Toronto
A strange startup town
He going to pull through this one again;
Make a few records about it, and it’s going to be over.Biggie
Disclosures below.
Toronto is a strange startup town. Sort of like New York, but without any of the VC money. High cost of living; without the salaries that come with it. Which leads to a strange phenomenon: agencies that are a cornerstone of a tech community.
Nowhere else have I seen so many agencies with such loud presence. Which makes sense, given the absence of real venture capital.
Look at it this way: Without backing, most founders are forced into either early revenue harvesting or living off of savings and taking the first possible win. Early revenue harvesting RARELY pays all of the bills if it is directly related to their core offering, so often times consulting pays the bills while the team finds product market fit.
By announcing a consulting company (like TWG, Jet Cooper, Teehan+Lax, Unspace, Nulayer) while working on a side project (PostageApp, Pilot/Rocketr, Medium, BuzzData, Pressly) founders can generate revenues and attract talent without having to relocate to SF or the Valley.
Obviously an incredible amount of skill and work goes into building an agency. The consulting companies I mentioned all have very hard workers, but it does make this town distinctly different from the Valley and I believe that the root cause is a lack of risk appetite from our VC money.
“What about Upverter?”
Not Toronto. Waterloo. And they started by dropping out of Engineering to join YC before visa issues forced them to Canada. Also, side point: Waterloo is more like Quebec City than it is like Toronto.
“500px”
Started in 2003, just finished raising their Series A, proves my point more than it doesn’t.
“FreshBooks”
Started out as a consulting company. Look up “Second Site Inc”.
“Chango”
Ok, fine, this one counts, but honestly Chris had a couple of pretty successful things before being backed by the Mantella guys (as one of their first startups) and it’s a modicum of VC money, not a standard.
All of this kinda builds on itself. Investors see play-it-safe companies exiting and they chase more of the same. Since we don’t ever have a Facebook size exit, the number of bright engineers with money is pitiful. Leading to fewer people willing to fund something just because it is cool or technically challenging. This chases the real risk taking engineers to California unless they get into Visa trouble or have weird libertarian views against moving to the US.
It has gotten to the point where even our agencies are getting acquired. Just recently Jet Cooper was purchased by Shopify. Probably $12 to $15 million, given that it came with the Pilot team and client receivables.
It isn’t that I disagree with Shopify’s strategy. If I were running a company like Shopify and I could get the 241 Spadina team for less than 10% of my company’s market cap, I would do it right now without a moment’s thought. They are super talented and organized. Its just that normally people this talented go off and start something AWESOME. It is a little known fact that JC was on “the list” of known-to-be-good vendors for YC companies, so even PG agrees with me here.
That doesn’t mean that this town isn’t fun or nice. It is! And Jet Cooper was a big part of that; but it is also weird when most of our success stories sound like “We started an agency and needed to solve our own problem by…” or “We incubated a startup that did social note taking while running a design agency” instead of “Then Zuck said, ‘fuck it, lets make groups public’ and a whole bunch of people got pissed off, like the LGBT folk, but we increased engagement by 35% and raised a series C at the highest possible rate.”
Disclosures
- I’ve worked for FreshBooks for two years right after university.
- Dom from TWG once convinced me that even if we live in a simulation it doesn’t matter. Also, I use Postage App here and there.
- Jet Cooper did the design of a failed startup of mine. I realized a cheque was going to bounce (If you havin’ cofounder problems I feel bad for you son) before they cashed it and they graciously gave me time to get the funds in order. They never once breathed a word of this to anyone. They are bros.
- Mantella offered to fund, err, incubate that failed startup of mine, but I turned them down because I had figured out it was doomed at that point.
- After that failed startup, I worked at Rocketr for a couple months. It didn’t work out because I was a data guy, but they lacked traction.
- My second startup Algo Anywhere was purchased by 500px.
- I’m working on a project with a former Teehan+Lax product designer.
