“The classic approach is to raise capital through government, institutions or private investors and then use that capital to setup infrastructure, such as office space, provide business mentorship, and make smaller investments.”

I’m still not sure what the argument is? An organic incubator that is essentially a consulting shop that has a product development arm. The capital and infrastructure are provided by consulting services rather than a set of limited partners. It sounds like a bootstrapping model where the entrepreneurs perform the financial and human capital along with the diligence on opportunities.

Unfortunately, I can’t find any data that support that the proposed organic incubator model is any more or less successful as the incubator of startups.

My guess is that the professional services side does 3 things:

1. Generate revenue
2. Incubate human capital and talent
3. Identify customer needs

Revenue Tradeoffs

The revenue generation presents a tradeoff between the growth of a successful consulting practice (see Hockey sticks and consultants) and investment in the creation of new ventures. This is a common challenge for early stage software startups, using consulting to get to ramen profitability. There needs to be a focus on being a product company and growth. This can often be lost with an intense consulting business.

Talent Incubation

Incubating human talent is one of the biggest benefits of a consulting practice. It teaches developers the business side and professional side of the equation very quickly. Understanding how companies make purchasing decisions and doing business development are critical skills for many entrepreneurs (go read How JBoss increased their deal size from $10k to $50k). Consulting businesses provide a great training ground for understanding customers and learning the skills necessary for delivery.

Customer Needs

Being in the trenches is a great way to see the problems of real customers. This is not exclusive to consulting practices. But it does provide a lot of designers and developers hands on experience with actual customers and the problems they deal with everyday. It’s a great way to observe, inquire and test the repeatability and salability of early stage products. Depending on your contract in particular the IP ownership from the consulting practice, it might even provide you the start of a code base.

Do your homework!

Understanding the tradeoffs and success factors is the responsibility of a founder. You need to understand the tradeoffs and risks for each decision, all you can do is make informed decisions and learn from your mistakes. Incubators and consulting practices don’t make it any easier and don’t appear to be an indicator of success.

Resources

• Bootup Labs
• Extreme Ventures
• OpenRoad Communications
• ThoughtFarmer
• Nitobi
• PhoneGap
• nForm
• Kiiro
• Communitech

It’s a great showing for our friends at TechCapital Partners with Metranome, OverlayTV and PostRank in the list. As expected for a conference in Toronto there is strong representation from the the Waterloo-Montreal corridor with only D-Wave System from BC.

• Aeryon Labs Inc., Waterloo, ON
• CognoVision Solutions Inc., Markham, ON
• Darwin Dimensions, Montreal, QC
• Dayforce, Toronto, ON
• D-Wave System Inc., Burnaby, BC
• EnStream LP, Toronto, ON
• GaN Systems Inc.
• GlassBOX Television Inc., Mississauga, ON
• IGLOO Inc., Waterloo, ON
• Metranome, Waterloo, ON
• Morega System Inc., Mississauga, ON
• NIMTech Incorporated, Toronto, ON
• Overlay TV Inc., Ottawa, ON
• Peerset Inc., Toronto, ON
• PostRank Inc., Waterloo, ON
• Remco Solid State Lighting Inc.
• Rypple, Toronto, ON
• Sixtron Advanced Materials Inc., Toronto, ON
• Skymeter Corp., Toronto, ON
• YOU i Labs Inc., Ottawa, ON

There is a strong focus on software/web services (particularly focused on media) with CognoVision, GlassBOX Television, Metranome, Morega System, Peerset and Overlay TV in the media enablement space. And Dayforce, Enstream, IGLOO, PostRank, and Rypple in the web services space.

It’s going to be an interesting dog and pony show.

“Located in Waterloo Region and serving technology companies provincewide, The Hub will help hardware and software entrepreneurs bring new tools, technologies and applications to market. The Hub will focus on commercialization, business development, access to financing and connecting clients with other digital media hubs across Ontario and Canada.”

It looks like it is a physical space with resources to help entrepreneurs.

“The Hub [is] a new centre that will help emerging digital media companies grow and succeed in the global market. In particular, The Hub will look beyond the entertainment sector to focus on companies creating hardware and software for industries, including advanced manufacturing, healthcare and finance.”

It’s great news for Waterloo Region. Further support of a great organization with Communitech as a leader. Additional attention and awareness to a growing tech sector with companies like OpenText and RIM. And additional real estate development and construction jobs.

What I am curious about is the relationship of the Accelerator Centre to The Hub? And what is the relationship to nGen? to MaRS? to RIC Centre? to OCRI? to Innovation Synergy Centre? Ontario Centres for Excellence? Is there a plan for where each of these pieces fit together? How about where these programs fit relative to local Economic Development Corporations? Is this really about creating an innovation and entrepreneurship based economy? Or is it about investing in third-party, arms length, pseudo-government agencies without looking like big government?

So it’s a mixed bag. This announcement continues to show technology entrepreneurship is a focus of the Ontario Government’s plan to help seed a new economy by bring new companies to market. But there seems to be a focus on real estate as the first step in enablement. Any thoughts?

I had an opportunity to catch up recently with John Green, cofounder of Savvica, and over an early morning breakfast got schooled on what’s new at LearnHub and JumboTests.

StartupNorth: What is JumboTests.com? What’s the relationship to LearnHub.com?

John Green: JumboTests is an extraction of core test preparation technology and content from LearnHub, and factored for a different audience and user acquisition model. Both sites are run by the same content, engineering, and community management teams here at Savvica Inc.

SN: So what is the change in target audience with JumboTests?

JG: LearnHub, although useful to English speakers everywhere, is targeted at the Indian student market. More than half of Savvica’s employees are in fact in our marketing team, which is based in Delhi, India.

JumboTests, on the other hand, is not focused on any particularly geography; it is equally useful to anyone studying for the standardized tests covered on the site (including GMAT, GRE, SAT, TOEFL, and others). This makes JumboTests especially relevant in the US and other Western countries which have the majority of the test takers every year.

SN: How are the user acquisition models different?

JG: Visitors to LearnHub mostly come through search engines. LearnHub has several hundred thousand pages indexed by Google and other search engines, and we rank at the top for hundreds of popular search terms. The site has a mix of user generated content and content made by our expert staff. For instance, LearnHub has the world’s largest free GMAT question bank, which has thousands of questions developed by us and our community. It is very popular.

Search engine traffic is less of a factor for JumboTests. Instead we are growing through strategic partnerships. Sites with existing, large, and relevant user bases (such as job sites, education sites, or portals) essentially embed JumboTests into their site using our partner platform. Our partners get hundreds of high quality practice tests that drive engagement, page views, and a split of the revenue.

Since the JumboTests launch 3 months ago, we have entered into long term relationships with 3 partners, all top in their categories: TalentEgg, India.com, and The Globe & Mail. All of these integrations are already deployed and online.

SN: So what’s next?

JG: We feel both properties have a bright future. Between the 2 sites, we help over 350,000 students a month with test prep, university applications, and career advice. That’s a lot, but there are many more students that aren’t on our sites but should be.

LearnHub is the largest education website in India, excluding reference sites like Wikipedia. But India has a long way to go in terms of Internet penetration. It has about 2x the Internet users as Canada, but it also has over 1 billion people. The number of Internet users in India doubled last year to 50-60 million. We are pegging our growth to outpace the Indian Internet penetration rate over the next 5 years.

JumboTests is tackling a more mature market. That is why we are growing it primarily through partnerships. There are a lot of established online channels whose audiences would benefit from our unique content and delivery technology.

The next Impact National Conference is happening November 20-21, 2009 at the Westin Harbour Castle on Queens Quay in Toronto. The conference features some interesting speakers including some familiar faces: Andy Nulman, Sunjay Nath, Ali Asaria, Jordan Banks, Saul Colt, Austin Hill, Mike McDerment and others. It looks to be a great conference with a great list of speakers in Toronto.

What is most interesting to me is the announcement of the Impact 2010 Programs, including Impact Ventures.

Many talented youth with innovative ideas steer away from an entrepreneurial path due to the numerous challenges, including funding and guidance, which they inevitably face; Impact Ventures was created to remove these obstacles. Impact Ventures strives to provide youth entrepreneurs with the seed funding, advisory services, workspace tools, and strategic resources they need at the crucial idea stage to create a successful business. Based on the successful Y Combinator model used in Silicon Valley to bring the next generation of ideas to life, Impact Ventures will help propel new startups to achieve their business objectives.

The selection process consists of an application form and an interview; there is no business plan required. During the pilot, three to four ventures showing the most opportunity for growth and long term sustainability will be chosen for the first batch. This three-month program will bring these budding entrepreneurs to Waterloo, the technology hub of Canada, to present them with all the components each entrepreneur needs to help build their venture.

Components for each selected Venture:

• $15,000 in seed funding for an average of 6% stake in the company
• Mentors available for hands-on help as well as advise
• Advisory services including Legal, Accounting, Banking and more
• Office Space in Waterloo to create an environment of collaboration
• Themed weeks where experts related to starting a business will provide their insights and advice
• Consultants to help a new company fill gaps in its initial organization

Impact Ventures is dedicated to the implementation of the entrepreneurial spirit amongst Canadian youth and values the independence of each entrepreneur. We are not interested in controlling the direction of the company as we trust in the entrepreneurs to make the best decision for their company. We believe in a non-regimented and friendly atmosphere where you are allowed to develop your startup with little interference, numerous resources and advice when you need it. Impact Ventures is set to revolutionize the startup industry by giving entrepreneurs an excellent spring board that will launch them to their success.

I’ve been talking with members of team creating Impact Ventures including Taimur Mohammad and Ray Cao since my post "Incubators, accelerators and ignition” back in April 2009. It looks like the Impact team has taken up the challenge and will be using their network of advisors, past members to help guide and mentor new companies. It also looks like they’ll be providing funding and consulting services to help kick start these early ventures.  There is a Waterloo residency requirement, which potential a detractor for many students actually enables students in the VeloCity program a formalized incubation phase beyond their residence. For many non-University of Waterloo students this provides students access to the ridiculous support network available in Waterloo (I’m looking at you TechCapital and Communitech and BarCampWaterloo). This is something that is definitely worth keeping an eye on.

• Register for Impact National Conference happening Nov 20-21.

Maple Leaf Angels is Ontario’s largest and most active angel investor groups having invested close to $6m in financings since its launch in 2007. Maple Leaf Angel’s membership base is largely in the core of Toronto and the partnership with the RIC Centre allows Maple Leaf Angels to establish a chapter to serve the western part of the GTA.

“In order to ensure that we have a large pool of investors who are looking to make deals, we were looking for a way to effectively tap into the Mississauga/Burlington/Oakville areas” says Rob Koturbash, managing director of Maple Leaf Angels. “The RIC Centre is an ideal partner as it allows Maple Leaf Angels to integrate with the start-up ecosystem they have fostered through their early-stage company mentoring and advisory services”.

The RIC Centre is based in Mississauga and is one of the Ontario government’s 12 regional innovation networks. The RIC Centre offers advisory, mentoring, networking, and industry outreach programs to help companies commercialize ideas in the aerospace, advanced manufacturing, life sciences, and emerging technology fields. RIC is currently active with more than 60 companies.

“We are excited to team up with the Maple Leaf Angels” says Pam Banks, Commercialization Director of the RIC Centre. “We feel this partnership offers an excellent opportunity for some of our promising clients, who are looking for funding, to have access to Maple Leaf Angels. We are also looking forward to being able to leverage the experience and networks of angels that want to get actively involved with helping and supporting their investee companies”.

The first Maple Leaf Angels – West chapter meeting will be held on November 19th and is open to all current or potential angel investors. The meetings will be held at the RIC Centre and will provide a convenient location for angel investors in the western GTA to access Maple Leaf Angels’ deal flow and leverage the due diligence expertise of the existing 40+ members to help evaluate deals. Maple Leaf Angels has provided its members access to early round investments in some of Canada’s leading start-up companies such as Well.ca, Homestars, Regen Energy and Streamlogics (acquired by Thomson Reuters).

craig at mapleleafangels.com

We’ve added a job board on StartupNorth to help Canadian entrepreneurs find great people to bring on.

Since launching a couple weeks back we’ve had 26 postings, 2667 views, 129 applications, and 16 referrals.

Companies looking to grow their team include: FreshBooks, Well.ca, Tungle, LearnHub, Fixmo, ThoughtFarmer, iNovia, and Xtreme, obviously some amazing opportunities.

It is free to search and post, so head on over and check out: StartupNorth Jobs at http://jobs.StartupNorth.ca

" Strong communities are better than weak governments." – Legatum Prosperity Index

Announcing the arrival of Startup Drinks 4! We’re continuing to keep the spirit of the startup community alive, one pint at a time on Wednesday, October 28th, 2009 to be held at Finn McCools, 70 The Esplanade, Toronto, ON M5E1R2.

It’s a simple concept: a grassroots effort to make sure startup folks get in touch and stay in touch.

Toronto

• Wednesday, October 28, 2009 starts at 6pm
• Fionn MacCool’s, 70 The Esplanade [map]
• Register

Montreal

• Wednesday, October 28, 2009 starts at 5:30pm
• Brutopia, 1215 Crescent St [map]

Ottawa

• Wednesday, October 28, 2009 from 5:30pm
• Venue: Fox & Feather Pub , Upstairs, Fox 2 room, 283 Elgin Street [map]
• Register

Waterloo

• Tuesday, November 3, 2009 starts at 6pm
• McMullan’s on King, 56 King Street North [map]

Remember, it’s about hanging out with other entrepreneurs and startups. Come out, be social and earn some social capital.