Maybe it was the firecrackers, or perhaps the paper routes.
It definitely wasn’t the toilets.
Whatever sparked Michael Litt’s entrepreneurial fire, it worked. At age 25, the Vidyard co-founder is already a startup veteran, with the requisite failures and triumphs that go with it.
Born, raised and schooled in Waterloo Region, Litt had already tried his hand at day-trading, launched a smartphone teardown blog, started a biodiesel enterprise and co-founded a media company before he came up with Vidyard as a fourth-year design project at the University of Waterloo.
Vidyard’s so-called ‘YouTube for business’ concept earned his team a coveted spot at Y Combinator, Silicon Valley’s highest-ranked incubator, last year, which in turn led to a $1.7-million funding round from a slate of top Valley investors, including YouTube co-founder Jawed Karim.
Litt is also co-owner of what is arguably Canada’s most statistically successful, if unintended, home-based entrepreneurial incubator: Batavia House in Waterloo, where Eric Migicovsky, the $10-million man of Pebble Watch fame, hatched Allerta Inc., and Dan Holowack laid the groundwork for TwitSprout.
When he’s not building Vidyard out of the Communitech Hub’s VeloCity Garage, Litt keeps busy with frequent business trips to California (with a bit of surfing thrown in), and organizes wildly popular startup recruitment events in Waterloo.
And those are just the highlights. For the rest of Litt’s remarkable story, you’ll have to read on. It’s not a short tale, but then, the most interesting ones rarely are.
Q – Give me your bullet-point bio. How long have you been an entrepreneur?
A – It’s hard to say, officially.
When I was in Grade 5, my grandpa used to bring firecrackers in from North Carolina by the carton-load, and I would sell those to my classmates.
Then I got a newspaper route, and then I ended up with three more in a summer, and so I was getting some of the local kids to help me to the point where I wasn’t actually delivering them anymore. I was kind of like a middle-man, and they would do the collections and stuff.
That was probably when I was in Grade 6-7.
And then, in Grade 8, I started working at Forest Hill Pharmacy and Bank of Montreal, doing maintenance and cleaning. Then, shortly after that, I was a playground leader, swimming instructor and lifeguard.
Then I took a bike mechanics course and started doing piece-wise bike assembly for Sport Chek at the Conestoga Mall and Fairview Mall locations.
That wasn’t really entrepreneurial, but I was working five jobs at a time, and that was just to save for university.
So, if I look back at when I was doing all that work, it prepared me for time management and being stressed out, and it set me up so that all throughout university I’d be essentially working, just to pay the bills and all that kind of stuff.
In 2007, I was on my second co-op term and I was working at a company called Roadtrek here in town, and Devon (Galloway) – my cofounder – and I started day-trading.
He was trading in tech and futures and Elliott Curves and all this kind of complex stuff, and I would just subscribe to Bullboards and throw money at whatever people were recommending would explode, based on rumours.
I did terribly, but one day I ended up with an opportunity on a stock called Nucryst Pharmaceuticals. The Bullboard said the FDA had disapproved an ingredient in their topical foot cream, which was a silver-nitrate-based ingredient, and they had recently approved it again.
So, I looked at when they had disapproved this ingredient and the stock price went from $16 and slowly trickled down to $1.40, so I bought in at about $1.55 and just said, ‘You know what? Worst case, it doesn’t go anywhere; best case, this ingredient is approved and it starts to climb the next day.’
The next day was the only day I wasn’t in the office; I had to be in the Cambridge plant.
I had a BlackBerry at the time, but nothing with data, though. It was a pre-Pearl, candy-bar BlackBerry that I doubt anybody had ever seen; I got it from a friend who was working there.
I would get BMO InvestorLine to send me text messages when a stock I’d invested in had done, you know, five per cent.
I was in the plant, and my job was essentially designing toilets for these RVs, and then testing them. They were installing a toilet into the new unit and I had to oversee this happening.
I got back to my car at about 2:30, and there was just a shit-ton of text messages, and the stock had gone from $1.65 to over $7.80, and I had no way of executing the trade; I didn’t know the phone number for InvestorLine or anything.
So I had to drive back from Cambridge to Kitchener, and I had this old Volkswagen Passat wagon, and the steering wheel would come off from the steering column. You’d drive along and you’d pull the steering wheel off and hang it out the window, and freak people out.
I’d always take the steering wheel off when I parked it, just because it was funny, and I remember that I couldn’t get the friggin’ steering wheel on, and I couldn’t get it into gear, and the battery terminals would go loose while it drove, so you’d have to tighten the terminals before you started it.
So I finally got the thing going and got back to my desk, and by the time I did, it was trading at about $5.80, but I dumped it, all of it.
It was obviously my biggest return, and I said, ‘This was a lot of fun’ and I paid my tuition and made a little bit of cash. But, day-trading is not a good, sustainable way to make a living.
So, my brother Steve and I bought a house in Waterloo, just off of Columbia, on Batavia Place. The whole idea there was, I had some cash from this trade, and we could do a zero-down, 40-year amortization, subprime mortgage, as long as we qualified.
And so, to qualify for the mortgage, I got my employers to state that they would employ me at X dollars per hour for the rest of my undergrad career and once I had graduated. That was at RIM, so the term after this thing (at Roadtrek).
So I got this letter signed and we got the mortgage and we moved into this house.
There was a bunch of guys from school; the whole idea was that I didn’t want to pay rent, because I needed to live outside of home, and we started building companies in this house just because it was something to do, I guess.
The first one that my brother and I went after was called Litt Energies, and essentially we wanted to build a biodiesel refinery in Guelph.
The way to do that is to get a whole bunch of feedstock, so waste oil from Maple Leaf Foods, which would be beef tallow and chicken tallow and stuff, and then waste sunflower oil from Frito Lay, and then turn that into biodiesel.
There was a company in Toronto that made turn-key facilities.
We needed about $5 million and a plot of land in Guelph, and we had all that sourced out, but what we needed was the money. So, my job was to pre-sell the biodiesel and my brother’s job was to go and raise money.
He was in Texas, Florida and all over the place because he was working at a company that sent him down there, and he was kind of moonlighting and trying to raise this capital.
I would drive all over the Greater Toronto Area, to local utilities, to try and sell biodiesel to these companies, and I had this little jar of it that I would put in my glove box.
I still had this shitty old Volkswagen and it didn’t have a heating core; the previous summer it had essentially just melted, so there was no heat in the vehicle.
I’d bundle up and drive it to Toronto, and I always had this thing in the glove box. It was so cold that day, and I remember when I got there – and this is to meet the head of the transit authority in Toronto – I popped open the glove box and the jar was frozen; it was like a biodiesel ice cube.
The problem with biodiesel is that the freezing point is actually a higher temperature than regular water or regular diesel fuel, so it freezes quite easily. You can imagine, in a Canadian climate, that’s a big aspect of fear.
You need to treat it accordingly and we didn’t have the chemicals to do that, so I remember being on the elevator and going up to this meeting and rubbing the biodiesel between my legs just to get it to melt, so that I wouldn’t have this friggin’ ice cube, which was the biggest issue to overcome.
What I would do is pour it into a wine glass and these guys would smell it, and some of them would, like, taste it and stuff, because it’s essentially just a refined oil, and it comes from waste oil, so it’s edible and everything.
I got up to the floor, went to the bathroom, got it under the hand dryer, melted it and did the presentation. We ended up pre-selling a few million litres of biodiesel. These transit authorities and big utilities just burn through diesel fuel with all the fleets, so it’s actually not that big of a number.
Steve took that number and went to investors in Florida and found a ‘deal’, which was roughly $5 million to build this facility, if I remember correctly, and they wanted personal guarantees – like, really, really bad terms – and somewhere in the neck of the woods of 95 per cent ownership, so there was really no upside.
I was in second-year university, living at this house and working at RIM for my co-op terms and I thought, ‘I hate school; this is a pretty good opportunity to not be in school, and run this cool biodiesel refinery,’ and I was all into green initiatives and all this stuff back then; not that I’m not now, but back then it was big; this was 2008.
We were kind of poised to do this and Steve wanted a better deal, and what happened was, in 2008 everything went to shit.
But, something that often gets overlooked is the whole food-versus-fuel debate. Ethanol is made from corn, and people were concerned that ethanol was going to displace the corn crops used for food.
Biodiesel, even though it’s using the waste by-products of creating food, got pulled into that, so every time we had a discussion about biodiesel, it was, ‘Oh, what about the food-versus-fuel debate?’
We were not a part of that because it was waste oil, but it’s very hard to educate people, and so the feedstock prices that we had previously sought out skyrocketed, so we could no longer manufacture the diesel fuel for the price we had sold it for. And, the whole thing was based on an incentive from the Canadian government which was 20 cents per litre on every litre of diesel fuel produced, so if you produced 5 million litres you’d get a million-dollar cheque at the end of the year.
Economically it didn’t make sense anymore; there was no foreseeable ROI or break-even, so we had to drop it. It fell apart at the seams, which is hard.
I remember at that point thinking, ‘There’s no way I’ll ever have another opportunity to start a business’ because we’d put so much time, energy and money into it.
It was a shitty, shitty, shitty feeling.
So, I decided then that I needed to get out to Silicon Valley.
I was working in software product management at RIM; I liked it, but I wanted to work for, like, a Facebook or Google. So, I ended up getting a job at Facebook on the platform marketing team. This was prior to Zynga, so this was, like, the platform that Zynga was built on.
The gentleman who interviewed me offered me a job. I got the offer letter, the relocation, the visa, everything sorted out, and it turns out that just before – and there were seven of us supposed to go – they actually cancelled the positions for the entire team.
So, two weeks before I was supposed to go out there, there was no more job, but I had all my visa and everything set up. This was 2008, approaching 2009.
What I did was, I took my plane ticket, visa, everything and hopped on the plane, and started e-mailing every single company in the Valley that had hired a UW co-op student from systems design engineering.
I got a hold of a company called Cypress Semiconductor, and I went in, and they gave me a job in their platform product marketing team.
That product was called Cypress West Bridge, and it was essentially the piece in the BlackBerry that enabled really high-speed USB loading.
So, what I would do is I would take a bunch of phones, test the side-loading speeds of these phones and then create a bunch of documentation that said the BlackBerry is the fastest because it has Cypress West Bridge.
I would put that into mainstream publications that engineers would read, and when they would go to design their new phones at, say, Motorola or Samsung, they would say, ‘Well, we need this Cypress West Bridge product.’
So there was a big box of phones and I was testing them, and I started taking them apart to see how they were built and what else was on the boards. There’s always a power-management integrated circuit; there’s the baseband processor and applications processor; there’s some form of memory; there’s all the power plants; there’s just a whole bunch of stuff on the phone that’s interesting.
I’d take them apart and cross-reference what I could see on the board with the Cypress database, and I could figure out exactly how much it cost to build the phone, and started publishing this information to my own blog.
One day, I published it and posted it to Reddit, it got picked up by Engadget and I got, like, 80,000 unique visitors. It was a teardown of the BlackBerry Storm before it had been released, because I had access to it.
So, this blew up with 80,000 uniques. I started thinking about doing some ad revenue, so I put AdSense on the blog.
Q – Did you get any blowback for exposing the innards of a pre-release phone?
A – I turned the blog into something called PhoneWreck, and I became Dr. Wreck. Everything was serviced anonymously, so I was very safe and I protected myself. I was moving between Waterloo and San Jose, so I started doing these teardowns.
I would get a friend who was running another blog to go to the U.K., and he would buy the iPhone before it came out in California because he could stand in line and get it as the sun rose.
He would do the teardown and send me the scans of the PCB (printed circuit board). I would identify all the ICs (integrated circuits) and actually publish the teardown before you could buy the product in California, which meant we got a ton of traffic through Engadget, Hack a Day and just tons of websites that would be dedicated to this.
So I had 80,000 uniques and put AdSense on the blog, and other semiconductor companies started to pay me to take apart these phones and publish the reference designs, because it was good marketing. They could say ‘Our semiconductor is in this phone and it performs well because of it’, and they could use that in investor relations, et cetera.
I ran that for a year and a half, from both Waterloo and San Jose; I just kept going back and forth.
Q – And nobody knew who you were?
A – Nobody knew who I was.
I got a few takedown notices; once the blog was published they would say ‘Could you please remove this data from your website; it’s infringing a few policies,’ so I would. But, at that point it had already spread, I’d already been paid by the semiconductor company and I’d already resold the device.
The problem was, the only way to get a lot of traffic was to buy a pre-release device off eBay. You could resell it, probably at a profit, but you’d have to pony up some serious cash. And, often those devices were procured by non-legal means, but I had no control over that because I was just a third-party purchaser.
So, it kind of got heavy, and Cypress saw value in the blog, so I actually gave them the assets of the blog, all the content, everything, and decided to move on.
It was probably a good decision, given how it went, but I ended up making a little bit of cash from it; it was a very good experience and it got me through school.
We had this house, and Eric Migicovsky was making watches, the inPulse Smartwatch. There was an article in the National Post about it; then The Next Web wrote a little bit about the house in one of the articles about Vidyard.
But we were in this house, doing these teardowns, helping Eric a little bit, and he had all the tools to take the phones apart, and so it was really cool that we could work together. That was in, like, third year.
So I ended up getting rid of the blog, and started thinking about an opportunity to start a business that would make cash aggressively, and who I would start that with.
I immediately thought of Devon because of our day-trading days. He’s an incredibly brilliant guy; he’s an engineer raised by accountants, so he’s got a very different way of thinking and approaching problems.
When I was at RIM, I had contracted a company to make videos to explain how to install BlackBerry Professional Software, which was this really complicated, small version of BES for SMBs that never really worked.
It was an $80,000 contract and I remember thinking about how easy it would be to make these videos myself on the weekends.
So we decided, let’s make a couple of demo videos for Bank of Montreal online banking; we’ll take that demo to TD and say ‘Look what BMO paid us to do; you should do this as well,’ and we’ll generate this business that makes a million bucks a year, and there’s, like, four of us involved.
It was the last co-op I had; I was in 3B going into 4A when we decided to do this, and I had an opportunity, because of what I did at Cypress, to go work at Google in Zurich on the geo and maps team.
I remember it was a very hard decision; I was talking to my parents, my brother, Devon, a bunch of people, and decided that the best idea would be to move forward as an entrepreneur and do something on my own, rather than go work at Google. Because, if they wanted me back then, likely they’d want me if the business failed, with lessons learned.
Anyway, we launched Redwoods Media that summer. Our incorporation date was May 11, 2010, and so our two-year anniversary just passed.
We started making videos. That summer, I enrolled in Summer Company out of the Region of Waterloo; they give you, like, $1,500 for the summer, and we hustled, all over the place.
We didn’t sell any videos that entire summer. It was terrible.
What we found was that we needed to go down-market.
We had been going after these big companies that have, three-, four-, five-, 10-month sales cycles, when what we needed to work with was startups who needed videos done yesterday.
Our first client was actually a car dealership in town here, called Dean Myers Chrysler. We made a video for them to explain all the value-adds that they have when you buy a car.
Dean Myers is an old-school dealership; they buy the cars themselves. They don’t get them from GM or Chrysler; they actually buy them and then sell them, so they have all these things that they add on for profit.
So that was our first video, and then we rolled that into another video with a company in the States, called ORBCOMM. Then we started generating a portfolio, and we had money we could invest in AdWords, and the business started to work.
So, we had a revenue goal, which was, by Christmas 2010 – we called it Project Christmas – we needed to make $50,000 from selling videos.
This was aggressive, because it was already the end of September and we’d maybe done, like, $3,000. So, if we didn’t make that, then I needed to think about getting a job, because it wasn’t a feasible business.
So on Christmas Eve, Dec. 24, 2010, Devon closed a deal with a business in California, called Adchemy. It was like a $12,000 or $15,000 contract that put us over that $50K mark.
At that point we were considering going for it because there was so much opportunity in the pipeline, and it was just very, very validating.
That’s the one moment where I can really look back and say, all of a sudden I actually felt like I had created something of value.
We hit that goal, which was aggressive to start with, and so we started making increasingly aggressive goals for ourselves.
We found all of our customers needed to put their videos online, and they were using YouTube or Vimeo, and they’d always complain about both products.
So, we built a very simple solution ourselves, which was hosted from GoDaddy.
But I was in my fourth year, I needed to graduate, I wanted to get my iron ring, you know, for my parents; graduate from university and all that stuff. And I also needed to incorporate the business with academics, because there was no way I would be able to do both.
So, Vidyard was my design project. This video analytics tool that kind of learned how people viewed content, could do calls-to-action and all that stuff that we have today, was all part of my undergrad curriculum.
Machine intelligence, UCD (user-centred design), interface design, design project – five of my courses in fourth year all contributed to the product, and the beauty of University of Waterloo is that they don’t take any ownership in what you create as an undergraduate student.
So, I just went to town, built the product and then just as I was graduating in April 2011, we applied to Y Combinator.
YC saw the product. When you apply to YC you make a video of the founders talking, and essentially they look at the video and try to get a feeling for who you are.
We used our own platform, and we could see how each one of them individually watched the video. When we went in for the interview, we showed them, and they were like, ‘This is really cool.’ Nobody had really done that yet, and we just wanted to see if and when they had watched the video; it was just something we’d built in a night.
So, they decided to fund us.
I remember I was at a Starbucks in Palo Alto, and I was peeing, and my phone rang. It was a Mountain View based number, and it was Paul Graham.
What he does is say, ‘Hi Michael, this is Paul Graham calling, thanks for coming in today; Y Combinator would like to fund you.’
And literally, I was standing there with my penis in my hands, on the phone, and I said, ‘I’m going to have to call you back.’
And I don’t think anybody’s ever said that to P.G. before.
So we went out to Y Combinator, built the product out, and we got to pour some gasoline on the development because we were no longer funding it with what we had generated in revenue from content production. We had that plus all this investment.
So, all of a sudden there was money. We built a product, people started using it, we had generated revenues, we had investors closing during YC, we had Dennis Kavelman as our chair, the first angel outside of Y Combinator to close, and he was the ex-COO at RIM and now he’s COO at Desire2Learn.
And things just started to work; it was unbelievable ever since that phone rang, and we built that product in fourth year.
So, in retrospect, to answer the first question you asked, it just kind of happened.
If you’re the type of person where you’re never really satisfied with the way things are and the status quo, and you see issues and you want to solve them, then it’s likely you’ll end up an entrepreneur at some point.
Because of where I was in life, it just made sense. I was very risk-averse; I had school to fall back on and there were always going to be opportunities. And the thought was, ‘The more I prepare myself as an entrepreneur, the more valuable I am to a big organization.’
So, here we are.
Q – What did that failure with the biodiesel teach you?
A – What it taught me was that it’s important to fail as quickly as possible.
So, if something isn’t working and you’ve done the validation in your mind and on a spreadsheet or wherever, and identified that it isn’t working, you need to end it and move on.
If you have a hire that isn’t working, or you’ve got a partner that isn’t working, you just have to cut the cord, because those inefficiencies can drag you down, and some people go down with the ship.
There’s really no point in doing that; you have to be smart and agile enough to see when that’s happening.
It’s also taught me that opportunities are endless.
You look now and there’s just a bazillion startups out there, right? The only thing that really separates the ones that succeed from the ones that fail is a matter of execution, and execution includes being able to understand when you’re failing.
So, we keep a very close eye on that because of the experiences we’ve had.
Q – In one sentence, what is Vidyard?
A – Vidyard is an incredibly easy way to put videos on your website and figure out if they’re working.
That’s one sentence.
Q – You can say more; that’s okay.
A – The whole idea is, you use a video to explain your product, and you want to see if people are actually watching it, and how much they’re watching of that video.
You’ve invested $20,000 or $30,000 in a piece of content that a content producer has made for you, so you want to split-test the thumbnails so that you get more clicks, so you actually get people to watch the content based on what they see when they load the page.
All those things are stuff that people haven’t really ever thought about when they’re actually making that investment in video, and video is becoming a really great way of communicating value; people would rather watch a video than read content.
So we just pad out all the marketing analytics tools around using video for that type of success.
Q – Where is the company sitting right now?
A – We have 12 full-time employees, which is nine more than we had a year ago today. So, we’ve grown substantially from that point.
We’ve got four open jobs. Those tend to never really go away; every time you bring on a new hire there’s a new opportunity that emerges.
We’ve got a sales team inside as well as outside.
We’re looking to close some fairly significant enterprise deals in the short term.
We raised $1.7 million from the co-founder of YouTube, Andreessen Horowitz, Softech VC and others, so things are good.
We’re operating a business now. It’s still a startup, obviously, but it comes with learning how to manage people, manage expectations, keep innovating and keep your head above petty stuff like politics.
Q – So you have lots of customers?
A – Oh yeah. We’re a revenue-focused business, so there are over 10,000 videos on the platform.
We’re serving millions of views per month now.
The way our pricing model works is, it’s essentially a price per video, and so it works anywhere between $5 per video per month and $2.50, but on the upper end there are a bunch of features and plugins that we add in that businesses are willing to pay a little bit more cash for.
We’re in a pretty good spot; we’ve got a lot of cash from the round and we are making money.
Q – Are you looking to do another round or are you looking to build organically from here?
A – Raising money is often a necessary evil, so if I can see an inflection point where, if we had $4 million in the bank now and I could turn that into $20 million, then I would go and raise an A round.
But if our business is such that it’s growing organically and slowly and there’s no way to rush adoption, then it doesn’t make sense, and we might as well build a business off of our own profits, and that way we maintain ownership.
But that’s certainly the slower way to do it.
In reality, I’ve never gotten to this stage with a business before, so I think every time you do one you get a little bit further, and the lucky thing is that we’ve got some amazing investors and advisors to look at the data and help us execute.
It’ll become clear, and it’ll become clear probably within a year, whether that makes sense.
Q – You took systems design engineering. Why do so many successful Waterloo Region tech companies seem to be founded by systems design grads?
A – Systems teaches you how to think and solve problems.
It also gives you an opportunity to have a very diversified work-term experience.
My first term was in mechanical design and mechanical engineering; then I went into industrial design with the toilets, which was terrible; then I went into software product management at RIM.
Those are three very different types of jobs, especially going from anything mechanical- or industrial-design related over to software.
You learn really quickly, because you get put in the deep end and you have to pick things up.
The other thing is, with a lot of the courses, they take three electrical engineering courses and put them into one, and so the amount of work is heavy, because they want you to kind of understand everything.
So it’s stressful, and you learn how to manage your time.
They also talk about entrepreneurship in some of the courses, and you do design projects all the way through, so in first year there’s a design project, and in second year and third year and fourth year, and they get increasingly bigger and more ballsy as you go.
Most of the other programs only do one design project, in fourth year.
I think it’s the combination of diversification – the type of people who go into systems are often athletes or artists or musicians who also excel in science or math, which is a pretty rare combination – and there’s a pretty extensive application process to get in, and the teamwork design projects are big.
Kurtis McBride, John Baker, Bill Tatham, those are a few guys who are all systems grads, which is cool.
Q – What’s so special about Y Combinator?
A – Paul Graham.
Paul Graham and Garry Tan, Aaron Iba, Harj Taggar, Jessica Livingston; Justin Kan is now involved.
Q – So it’s the people?
A – Yeah, it’s the people.
The people have all run startups before with some success.
They’ve got incredible networks in Silicon Valley; if the Waterloo network is x, the Silicon Valley network that YC has access to is, you know, 800x. It’s unbelievable.
So, they can see problems that you’re having as a startup, and they understand or have seen other startups flounder with the same issues, and they can pull data points and help you solve your situation.
For us, for example, pricing; we had this big issue with features and pricing. We talked about freemium versus SaaS and all these other things, and they could look at our product and say, ‘This is the way you’re going to do it; this is the way that makes most sense, because we’ve seen x, y and z.’
There are very few people who have that, especially in this area. There are a lot of really legacy- and security-based startup companies, and what you get in our community is great, but it’s padded out with C-level execs who haven’t started something from ground zero.
From ground zero to now is, like, one stage of life; from now to Series A is another stage of life, and there are very few people who have actually done that entire process.
The other thing is, the way you raise money in Silicon Valley is much different than you traditionally do it here. Here it was all government grants and the time to get the money was long; four, five, six months, so you had to hedge on government grants, and have a services-oriented aspect of your business.
Whereas, in California, they give you $2 million to figure it out, or at least right now they do.
So, Y Combinator gives you access to the aggressive mentality; people who have large funds and are prepared for significant amounts of failure, and treat it more like a game, almost.
So it’s the people.
Q – And yet, you’re still here. Why do you choose to be in both places and not just one?
A – To be completely honest with you – and I’ll always be very honest – there were some personal reasons to be in Waterloo, from the perspective of my family. They’re located here, and my father has been struggling with illness for the past two years, so it’s nice to be close.
So, I looked at that as an aspect of the decision process.
And we essentially went to the team and said, ‘Where do you guys want to work?’, and a lot of them are from this area, because there’s such an abundance of high-quality talent that I went to school with; Devon I went to school with, Tyler I went to school with, that we can just keep extracting.
We’d had a few interns who were good; all of us were Waterloo grads and we knew the network very well.
And, a gentleman by the name of Ron Conway, who is the head of SV Angel and one of the most successful angel investors in Silicon Valley, came to us after we raised money from him, and said, ‘The biggest issue you’re going to have after YC is not building the business and getting customers; it’s going to be finding, hiring and retaining high-quality talent.’
It’s very poachy in Silicon Valley; you hire a really good engineer, they go to a party, they meet someone else working at another company and they start thinking about their options. They get offered some kind of a better deal; there’s incentives and referral bonuses, and it’s just very, very gamey.
As I got thinking about building a team, building a product, innovating and building a sales team, and then dealing with losing engineers and employees that we’d invested in training, I thought, ‘If I can remove anything of complexity for myself in making this thing succeed – because all startups are bound for failure – I may as well.’
So, Waterloo just seemed like the perfect opportunity to do that, because there really wasn’t a startup in B2B SaaS, run by a bunch of young bucks, that had a bunch of money from Silicon Valley, operating here. It kind of made us a big fish in a little pond and that allowed us to hire some really interesting talent.
So, I think Waterloo is a great place to start a company, in terms of running a business that needs to do sales and stuff. It’s not that great because a lot of your customers, 95 per cent of them, are going to be stateside, and it’s difficult to get to them because San Francisco is a six-and-a-half hour flight coming in this direction.
But, if you can stomach that, then you can survive a lot longer.
We’ve worked out that it’s about three times less expensive to build here, so you build a three-times-bigger team, or you last three times as long.
We’ve decided to build a three-times-larger team, and take the risk.
Q – Do you see yourself as setting an example for other companies, to show them you can go to California and take advantage of that, but also build your company here?
A – Pair was in the Y Combinator class, and they did a $4.2 million round that Yuri Milner kind of led, and they came back. They need to reset their visas, and it’s a question of whether or not they’ll stay; it depends on whether they can find the type of talent they need to build a business.
But, in the VeloCity Garage, I’m always open to talking to the new startups. There are a lot of guys in there who are just coming out of school, and are exactly where I was a year ago. So, when I come in in the morning, if any of them have a question, we go for a walk and just, like, chat through it.
There’s a lot of stuff I would have dealt with from the fundraising angle, the partnership angle, what to do with co-founders, what to do with new hires, that they’re going to go through, and if I can give them lessons learned and just tell them about the mistakes I made, I can help them.
So I think good advisory and good mentorship is about listening and in looking at your own experiences, and trying to give advisory based on those. Or, just tell the story and let the individual extract the value out of it, because there’s no way I know the answer to every question.
Q – What do you make of the explosion in accelerators and incubators? There seems to be one in every town now.
A – You know, everybody looked at Y Combinator because they were really the first, and said, ‘This model’s working; let’s make a business out of it.’
The difference between Paul Graham and everybody else is that P.G. never wanted to make a business; he wanted to help. He was giving speeches about being an entrepreneur from his experience at Viaweb, and a bunch of the guys were like, ‘Hey, can you fund us and teach us?’
And one of those guys was Alexis Ohanian, who is the cofounder of Reddit and now a big spokesperson for SOPA and all this other stuff.
So, he just intrinsically wanted to help, and I feel like a lot of these other programs are designed to create jobs in communities and make profit for the people running the organizations.
The whole concept of open-sourcing the model of an incubator is ridiculous to me, because it’s different for every company. The way Y Combinator approaches it is, you just have a very, very basic structure of, ‘You ask us for help when you need it; if we don’t hear from you we assume you’re fine, or we assume you’re failing,’ and they’ll reach out to you if they don’t hear from you in a very long time.
It never ends; I go back and talk to P.G. or Harj or Garry whenever I’m there.
I’m worried that these things are going too big too soon; the first YC class was three or five companies; a very small, tight group of people. They ate together, they hacked together, they just worked on stuff.
Other programs pad out all these in-kind services and try to surround the entrepreneur with all the help they need, but that can be distracting, because you’re getting pulled in so many directions by service providers who are saying, ‘Oh, don’t forget to do payroll’ and stuff.
The way YC looks at it is, they just handle that shit for you, so all you think about is your product and your users.
I’m worried that, without the right type of mentorship and guidance and aggression, there won’t be too many (incubators) that are successful.
I haven’t heard of any raging incubator success stories outside of Y Combinator.
Q – What can Waterloo Region do to improve its tech ecosystem?
A – I think VeloCity is literally the future of the tech ecosystem, and making it possible for those kids to stay in this area and grow and succeed; continuously bringing in people from Silicon Valley and New York to talk to these guys, make investments in these guys, is going to be incredibly, incredibly important, because what will happen is, a lot of them will go to Silicon Valley or New York and never come back, and then, when they exit their businesses, they’ll stay in Silicon Valley or New York and reinvest into those communities, not into Waterloo.
I think Ted Livingston and I both share the same opinion, that there’s a lot of opportunity here, and ideally one day we’re both in a position where we can give back to the community in terms of angel investment or whatever.
But, we need so many people to make that work, so if I was running the show here, I’d be focusing on bringing some amazing entrepreneurs in, not as EIRs, but just to communicate and speak and generate buzz and hype, as well as get more mainstream tech publicity.
Investors read TechCrunch. When there’s a company in here that’s launching a new product feature or announcing funding, they should be getting priority access to some type of TechCrunch publication, so that investors see that, and start seeing Waterloo pop up again and again and again.
Waterloo is looked at as an engineering farm right now; not a place to run a business, but a place to run an engineering team.
Q – What has Communitech meant to your success as an entrepreneur?
A – I came to Communitech with Redwoods Media. My EIR was generally pretty supportive, and this space (the Communitech Hub) opened up shortly after that.
We started in May of 2010, and I moved in here in November 2010, into a desk in the back room, and I got a new EIR who was very, very, very supportive; gave us the resources, connected us to OCE, connected us to IRAP, CYBF.
We were able to get about $65,000 to $70,000 in funding from a variety of organizations that we used to grow the business and start paying ourselves, because we’d been so long without money.
Communitech certainly helped line that up, and they kind of got us moving and put us in front of a bunch of early customers.
So, Communitech from that regard has been amazing.
Also, because of the network, we hooked up with our lawyer, who has been incredibly helpful and assistive to us, as well as an amazing accounting firm, Ernst & Young. They essentially stay out of the way; they do your SR&ED claim and worry about all the nitty-gritty details for you, and let you focus on your company.
We wouldn’t have interfaced with them if it wasn’t for Communitech.
We actually ended up recently hiring Matt, who was our accountant on record at Ernst & Young. We would have never found a guy like Matt if it wasn’t for Communitech.
Our first engineer also came through the Communitech recruiter, so there’s been lots of awesome things they’ve done.
They support our recruiting event, which has been amazing for us, to help hire.
The list does go on and on; Communitech has been very helpful.
Q – What’s your best piece of advice for someone in their last year of school, just coming out, trying to find their way?
A – Connect your idea or your business as much as possible with your design projects, because that’ll allow you to get a lot of groundwork accomplished on something that you can turn into a business immediately upon graduation.
Be focused on revenue, whether that’s time from your users or cash from them, and actually build a business that matters.
And grind away. A lot of people think they’ll build a cool technology and it’ll just kind of pick itself up; the reality is that you have to manually put it in front of people.
Interestingly enough, the weirdest learning experience for me was, at our first recruiting event, we had nobody sign up for it. So, I went on campus and handed out pamphlets in classes and said, ‘You’ve got to come to this event; it’s going to be great; we’ve got unlimited beer, poutine; come talk to startups.’
We did this because we needed visibility, because nobody would apply to Vidyard; they’d all apply to Facebook or Google.
And slowly it filled up, and then the events sold out, but it was all ground-up.
Now, I send an e-mail to a couple of guys and boom, it’s sold out.
The same thing is true for your startup; you have to grind it out initially. When you’re a student is the best time to do that.
Use the student card to get meetings with people, to really learn.
Leverage this community as much as possible; get a desk in the VeloCity Garage or go to the VeloCity residence and just surround yourself with the best five people who are all going to build companies and do amazing things in life, because your closest five are the five that you innovate with and grow with.
For me, it was Batavia. I was driven by Eric, sitting there working on his watches, and I’d like to think he was driven by me in that regard.
You need to put yourself in those types of positions, because otherwise it’s too hard; you want to drink and go party and all that stuff, you don’t want to sit in your room and write code.
