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Doing a startup but not in Silicon Valley? Here are 8 things to consider.

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I returned to Calgary Alberta Canada after 8 years living in Virginia and working with tech companies in the US and Europe. I still work with companies in US and Europe. I was quite involved with Calgary’s nascent startup community from 1996-2004, either with my own ventures or working with others. During that time I founded the TBL Napkin, a tech entrepreneur’s networking group that met for 3 years until the tech crash killed interest in it. At those events we hatched the idea that we eventually turned into the Banff Venture Forum, an investment forum for tech and energy startups in western Canada and it is still going strong.

Starting a company in Calgary has its own pros and cons, and while it is neither the best nor worst place in the world, Calgarians tend to have some blind spots, so here are some key points to keep in mind. I think these lessons apply to any startup that is not located in a technology hub.

1. Too much and too little money.
While Calgary has a huge and very wealthy oil and gas sector, that wealth and the expertise that comes with it doesn’t translate to technology companies. The mindset in oil and gas is completely different, how you start companies is different, and how you grow is different. So after many losses investing in tech, most O&G money stays in O&G where they understand the business. This means chasing investment from O&G people is valuable time wasted. The problem for startups is that all that wealth drives up people costs, and while sweat equity and shares work in the Valley, they simply don’t have the same value here.

2. Cashflow is king
The vast majority successful Calgary startups that grew to successful businesses focused on real cash-flow from real customers (not advertising). Cashflow early has two positive effects, it forces you to really listen to customers, and it provides immediate market based feedback on your idea/plans. Since Calgary sucks for raising tech startup money, real customer cash in the door really reduces the startup pain of debt, credit cards, family loans, stress, etc. This also means that capital intensive or infrastructure type companies (i.e. networking tech, hardware, nano tech etc.) that require lots of capital and/or long sales cycles should be avoided, or take your idea and move to where the customers and the financing are located. Same goes for advertising based companies.

3. Nobody knows your name
Calgary or most other Canadian and European cities are just not in the map in the US. In 8 of years living on the US east coast, it was rare that I would meet someone who had heard of Calgary, let alone know where it is. When I said Calgary, I could have been saying Riga Latvia. When I said Calgary was like Denver, it didn’t help, since they didn’t know where Denver was either. While you can say they are ignorant, consider that in a 6 hour drive you can go from Richmond Virginia through Washington DC, Baltimore, Philadelphia, New Jersey and New York city, not to mention all the smaller cities and suburbs. Drive 6 hours from Calgary and… well one more hour and we’ll get to Saskatoon! From Northern Virginia to Boston, over 50 million people occupy just 2% of the US land mass. People build very large successful businesses that in only exist in that small East coast corridor. Chances are you could be competing with a startup from that area, and they can drive to the customers. So you need to think about how you will differentiate your company while minimizing the potential disadvantage your location.

4. Do other stuff to pay bills
Calgary’s Smart technologies started out distributing and selling conference room equipment, projectors, etc, and did that for many years before and during the development of their smart board technology. Numerous companies have used consulting to pay the bills while they worked on the product or paid others to work on it. The best deal is if you can find a customer to fund your development because they really want what you can provide. Just make sure you retain ownership/marketing rights.

5. Go park yourself
The founder of Calgary’s critical mass parked himself in New York for long periods of time, and went up and down Madison avenue trying to sell Golf instruction CDROMs. That led him to landing a web site design contract for Mercedes Benz. At the time, critical mass didn’t know much about the web. A Calgary based company that built chat services for commerce web sites moved to LA to be physically close to their customers. Two years later Ask Jeeves bought them for XXX hundred million. If you need to sell to companies in Boston, hire a local sales person and go sell there with them until you know the roads and lobbies/offices of those companies by heart. You will then learn if your product is really needed (Golf CDROM? No thanks) or if you should be doing something else.

6. Stay small and manage the burn closely
You need people to make progress, but you also need feedback, answers and real information about the market, which means lots of learning for the founders. Learning is actually more important then building product. Learning progress is understanding what the market really needs and how to deliver it with the least amount of work and (borrowed) money. Find cheap ways of getting noticed, and be relentless about talking with potential customers and experts in your market. Give yourself a point every time you ask a question and subtract two points for every statement you make. The second mouse gets the cheese. All successful businesses have a simple economic equation at their core (even yours!). Know your equation forwards, backwards, and know all the factors that influence it.

7. If you don’t succeed, welcome to the club
Tech startups fail 90% of the time. So treat doing a startup as a learning experience and a chance to do something you have dreamed about doing. If your startup doesn’t succeed, well chances are you learned much more then you thought you would, and you have some scars to show for it. People who know about startups respect the attempt, and will be interested in hearing your stories and sharing theirs.

8. Press replay
A group of Calgary based entrepreneurs have been working the business model of direct media and font sales since the early 90s with Image Club Graphics, (sold to Aldus/Adobe Studios) to Eyewire (sold to Getty) to Veer (sold to Corbis) to iStockphoto (sold to Getty) to Stocksy and Dissolve. While this is neither original or particularly creative, it is effective since entrepreneurs can reuse business assets like contacts and refine the specific knowledge of that business. A similar thing has occurred in security software, where some Calgarians built an expertise in security software products and have continued to start, build and sell companies in that business domain.

Doing a startup takes guts. Doing it in Calgary increases the difficulty, but hey if my friends at Target Process can bootstrap development of an Agile Project Management tool from the very poor dictatorship of Minsk Belarus, why can’t you build your startup here? By the way, Target Process has sold 200+ seat licenses to Calgary’s Smart Technologies.

Cheers,
Robin Dymond.

Robin Dymond, CST is an international trainer and consultant in Scrum, Agile, and Lean methods. He offers certified Scrum Master, Product Owner, Lean and Kanban training, and has trained over 3000 people in Canada, USA and Europe. A speaker and author, he’s presented keynote talks and sessions at conferences including Agile Eastern Europe, Agile 20XX and others. He is President of Innovel International Inc. Dymond has 24 years experience in software and a BScEE from University of Calgary.