How to build a Startup

December 5, 2021

Yesterday I attended a workshop hosted by CPEAC on How to build a Startup. The speaker Zack Zhang is a young entrepreneur who had worked as an mechanic engineer for years before he started his own startup AI Shading earlier this year. I have read on the news about a lot of ongoing projects and initatives posing much emphasis on technology and innovation in business here in Calgary, but hearing from the entrepreneur’s personal prospective is quite an insightful one. Here are some notes and takeaways from the workshop.

The cruel fact

We probably all have heard about the low survival rate of startups. Here are some quick stats regarding startups:

  • firt time founders' average age is 40
  • less than 2% of ventures managed to raise VC
  • less than 1% of ventures ended up IPO
  • about 90% of startups fail

The speaker also mentioned that the initial idea is mostly not going to be the same as the one eventually ended up with, because new considerations will keep coming up.

why do startups fail?

To my surprise, the number one reason that startups fail is due to no market need. This accounts for 42% of the situations when startups fail, according to CBInsights, outpaced for about 13% of the second reason, which is ran out of cash. However, personally I think running out of cash is quite a generic situation and can happen in multiple phases during the life-cycle of a startup, and perhaps would have covered other reasons that startup might fail for, had the startup survived this round of fundings.

Lean startup

Lean Startup is an ideaology on how to build a startup. The idea is mentioned in the book The Startup Owner’s Manual by Steve Blank and Bob Dorf. There is actually another book called Lean Startup by Eric Ries. The speaker mentioned the former.

So what is lean startup? In essense, it is through build-measure-learn and repeat this process until you find that there is a market need for your product and business model. The word “lean” also suggests that you do not need to make everything perfect before putting it up to the market - in fact, that’ll just delay your progress. What you need is a minimal viable product (MVP), put it to the market to receive feedback, and improve it.

lean startup
lean startup product cycle

Here is a very intuitive drawing by Henrik Kniberg from his article Making sense of MVP:

lean startup
MVP graph made by Henrik Kniberg

What you need is a prototype that works, and with that you can start testing the water. When you are ready to bring it to the broader audience, you can prepare for the pitch.

Apart from using the MVP ideaology, the other key message is “getting out of the building”. Entrepreneurs need to get out of their office and actually talk to users, gather their opinions so that your product can improve.

Funding and wage subsidy

fundings

At the begining when all you have is just an idea, you are likely starting the fund raise from your family and friends. When you have some business plans and prototypes built, you can first reach out to government and institutions and seek for some professonal support, advises, and potential funding opportunities. When your business scale up, you can reach out to private investors such as angle investors, and may go through several rounds of fund raising while your company’s evaluation grows.

In terms of fundings, there are two types of fundings, dilutive fundings and non-dilutive fundings. Non-dilutive fundings are funds from government, NGOs, universities and do not need for your shares in return. Here are some resources available in Alberta

  • Mitacs: the Mitacs accelerate program provides 50/50 (50% from the entrepreneur and 50% from mitacs) portion in funding support. Due to pandemic, the program has even a preferred rate that mitacs provide 75% of the funding. Mitacs helps finding university students to get involved in your research and work. If your business is suitable for university students to gain some experience, the likelihood of getting Mitacs funding is pretty good.
  • Futurepreneur: provides low interest loan. If you have a good business plan, this is also a good option.
  • Alberta Innovates: they provide even more support on every stage of the way. Your project will be evaluated for the feasibility. This is a provential program.
  • NRC-IRAP: a federal program that also has funding opportunities

wage subsidy

Wage subsidy covers a portion of the salary you need to provide to your employees. The company contribution part is not covered.

  • Venture for Canada: an NGO that provides salary subsidy for companies.
  • Eco Canada: this is specific for startups involved in renewable energy, clean energy, energy efficiency.
  • Alberta Jobs Now Program: their website indicates the portion and cap of salary subsidy amount.
  • Technology Alberta: a relatively new program that provides a small portion for employees' salary.

Resources

resources in Alberta

There are many training programs available in Alberta. Even for people who do not have a plan to start a startup or business, you can still check out the resources and courses they provide.

  • Platform Calgary: a pre-accelerator platform. They provide some great courese to get you started with the right mindset to build a startup. Some courses provided such as Startup 101, Customer 101.
  • Startup Edmonton: also a pre-accelerator program.
  • Foresight Canada: this is an accelerating program with a focus on clean energy, green economy, energy efficiency related topics.
  • Alberta Innovates: they provide not only funding opportunities but also lots of support and advices from experts.

other resources