Startup Life: Where Poor is Cool?
Several weeks ago, I attended a two-day alumni retreat with fellow Cohorts from HYPERDRIVE, the globally-recognized, Kitchener Waterloo Accelerator. We had the benefit of hearing Paul Singh, Founder of Disruption Corporation, a VC firm based out of Washington, D.C., speak about the venture capital funding experience for early-stage startups around the globe.
Paul shared a provocative and yet validating talk with our motley crew of startup Founders who are all at varying stages in our company’s evolution. During our time together at the retreat, one team would announce an eight-figure acquisition deal while another would announce they were no longer alive. It was a pretty broad range between us and yet there remained one common thread; how incredibly difficult it was/is/will be to raise capital in Canada during the early stages of growth.
He described something called “the invisible game” and that description had all of us leaning in. Paul explained that this was that space where VCs and startups live. The Founders commiserated about comments from VCs (particularly in Canada) who will say things like, “We’re just not ready right now but keep us updated because we’re very interested!” or… “If you can just show a bit more traction in the market, like 25 more customers (AKA – an absolutely ZERO risk company for us to invest in) we’ll definitely be in!”
Paul also shared commentary from other US VCs that believe Canadian startups don’t have the same hustle as American startups. I can’t comment on whether that is or isn’t true around the country, but, in HYPERDRIVE, the pace is gruelling and within three months we went from writing our first line of code to launching our MVP in 11 countries. Maybe my perspective is myopic , but to make that happen took a hell of a lot of hustle.
What Paul validated however, is that Canadian investors are simply not risk tolerant. They want the sure bets. And, because my Cofounder Jim Moss and I lived in Silicon Valley post dot-bomb through the social media rise and housing bubble bust, we understand why there may be some hesitation to model Canadian investment conduct after the US. But, is “the invisible game” just Canadian investors confusing pulling the wool with being polite?
Fortunately, Jim does most of the heavy lifting with our fundraising and I admire how much stamina it takes. He is always confident, optimistic and open to any meeting, He is always raising money and although as our fearless leader we appreciate his motivation, therein lies the problem. If your CEO is constantly thinking about payroll, when does he get time to be a visionary? An innovator? A leader? The short answer is; in between meetings.
In Silicon Valley, and other well-known tech centres, there is something called dream funding. It is also in our mind, the place where doves fly, unicorns roam and the world has a pink, utopian hue. It does not exist in Canada, so we yearn for it like a pawing dog on their owner’s lap, “What about us? We’re really good at this startup thing! We have great ideas too!”
The problem with asking companies with great ideas to simply get to an MVP as fast as humanly possible then sell the crap out of it is a subsequent stall in product innovation. And, you have to live through poverty to get there, if you ever do get there. Singh posed this excellent, rhetorical question in his talk. He said, “When did it become cool to be poor?”
We all laughed and nodded in agreement. There is a school of thought that believes being poor makes us hungrier. I’m on the fence about this. I certainly agree that being a poor startup hasn’t been easy and that we wanted to get out of that discomfort as fast as possible. But, did that make us work harder? Stay longer? Push beyond our limits? I actually don’t believe that being broke was the X-factor that kept us motivated. The fire in our belly burned way deeper for building a kick-ass product than it was to be rich. Don’t get me wrong. Money plays a role and we know that with money comes more resources and a higher likelihood that you can build the company you want. I just don’t think we need to live in fear and stress to build and innovate awesome tech.
And, as published in Science, poverty actually taxes our brain. Scientists have discovered that being poor actually impairs our cognitive abilities. Since we only have so much cognitive capacity to spread around; it’s a scarce resource. In a series of experiments run by researchers at Princeton, Harvard, and the University of Warwick, it was concluded that poverty imposes such a massive cognitive load on the poor that they have little bandwidth left over to do many of the things that might lift them out of poverty.
The condition of poverty imposed a mental burden akin to losing 13 IQ points!
Think about that for a second. 13 IQ points is a massive amount of creative bandwidth that we’re taking away from some of our most innovative thinkers, and if you believe we’re moving towards a knowledge-based economy; the future of our economic prosperity.
Fortunately, Plasticity Labs is a bit of an anomaly in all of this and Fibernetics Ventures (FVI) came to us with vision and foresight, and maybe just a hint of that Silicon Valley funding for dreamers. So, we are now considered one of the lucky ones. But, we are a very small percentage of startups that get to this point. We believe it has a lot do with our product, our hustle and our vision. But, we also feel that it could have been easier and there are massive gaps in the system that need to improve before we get to honestly call ourselves Silicon Valley North.
Paul’s final remarks were both encouraging and unsettling. “Don’t worry, this problem with funding will get fixed. It just won’t get fixed by a Canadian. It will take someone from the US to solve it.”