virgin Gaming, Google, Zynga, Kobo, and more.

JOLT will announce the call for applications shortly.

ow.ly/avlFP

OSC Announces Small and Medium Enterprises Committee Members for 2012-2013

Montreal Mentor Monday – May 7th

Registration for the Montreal Mentor Monday is now open. 

Date:        Monday, May 7, 2012

Location:  Maison Notman House, 51 Sherbrooke Ouest, Montréal, QC

Time:       3:00 to 6:00 pm

Click here to register and use the password “DPMontreal”.  Registration is limited.

Questions?  Contact Karin Dean-Williams.

OMERS Ventures Invests $20 Million for Equity Stake in Leading Canadian Startup HootSuite

One of the largest Canadian VC transactions in the past 10 years

OMERS Ventures, the venture capital investment arm of the OMERS Worldwide group of companies, and leading social media management system company HootSuite Media Inc., are announcing one of the largest Canadian venture capital transactions to take place in the past 10 years.

OMERS Ventures is buying a $20 million ownership stake in Vancouver-based HootSuite via a secondary purchase from the company’s existing shareholders.

Enterprise customers including PepsiCo, NBA, FOX Network, TIME and others use HootSuite for collaboratively publishing and measuring social media marketing campaigns, as well as monitoring social channels to provide customer support. In just over three years, HootSuite has grown to nearly four million users with dashboard sign-ups across six continents.

To date, there have been 1 billion messages sent through HootSuite. Each day 1.5 million messages are sent using the dashboard, with an effective reach of 1.7 billion consumers. The Vancouver headquartered company has grown from 25 people last year to a 140 person team today and is on track to reach 240 people this year. The addition of OMERS Ventures as an investment partner further positions HootSuite to continue this incredible growth.

“The OMERS Ventures investment marks a new milestone in the growth of HootSuite. We’re extremely proud of our company’s trajectory, from a modest beginning three years ago to our current global leadership position. We look forward to working with the experienced team at OMERS Ventures as we continue to deliver world-class social media management, marketing, and analytics product offerings to our customers,” said Ryan Holmes, CEO of HootSuite.

Launched last year, OMERS Ventures invests in venture capital assets on behalf of the $55 billion OMERS pension fund. OMERS Ventures looks for partner companies with strong entrepreneurial teams with potential to become leaders in sizable markets, particularly in the technology, media, and telecommunications sectors.

“HootSuite has revolutionized the way companies create and execute their social media campaigns. In a rapidly advancing market, we believe this company has the disruptive DNA to lead this market, and we are very excited to work with HootSuite to help further accelerate their success,” says Derek Smyth, Managing Director of OMERS Ventures.

Read more about why OMERS Ventures has made this investment.

CVCA response to Preston Manning and Jack Mintz FP submission – What Venture Gap?

The Canadian Venture Capital Association has submitted a letter to the editor in response to a Financial Post article by Preston Manning and Jack Mintz, who called into question the existence of a venture capital supply problem in Canada.  Read the Manning/Mintz submission.

 March 14, 2012

National Post
1450 Don Mills Road, Suite 300
Don Mills, Ontario
M3B 3R5

Dear Editor,

I read Preston Manning and Jack Mintz’s article (“What Venture Gap?”) in the March 8 edition of the Post with great interest and some puzzlement.

From my perspective, a significant gap has emerged in the balance between the supply of, and the demand for, venture capital financing in Canada. This gap needs to be addressed for Canada to develop the world-leading high technology companies we require to improve our lackluster record in successfully commercializing the innovations that are bubbling through our incubators, research institutions and universities. In this regard, it is worth recalling that venture capital has proven itself to be the essential building block in the U.S., Israel, Canada and elsewhere for the development of high growth companies across the entire spectrum of high technology industries from information and communications to pharmaceuticals and clean tech.

On the supply side, venture capital investing volumes are a fraction of what they were over a decade ago. In 2000, the venture capital industry invested just under $6 billion while last year that number stood at just $1.5 billion. For entrepreneurs and their companies this situation means that they are only able to raise about 40% of the capital available to their U.S. counterparts. This underfunding is causing many of our most talented entrepreneurs to go to where there’s greater capital availability – namely, the U.S. – and remain there, to the detriment of the Canadian economy.

Ultimately, venture capital investments are driven off the amount of capital available to venture funds themselves. Here too, worrisome trends have developed. Major funders have all but disappeared and the venture capital industry itself is in a capital drought. For instance, in 2011 not a single dollar from outside Canada found its way into our funds.

On the other hand, demand for risk capital is surging. Governments have laid the basic foundation by their huge support for R & D through a plethora of effective support programs, the most notable of which is the SR & ED one. Importantly, there has been considerable growth of business incubators and accelerators across the country, much like the well-known MaRS Centre in Toronto, whose activities are fostering the development of a new and vibrant generation of high technology entrepreneurs.

To sum up, venture capital supply and demand are incontestably out of synch. Venture Capital turns research into jobs in sectors that are vital to Canada’s economy and its ability to compete globally.

And, we need to act.

Yours truly,

Gregory J. Smith
President, CVCA

An Android in Every Pocket and the Power of Connectivity – Themes from Mobile World Congress

Together with Google Ice Cream Sandwiches and a BlackBerry-enabled Porsche, mobile visionaries, professionals, and enthusiasts descended upon Barcelona last week for Mobile World Congress (MWC). The event was attended by more than 67,000 individuals and brought together more than 1,500 exhibitors, including representatives from the largest carriers, hardware manufacturers, and software companies in the world.

This was my first time attending the event and walking the halls was an exciting occasion to feel the pulse of the fastest-growing and most rapidly evolving global industry.  In 2011, global cellular connections grew to more than 6 billion; within the next three years, there will be more of these connections than there are people living on the planet. Consumers are using mobile devices in new and dynamic ways every day.  From watching YouTube videos to checking in on Foursquare, we’ve come a long way from phone calls and the future of functionality appears limitless.

Keynotes, panels and conversations spanned dozens of themes with a handful that seemed to truly resonate with audiences.  Of these I’d like to share three that really excite me as the most powerful and prolific.

1)     Handset manufacturing will become a commoditized business more rapidly than anticipated.

MWC showcased devices from Samsung, LG, Motorola, HTC, Fujitsu, Huewei, and ZTE with form factors that were virtually indistinguishable and all running Google’s Ice Cream Sandwich.  The open source nature of Google’s Android operating system means that consumers receive a unified experience at no additional cost. It also means that handset manufacturers are searching for new ways to differentiate themselves. While some have attempted to add certain differentiating features – Samsung has its oversized Galaxy Note, LG has the Optimus 3D (featuring glasses-less 3D), Fujitsu has a waterproof device (which you can’t actually use underwater), and some will release quad-core devices shortly – the reality is that these “differentiators” are not likely to drive significant customer adoption for any one brand. More than ever, it seems that the only aspect left for true competition is price. Ultimately, this trend will lead to an increase in the adoption of smartphones; an incredible thought when you consider that smartphones have already experienced the fastest rate of adoption amongst any consumer device in history.

2)     Connectivity is driving the most powerful shift in consumer behavior history.

We are never more than 3 meters away from our devices and our devices are always connected.  We’re on the verge of true Internet ubiquity and as we rocket toward this reality the ways in which it is leveraged will be astonishing. The GSMA reports that there are more than 9 billion connected devices today and by 2020 there will be more than 24 billion. The inherent opportunity for global companies to empower these devices and their users is undeniable.  Of course, the precise behaviors that best embrace this connectivity are difficult to predict.  The most promising of these technologies will focus on the experience of multiple connected devices sharing information in order to promote passive productivity. This trend should drive every product being built today to utilize these capabilities from the ground up.

3)     Brands yearn for better engagement from mobile users.

With eyeballs increasingly moving to mobile, there is a widespread understanding from brands that they need to build a substantial advertising presence there. Traditional banner ads have been transplanted from web to mobile and there is increasing awareness that this paradigm is not utilizing the core strengths of always-on, always-connected devices. Brands are looking for a solution that will give them a way to control and maintain a long-term relationship with consumers. This long-term relationship will be built through personalized engagements with consumers at optimized intervals.  Furthermore, this relationship will not be restricted to smartphones; as consumers continue to build their collection of connected devices (tablets, cars, thermostats, etc.), the engagement experience will be seamless and intelligent (relates to #2). The resulting ROI feedback loop will be longer for brands, but should create more unique and actionable metrics.

The overwhelming atmosphere at MWC 2012 was one of excitement.  As Google’s Eric Schmidt succinctly pointed out, “In 12 years, handsets are going to be 20 times faster, which means phones that cost US$400 now will be available for US$20.” The mobile revolution is in its infancy and there is no doubt that building for the future means building on mobile.

Submitted by  Bram Sugarman (@bramsugarman),  OMERS Ventures

Backbone’s Start Me Up! Contest

Backbone magazine presents The Alpha Exchange Innovation Campaign - boosting inspired Canadian technology entrepreneurs to the next level.

Qualified entrants are early-stage companies, with revenue of no more than $2 million annually. Successful entrants will have a ready-to-sell product or service and a complete business plan and market analysis. Any business or technology sector is relevant.

Application criteria

• The deadline for entries is 11:59 PM Eastern on March 31, 2012.
• Live judging event will be held in Toronto on May 15, 2012 at the Discovery 12 event (Metro Toronto Convention Centre)
• The top 200 applicants (C200) will receive invitations and will be profiled at the World Congress on Information Technology (WCIT 2012), Oct. 22 to 24 in Montreal.

The winner will receive:

• $20,000 in cash
• $65,000 in related products and/or service
• One year of mentoring and business assistance from a team of Canadian business and technology experts
• One year of on-going coverage in Backbone magazine and online

The runner-up will receive:

• $5,000 in cash
• $10,000 in related products and/or services

In addition to coverage in the publication for a full year, Backbone will create an online Innovation Campaign Portal where readers can monitor the winner’s advancements, successes, resources and challenges in weekly blog posts, tweets and other Web content.

Alpha Group, the founding sponsor, is an organization established in 2007 to reinvigorate trading in Canada. With its Alternative Trading System, Alpha Group brought the change the financial industry was waiting for in the trading space. Now, with the formation of its Exchange, Alpha Group is looking at bringing similar change to the Canadian listing space driven by what issuers and investors need.

The campaign is consistent with Backbone’s mandate of inspiring innovation and helping companies learn from other businesses. The process and the content becomes a live case study, which not only creates a valuable profile for the winner but will also provide great stories for readers. It is also an opportunity for Backbone and our sponsors to further Canada’s overall competitiveness on the world stage.

Backbone has developed communication/distribution alliances with a growing list of organizations who provide valuable resources for Canadian start-ups. We would like to thank these organizations/supporters for announcing our campaign to their network. The list includes government agencies, industry associations, incubators, consulting companies, the angel investment community, VCs, law firms and the financial investment community.