There have been a number of great blog posts with respect to or related to “web start-up dream” and similar topics which has inspired me to write this posts. This post has been simmering on the back burner for probably two years and when Dharmesh Shah recently posted “The Magical Founding Team Mix For Web Startups” at OnStartups I thought hey now is as good a time as any.

Having spent the majority of the past 4 years conducting ethnographic research amongst a number of very early stage Ottawa start-ups and 4 years previous to that working with a number of start-ups I noticed a certain pattern emerge amongst the more successful start-up. There is always a mix of business and technical expertise even at the very erarly stages. At a minimum one business founder and one technical founder or if a single or pair of technical founders a strong business oriented advisor(s). Always.

With the cost of starting a web business dropping to almost zero until you start to incorporate the barrier to entry into the market is very low. However, the barrier to success increases exponentially as market competition heats up. The key success factor to succeeding in a highly competitive market place IMHO is people and in the case of a start-up the founders. Therefore if the founders are the key to success then what attributes should they have? Is business acumen a requirement?

Ben Yoskovitz makes some great points about “The death of the business founder”. The premise is that in the early stages all you need to succeed is technical talent. There is merit to this argument and in the earliest stages of formation this is probably valid. However, as you progress from MVP to customer development the need for business and marketing skill increases dramatically. In the first year of a start-up the technical requirement likely exceeds the business requirement, but after MVP the need for business acumen becomes the key success factor.

One of my favourite essays is Paul Graham’s “How to be silicon valley”. This quote is from early in the essay:

“I think you only need two kinds of people to create a technology hub: rich people and nerds”

This is in reference to what made Silicon Valley such a great technology hub and hive of successful start-up activity. At face value one could imply that all you really need then is “nerds and money” to be successful. This tends to validate the point that Ben made above. However, the money Paul Graham is referring to is “smart” and “active” money. The money in fact comes complete with business acumen, connections and is usually an active participant in the process or the third founder. Here is another quote:

“Startup investors are a distinct type of rich people. They tend to have a lot of experience themselves in the technology business. This (a) helps them pick the right startups, and (b) means they can supply advice and connections as well as money. And the fact that they have a personal stake in the outcome makes them really pay attention.”

Dharmesh Shah recently wrote a great article at On-Startup titled “The Magical Founding Team Mix For Web Startups”. This is perhaps the closest to my original hypothesis that you need both technical and business acumen for a successful web start-up. Dharmesh list 4 key roles in the start-up; Developer, Designer UX / UI, Inbound Marketing and Sales. When you look at the roles and descriptions there are two business and two technical roles on the dream team. In most start-ups the founders where many hats and in a two person start-up the business founder (inbound marketing and sales) the technical founder (Designer and Developer) and each founder would have two hats.

IMHO business acumen is an essential skill set for at least one of the founders in a start-up. I guess the question you need to ask yourself is “are you building a web app or a web business”. If you want to sell $2.99 apps on the web then two technical founders will work just fine. If you want to build a web business then business skills are required whether as a business founder or active, smart hands on money with business acumen. Since most start-ups I know are bootstrapping or self funding the business founder is a must have.

Ian Graham

Filed under: Commercialization, Featured, Start-up, The Code Factory by Ian
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The picture for today’s post is the Roman God Janus (thank you David Megginson for the suggestion when we chatted the other day) with one face looking back into the past and the other into the future. Janus also gives his name to the month of January as the old year winds down and the new one begins. If the demise of Nortel is the closing of the door on the old tech sector perhaps the Shopify Series A round is a window opening in Ottawa’s new tech sector.

Photo Attribution: Janus by RedJinn: Back on Board’s

Looking back …
At a macro level things are still pretty frightening. Greece, Ireland and the UK all caused tremors in the financial sector but, the bailouts coupled with fiscal corrections seem to have worked… for now. The US still has a staggering unemployment rate and the housing crisis has left millions homeless, they have massive debt and continue to print more money. Stimulus spending in most of the developed world is coming to an end and the focus is on fiscal restraint. The Canadian Minister of Finance Jim Flaherty has said that this will be the year of “No” for the Canadian Government and the start of tightening the belt (probably not the end). However, stimulus spending has been extended to October and then it is fiscal restraint. So at a macro level there are some pretty concerning trends.

The micro (or regional level) and by that I mean Ottawa is pretty solid in the tech private sector. Nortel has been sliced diced and acquired by a variety of buyers, which I think, is a good thing and helps bring a bit of stability to the old tech sector. Many of the start-ups I have been following for the past 6 or 7 years continue to improve their fundamentals and there have even been some stellar news stories in Ottawa. The BIG stories are Shopify securing a $7M series A round and Protus IP Acquisition both REALLY good news stories. In the current environment securing a Series A round is a real testament to the hard work and success of the founding team at Shopify. A hearty congrats to Tobi, Mark MacLeod, Harley and the rest of the team. Congrats to the Protus IP team to on a great exit. This should help to bring at least a little bit of liquidity back to some of the local investors and perhaps this is just the tip of the liquidity iceberg … fingers crossed.

Now Looking forward …
I believe that Ottawa now has the opportunity to regain much of that lost ground in the tech sector. As stated previously I have not been this optimistic on the Ottawa tech sector since the bubble burst back at the turn of the millennium. The topic of Ottawa’s tech future will be turned into a series of blog posts over the next few weeks. So at the regional level things are looking good although there is much more that could be done.

As an aside … I have stealthily launched a new start-up recruiting firm not too long ago and this has been very well received, is a lot of fun and basically builds on a lot of the community work I have been for the past 6 or 7 years. More on this next Monday. You can find me on my new twitter account at @StartupScout

Wishing everyone a happy, healthy and prosperous 2011.

Ian Graham

Filed under: Featured, Ottawa, Start-up by Ian
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