Do Canadian Startups Call it Quits Too Early?

The path to success is anything but straight.

The path to success is anything but straight.

“Most overnight successes take a long time. And in most cases it’s not this big vision from the beginning it’s just an evolution of the idea,” said angel investor Ariel Poler to the Startup Grind Toronto gathering on July 9.

When it comes to deals, Poler is in a position to know. Out of more than 20,000 investors tracked by Cdling in terms of network and capital employed, Poler is ranked number 16. And with characteristic humility, Poler talked of his own experience with Odeo. It eventually led to Twitter, but only after the founder and the board gave up on it.

Odeo raised $5m from angels to develop a business around podcasting. To put that $5m angel round in perspective, that’s nearly 20% of total 2013 ICT angel investment in Canada, according to the National Angel Capital Organization. Median angel deal sizes range from $135,000 in eastern Canada, to $215,000 in central Canada.

Back to Odeo and Poler, who says “I thought podcasting was really great. I reached out to Evan Williams when he was doing Odeo, and we worked together on it.”

There was just one little problem. Podcasting began looking like a dead end. “Evan was the founder and CEO, and was about to get married, he was not having a good time. He came to the board and said ‘I don’t want to do this anymore.’

“So the board decided to sell the company. ‘We have a company that doesn’t have traction with a founder-CEO who doesn’t want to move forward.’ Evan agreed.”

Poler and the other board members knew it would be a struggle to find a buyer, but believed there was solid value there. “Odeo had raised $5m, 3 was still in the bank.” And Odeo had a promising project.

“A little before then, because podcasting wasn’t doing so well, Evan had asked the team to come up with other ideas. Twitter had come up.

“We thought at the very most we could get $10m for the whole thing (Odeo) if we were lucky.” They were dead wrong. “Nobody would buy Odeo even with Twitter. Nobody would take it for free. No takers at any price.”

It’s pretty extraordinary that a founder feels he can tell his board that his fire has gone out. The board’s response was also pretty extraordinary. And even when the founder’s lost passion rendered worthless the millions invested, the board was still willing to deal.

At the board meeting to decide what to do, Williams announced that he had a new passion, Poler says. “What he did want to do was an incubator. ‘So I’m (Williams) going to buy everyone out and I’m going to start an incubator called Obvious. Twitter will be the first project inside the incubator. Jack Dorsey, the person who had the idea, is going to run it.’”

While Poler didn’t say what buyout terms Williams offered, the board accepted.

Williams might have been in a stronger position than some first-time founders. Before Williams started Odeo he co-founded Pyra, a blogging software company. He sold that to Google for an undisclosed sum.

Still, more time passed before Twitter took wing. “Twitter was just one of the projects inside Obvious,” says Poler. “It was 3-6 months before Twitter started to get some traction. And then it was still more time before it became obvious that this is huge, and they should get rid of the other incubator projects and just focus on Twitter.

Since this sequence of events is the norm, what do we have to do to ensure that it happens regularly in Vancouver, Montreal, Toronto, and Halifax?


Should Canadian Startups Move to Silicon Valley?

Does a Silicon Valley insider think it’s best to relocate to the Bay Area? Not always, says Ariel Poler.

Poler, one of the most connected and prolific Angel investors in the world, was Michael Cayley’s virtual fireside chat guest at Startup Grind Toronto’s July 9 event. A big thank you to Pivotal Labs for providing the space. Pivotal’s leadership in agile development of highly-scalable mobile and web software was evident in the superb meeting room.

“Re-locating to San Francisco could be the wrong thing if you don’t have your core team,” says Poler. “I’ve seen single entrepreneurs who come here and try to build a team from scratch and that’s really tough.”

Silivon Valley talent competition is so ferocious it can stall startups.

Only start ups that have the core team in place, should move to Silicon Valley.

Says Poler, “some companies might be better off moving here, but not right away.”

To illustrate, Poler points to StumbleUpon. “Their product was getting traction, they had 100s of 1,000s of users. The product demoed really well. The business model was clear.” Not only was the core team was in place, “the team was ready to move.”

If you’re at that point, dithering over the move can be deadly.

You get a strong sense of just how intimate Poler expects the connection between himself and entrepreneurs he backs will be. “As an investor, I only deal with entrepreneurs I’d have dinner with… It’s difficult for me to add value for remote workers. And I don’t like airplanes and long telephone calls.”

And one last point. Poler encourages people to be skeptics when it comes to myths propagated and promoted by the tech press. One popular notion, is that when you have an opportunity that could be huge, speed is of the essence to capture it. Poler disagrees.

“Speed is over rated,” says Poler, “it’s more important to be going in the right direction. I’m not sure I’ve seen a startup that failed by going too slow.”