Techcrunch broke the announcement yesterday that MSU had lead another investment round into StatusNET. This is great news for StatusNET, but every investment we make means that we have less money to invest in new companies. And we have been investing pretty fast – 11 companies and 7 follow-on investments so far and a twelfth investment in the works. So we are now doing what you, the entrepreneurs, often need to do – we are raising money for a new Fund.
LEGAL DISCLAIMER: Please note we are not soliciting investments from anyone!
We are submitting a proposal to Investissement Quebec to manage one of the recently announced $41.25M seed-funds.
We have some big plans on how we are going to use this fund to really accelerate Quebec (and Canada’s) web-centric start-up community ! Out of respect for the process we won’t give any details here, but if you want to contribute input and ideas into what you the entrepreneurs are looking for in a VC, now is your chance to let us know !
We would also like to hear your opinions on how you think we have done so far in terms of our investment activity level, the way we have dealt with you as entrepreneurs, whether we seem to “get” the web-centric eco-system, whether you feel confident in presenting us deals and ways in which we could improve things going forward.
Please use the comment box below (en francais or in english) and thanks in advance for your support and input !
by Greg Isenberg
I think you guys are doing a great job in terms of the portfolio of companies that you choose to invest in. You seem to invest in companies that are thought-leaders and understand where the web is going. Moreover, your not just investing in talented ceos, but in great people.
Good job guys.
by johnstokes
Thanks Greg !
by Scott Lancaster
Keep the FLOW going guys!
by johnstokes
We are just FLOWing with the music !
by Evan Prodromou
John, as an entrepreneur who’s received two rounds of investment from MSU, I hope I can provide some valuable feedback.
I’ll get the hard stuff out of the way first: I think when we first started working together, I had a hard time communicating my vision to you, and we had a hard time convincing each other of where the value in StatusNet was. Being on my first funded startup with a group that was on its first round (well… 1.5th round) of startups wasn’t easy for either of us.
Fast-forward about 18 months, and I think we’re doing really well. Somewhere along the line we found a story that clicked for you and clicked for me, and MSU became a strong partner and advocate for this company.
The best parts of the MSU experience, for me, have been the close feedback loop; the referrals and suggestions for partners, investors, advisors and services; and the access to other portfolio companies.
Suggestions for change? We had some great meetings with other founders in December; it’d be really good to do that on a more regular basis.
Also, for new companies, a weekend “boot camp” that drilled in _exactly_ what the founders should expect over the next 6-12 months would be really great. Every startup is different, of course, but knowing what the roadmap is can help founders understand how they deviate and why.
Pairing up founders with entrepreneur mentors who’ve been through the process before would be another win. I’ve been lucky to talk to some great folks in the area; I’d be happy to share what I’ve learned with others coming up.
Finally, there are some really good advisors in Montreal that were instrumental in making StatusNet a success (I’m sure you know who I’m talking about). Getting them involved at an earlier time might be really useful.
Overall, I’ve been lucky to have such a good friend in MSU. You’ve bet on me and my vision, and I appreciate your support. The first thing I tell other would-be local founders is, “Let me introduce you to John and Daniel at MSU.”
by johnstokes
Cheers Evan – get introducing – We are still looking for great entrepreneurs and ideas !
by Avery Pennarun
How do you judge whether a startup fund is doing a “good job”?
For an entrepreneur, a “good startup fund” is the one that invests in his company, and all the other ones are crap. Well, you haven’t invested in my company. But we aren’t looking for financing yet. You did invest in the companies of some of my friends. So… good work… right?
From your own point of view, you’re probably doing well if people have heard of you and if you’re one of the first groups entrepreneurs think of when they’re looking for financing. I think this is true; first of all, you’ve got a really obvious name and lots of people blog about you. Secondly, you’ve funded some companies that have a lot of hype in the Montreal web startup community. That’s good marketing.
Furthermore, I haven’t heard of anybody hating you yet. I guess it’s too early to have gotten into CEO-ousting and bankruptcies and other boardroom hijinks. Or maybe you have and somehow it all turned out okay? If so, well, good job on that then.
by johnstokes
Hey Avery, you’re right. From our point of view we have a business to run, just like the people we invest in. So we need to market ourselves and get our name out there. Part of this marketing means that we try and say “yes” to people as much as possible, but we ultimately end up saying “no” more often. So it’s nice to know that the people who do hate us haven’t started spreading the word yet
by David Nault
The MSU team, their contacts, their start-up “did that/ done that” know-how, the constructive criticism they give all passing entrepreneurs, their “skin in the game” mentality and finally their passion for Montreal start-ups are all reason I would award them their piece of the seed fund. Bonne chance !
by johnstokes
Everyone, and I mean everyone, needs luck – thanks !
by Phil Telio - Startup Camp Montreal
MSU has been instrumental in the success and growth of Startup Camp Montreal. From day1 John and Austin have been committed to vetting, training and challenging presenting companies. They are not just searching for the next great opportunity, MSU is dedicated to fostering innovative thinking and entrepreneurship. Your support is greatly appreciated.
by johnstokes
Cheers Phil, Startup Camp is a key part of the Montreal tech calendar. Couldn’t do without it. Looking forward to Startup Camp Montreal 6 !
by Olivier Berger
Here is an excerpt of the email I sent to MSU a month ago:
“John, Daniel and all the MSU team, we would like to thank you for your support all along and for your strong belief on keenkong and its team. MSU
are the only seed investors in Montreal who truly live up to their
words. Your impact on the start-up community is huge. We are very
excited to work with you to make keenkong an amazing success story.”
Voila. This email was sent just a few days after we successfully closed our 2nd round of funding with promising new Canadian and US investors, for an undisclosed (yet…!) amount
pretty close to our friends at Status.net.
By the way, I’m from Paris so it is hard for me to make compliments +
when I wrote this email, I already had the funds in the bank so I had
no other motivation than to acknowledge a reality.
What we liked and like about MSU: their honesty, their
professionalism, their creativity and on top of all, the meetings at
Le Cartet when we gently(?!) fought with baseball bats (in hard wood)
on the product/positioning.
What we admire: their constant openness to meet and spend time with
new would-be entrepreneurs. Their ultimate vision for what they want
to achieve for the startup community in Montreal, Quebec and Canada.
What we aspire to: More opportunities to share funding experience (we
have a lot to share now!). More gathering/drinks between
companies you invested in.
Bring the base ball bat, John, I ‘ve got mine. I ll be at Lecartet tomorrow morning at 7am as usual.
by johnstokes
If we weren’t open to meeting and spending time with new, would-be entrepreneurs, we’d be out of business pretty soon – and Le Cartet would probably shut down pretty soon after ! Merci mon ami francais.
by Guy Lemieux
I really like the look and feel of your site and the dynamism of your blog. It is great to see a large concentration of entrepreneurs running a fund.
by johnstokes
And don’t forget that there are another fifteen or so entrepreneurs who invested in the fund – a big shout out should go to them too !! Thanks Guy.
by Tara Hunt
Congrats on your progress! And I haven’t been funded by you (yet
), but I am excited that you are driving this. You really ‘get’ it. Looking forward to all of the great things to come!
by johnstokes
Looking forward to the pitch Tara !
by Shaan Siddiqui -Emotify
MSU is what an early-stage investor should be in my opinion, one that takes risks on big ideas and sees the potential. They are receptive to all thing entrepreneurial and will always tell you what you need to hear (even if it’s a swift kick in the pants). As everyone has said previously, they are a huge part of the startup community in Montreal and I doubt it would be so strong without their involvement.
One of the many things I’ve noticed working with them is that they always challenge you as an entrepreneur. Even if you know, or think you know what you’re doing you need to prove why. I like it. This approach has helped me personally stay on track and focused. Just one example how MSU likes to play an active role in the growth of your company. The other of course would be John calling you early Sunday morning telling you to “Get in front of a computer!”
Some suggestions: Host more networking events for investors/entrepreneurs to mingle, no more Laika and have training sessions on anything related to running a startup.
by johnstokes
Shaan Siddiqui is living proof that there is life in the West Island! Can’t wait for Emotify to come out of stealth mode.
by Normand Bélisle
I’m involved with a company which recently got an investment from MSU.
As a private investor, as a consultant or as a board member I’ve been exposed to many investment deals in my career. I can testify that MSU has the greater respect and consideration for the entrepreneur. This translates in the relationship as well as in the shareholders agreement which reflects the right balance between the parties. I hope the MSU team will be able to proceed with the new fund.
by jean philippe gousse
Je tiens tout d’abord á vous féliciter, pour Le travaille accompli par MSU Durant ces dernières années.
Je tiens cependant á vous faire part de quelques réflexions sur le monde merveilleux des start-Ups et des VCs á Montreal.
Tout d’abord il me semble assez curieux que certains entrepreneurs soient aussi investisseurs aux seins des VC qui les financent, comprenez moi bien je n’ai rien contre les entrepreneurs/Investisseurs, je trouve cela tout à fait respectable, mais je trouve surprenant que ces entrepreneurs choisissent d’investir dans des fonds qui vont servir à les financer par la suite.
Ma deuxième remarque concerne le type et le nombre de projets qui sont financés en ce moment. J’ai l’impression que tous les projets ou presque tous reposent sur le même “business model”: innovation, audience et monétisation de l’audience.
Ce “business model” en plus d’être très gourmand en matière de fonds á investir, puisque la rentabilité des entreprises n’arrive dans le meilleur des cas que plusieurs années après le lancement de ces mêmes entreprise et qu’il faut pendant ce temps supporter la marche opérationnelle de l’entreprise et son développement, ce “business model” disais-je demande de la part des entrepreneurs en amont, beaucoup d’énergie et de temps dans la création et la présentation de documents .ppt avec des beaux graphiques et des tableaux financiers qui n’ont aucun rapport avec la réalité, en effet comment prévoir avec certitude ses revenus à deux ou trois ans…
Cette approche pose á mon humble avis plus de problèmes qu’elle n’en résout , mais la question n’est pas là.
Il y a de ce fait beaucoup moins d’élus que de prétendants et de nombreux projets restent sur le bas coté faute d’argent disponible.
Je pense que vous devriez profiter de cette période pour changer en partie votre stratégie, prendre modèle sur des compagnies comme Ycombinator qui loin de chercher Le “blockbuster” cherche à créer et à consolider un réseau d’entreprises solides et viables qui pour certaines travaillent sur des marchés connexes.
Imaginez que vous offriez en parallèle a votre offre de financement classique une offre plus agressive avec pour objectif de financer un plus grand nombre de projets avec des montants moins important. Vous pourriez financer des dizaine de projets chaque années, je suis convaincu que cela serait profitable a l’ensemble de la communauté ainsi qu’a vos bailleurs de fonds évidemment.
Amicalement
Jean Philippe Gousse
by johnstokes
Hey JP – peut etre tu as raison!
“Misant sur notre expérience, nous en sommes venus à la conclusion que le succès en matière d’investissement à l’amorçage requiert un système qui puisse encadrer un grand nombre d’entrepreneurs. Ce système doit être en mesure de soutenir les entrepreneurs et de leur fournir de nombreux services de mentorat ainsi que du capital de risque en petites quantités au fur et à mesure que leur projet/entreprise rencontre les jalons de création de valeur.
Un tel système d’encadrement requiert une stratégie visant à augmenter à la fois le nombre d’entrepreneurs de qualité ainsi que le nombre de mentors d’expérience dont peuvent profiter ces entrepreneurs. Une telle stratégie pourrait élever notre communauté d’entrepreneurs et d’entreprises au niveau international, mais sans elle, le succès des sociétés de capital de risque œuvrant dans le secteur des technologies repose sur des bases fragiles.”
by jean philippe gousse
Hi John,
Thanks for your reply.
Hope You will succeed with Investissement Quebec.
by Eric Aubertin
I think Canadian and Quebec companies have tremendous creative technology power that is being under exploited.
The two main reasons for that are: 1) few entrepreneurs have been successful at “exiting” and selling their start-up following the numerous growth phases and 2) it is incredibly hard to get funding in Canada with the alternative being to move to SF, Boston, or NY where your next VC is located.
MSU brings together people that have seen more sunny and rainy days, and I believe they can successfully guide Canadian and Quebec companies make it big.
With additional funding power, I am convinced MSU can create a strong positive impact on the economy as well as making our world a more efficient and enjoyable one through launching innovative and useful technology platforms.
Very exciting!
by johnstokes
Thanks Eric – It means a lot coming from someone who has had some great entrepreneurial success and is out there doing it again !
by Ben Yoskovitz
There’s no doubt that MSU has been instrumental in growing the Montreal startup market overall. Perhaps of most importance is how active they’ve been at the entrepreneur level; they meet tons of people, participate in many events and are completely accessible. That’s been of huge value.
They’ve also helped fill a gap in the funding process – between bootstrapping (and possibly “friends & family” angels) and more traditional VCs.
The challenge I see is that the gap isn’t completely filled at this point. A typical MSU investment is in a spot where the entrepreneurs need to very quickly go raise traditional venture capital, which means there may not be enough time for these startups to get the traction they need to justify VC funding. As well, it splits founders in two – they’re trying to launch/build traction but simultaneously having to focus on raising capital as well. That’s often the reality of running a startup, but it’s not necessarily evident for 1st time entrepreneurs who raise an MSU-sized round.
MSU has done a number of follow-on investments (as they mention), which I think is a direct result of the size of investment they’re making, and the lack of sufficient runway that might provide their startups.
Having said that, I know MSU and others are working to fill these games in a number of ways, which I think will prove very interesting and beneficial to the Montreal startup scene. And I look forward to seeing how that happens and participating as well.
by johnstokes
When we raise a larger fund we will certainly be in a position to put more money into ideas that are progressing well, but we will still be investing small amounts and making sure entrepreneurs are focusing on hitting the (original or revised) milestones before putting more money to work.
We have made six follow-on investments so far and only in one case was it because WE felt that they needed more runway. In the other five it was because they had other investors interested and we wanted to put money in along-side them. Admittedly, two of these businesses were running on fumes when they closed the follow-on, but the other two were just being prudent in raising money when they had the chance.
I think it’s a great idea for first time entrepreneurs to test themselves with smaller amount of capital. Larger amounts of capital can certainly give you a longer runway to gain traction, but in inexperienced hands larger amounts of capital can also delay you asking the big questions about whether your product is something people want (to pay for).
The two biggest concerns I see when giving entrepreneurs small amounts of capital are that 1) they aren’t ready to “hit the ground running” in turning their idea into a product or 2) they get “stuck in the headlights” and focus on making the cash last as long as possible, rather than spending it as soon as possible on the things that will help them get to their next major milestone.
We are still tying to run our business at the same time as raising money and I completely agree that it’s hard to balance everything. The best answer – get a great team around you and lots of coffee !
by Yona Shtern
MSU played a vital role in helping us, as founders, get our business out of the idea stage and also helped us get beyond “proof of concept” and into growth phase. Beyond providing candid feedback, John has been able leverage an important network of global contacts that have contributed in a material way to our success – beyond simply writing a cheque.
by johnstokes
Maybe true, but you still like getting those cheque
!
by Alex Karakozoff
Bravo to MSU for their early stage start up success. They bring a fresh approach to early stage investing in Montreal. BTW, for those on this blog who don’t me, I am an early stage, non-institutional U.S. investor in Montreal with investments in Terrascale (exit of $47M on a $3.5M investment), Tungle (#1 cross-calendar provider) and now Keen Kong, where MSU is invested. I have 5 exits and more importantly 80% success rate, either as a startup executive or investor, as well as success as an officer in public technology firms. My background is Silicon Valley.
There are a few outstanding VC’s like JLA, now in Montreal. However, Montreal is a difficult environment for a start up with the current “old school” VC’s, especially in the early stages. The result of the “old school” attitudes is few entrepreneurs have been successful at “exiting” and selling their start-up, even after the numerous follow on investments. Those that have exited, the founders and employees typically had only had a small ownership percentage. One of the exceptions is Terrascale, where the outstanding CEO Gautham Sastri had the foresight to bring on both JS Cournoyer and Alan MacIntosh, two of the MSU principals on board for some of their early success.
I am now investing with John Stokes at Keen Kong, I have worked with 3 of the MSU principals. They bring a start up attitude and Silicon Valley style assistance at the early stages of a company. In addition, they bring a higher level of concern for the entrepreneur’s and team’s financial success. We share common values, which makes it easy to co-invest and roll up our sleeves and help the company win the highly competitive startup race.
by johnstokes
Thanks Alex. We love US dollars in Canada, but yours are particularly nice because them also come loaded with knowledge!
by Pierre-Claude Roy
Travaillant sur un projet de startup moi-même, j’ai rapidement été accroché par l’approche de MSU. Elle correspondait vraiment à l’approche de financement auquel mon modèle d’affaires semblait démontrer.
Or, le seul hic, est que je suis situé à Sherbrooke et non pas à Montréal.
Je serais heureux de voir MSU créer un rejeton dans une ville telle que Sherbrooke, ville universitaire, par excellence pour y faire des affaires selon plusieurs analyses.
Je serais même prêt à assister autant que je le peux à développer le concept ici.
Qui sait, peut-être un jour aurons-nous un SSU !!!
by johnstokes
Bientôt peut-être !
by Hugh McGuire
MSU has created an environment for growing & success to a whole raft of young entrepreneurs and young companies in Montreal. MSU has also created a network of passionate technology visionaries struggling through the challenges and successes of running a start-up – this network I think is invaluable. These people and companies will be leaders of technology in Montreal, Quebec, Canada and the world.
MSU has provided guidance and support, as well as the tough criticism needed to help companies find their way to success.
I think it’s crucial for Quebec’s future that the work of MSU continues, so that we can foster and help grow the big ideas of the future, and then build a bigger network of successful entrepreneurs.
by johnstokes
Maybe we could write a book about it ?
by johnstokes
We submitted our proposal yesterday and I wanted to let you know that all of your comments were included as part of our “soumission” !
We put a lot of time and effort into the document (it was 234 pages !) and your comments really helped to inspire us and keep us motivated – particularly at 4am in the morning, the day before we submitted !
A big thank you to everyone who commented.
Cheers
John, Daniel, Alan, JS and Austin
by Paul Bolduc
Here’s the challenge many of us have faced at one point in time or the other: few institutional investors are capable of funding early-stage companies. MSU bridges the important gap between seed funding and institutional funding. Investissement Quebec must recognize that stimulating the development of companies at all stages is critical to maintaining (and should I dare say leading) Quebec’s expertise in the new economy. MSU takes the time to review all investment proposals sent out to them. And whether MSU invests in your startup or not, they provide precious feedback and advice on how to continue building your business. IQ needs to take a very close look at stimulating early-stage technology businesses – and MSU is well positioned to developed this market.
by johnstokes
Thanks Paul !