To scale a startup, it takes a village

Building a business is no easy task. It takes hard work, a steadfast belief in your idea, your team and yourself — and a lot of help. Earlier this year, when venture capitalist Ben Yoskovitz, surveyed CEOs to ask how they felt about their jobs, many shared just how difficult it can be. Anita Ramdas, CEO of Shufflespace, told Yoskovitz that she wished someone had explained to her earlier how important it was to build a “community of support.” But what should that community look like, and where do you go about finding it?

Read on for expert advice on building a proverbial village to provide support.

What’s the big idea?

Before starting a business, founders need to make sure their idea is a good one — or, as Abdullah Snobar, executive director of DMZ and CEO of DMZ Ventures puts it, that it “creates a holy-sh*t factor.” Passion alone is not enough. “Founders need to be working to solve a problem that’s actually worth solving,” he says. “Their team needs to commit to refining their unique value proposition and ensure all decisions tie back to how they differentiate themselves in the market.”

Entrepreneurs have to talk to their target market to see if their idea addresses a genuine pain point potential customers would pay to solve and how much they’re willing to spend.

Programs at DMZ support founders at these early stages of the entrepreneurial journey, providing startups with all the resources they need to ideate, finesse their product-market fit and execute their go-to-market strategy. “If a founder and their team are motivated to see their vision through, they are more likely to get creative and build a successful product or service,” says Snobar.

Mentorship 101

When it comes to mentorship, there are three main buckets: general tactical guidance, soft-skill mentorship and domain-specific subject matter expertise, says Jon French, director of University of Toronto Entrepreneurship.Mentors in the first bucket focus on fundamentals, guidance that can come from any number of business experts. “But soft-skill mentorship is best done by an entrepreneur who has been there, done that,” French says. “It’s so important to get advice on mental health and work-life balance as you build your workplace culture.” And subject matter experts can “pressure-test a founder’s hypotheses and let them know if their solution is actually viable,” he says.

Founders can find mentors through entrepreneurial hubs — at the University of Toronto, there are more than 10 campus accelerators, as well as additional programming for entrepreneurs. A&S Venture Mentoring Service in the Faculty of Arts & Science is a free service that matches entrepreneurs with mentors. There are also resources aimed specifically at historically marginalized groups. The school’s Black Founders Network supports Black-led startups. There’s an Indigenous entrepreneurship program that was developed in partnership with Redbird Circle. And there’s lots of programming aimed at women in STEM-specific fields. French recommends groups like Techstars, Founder Institute, the City of Toronto’s StartUp Here initiative and NEXT Canada.

Of course, when it comes to putting mentors’ advice into practice, things can get confusing — especially if founders have multiple mentors.

“Whether you’re in an accelerator, or you’re looking to raise investment, VCs will say that they look for founders who are coachable, willing to listen and willing to take advice,” French says. But he points out that it can lead to a huge network of really smart people offering conflicting advice. so the other piece that’s important is to figure out when to listen to advice and when not to,” he says. “If you can hear advice and then counter it with data or with evidence that you got from your customer discovery experience, that’s something your mentor will respect and that will lead to a healthier relationship.”

Money, money, money

When thinking about funding, “entrepreneurs should always refer to the big why — why have they built their business in the first place,” says Sévrine Labelle, managing director of the new Thrive Lab at BDC Capital, which is investing $100 million in high-potential, women-led companies. “How can they make the biggest impact? Is it better to stay local or grow big? Do they want to keep full ownership or are they willing to open their ownership and bring investors with them?”

If they want to grow substantially, seeking investment is likely the way to go. For those founders, Labelle says the best sign that they are ready is that they have a strong business plan and have contributed their own money to the company.

Founders need to be patient. It can take up to a year or two to find the right investors and close a round. Part of that process is due diligence, a formal exercise that gives funders a detailed understanding of the company so they can determine whether investing is a sound business move. But, she says, founders should think of due diligence as a process that’s beneficial for them, too. “The entrepreneurs need to be sure that the investors share the same values and vision for the development and growth of the business — and that they get along well.”

Get legal on the line

Don’t skip talking to a legal expert due to the assumed high cost. New startups might not need (or have the resources) to hire an in-house lawyer, “but most firms that work with startups offer accessibly priced, fixed-fee packages that cover incorporation, provide templates for important documents and insights into stock option plans,” says Konata Lake, head of the Emerging Companies and Venture Capital Group at Torys. “This advice doesn’t have to be costly and if you go with a reputable firm that has experience with venture-backed companies, you can hit the ground running.”

It’s important to incorporate early to “protect the founder from liability related to the business and to place the startup on a path to being investible,” says Lake. Plus, a lawyer can explain employment law, help develop a plan to protect your intellectual property and offer strategic advice around investors. Early legal advice can also help founders avoid costly mistakes, like unknowingly giving up a large percentage of their company because they’ve made back-of-a-napkin agreements instead of using proper legal documents. “It can be expensive to clean up something that’s not done in the right way,” says Lake.

Handling space restrictions

Tech ventures often need specialized space. Biotech startups require access to wet labs, while other entrepreneurs might need kitchen space (think Venturepark Labs’ food incubator) or a lab to develop hardware (like ventureLAB’s  Hardware Catalyst Initiative).

This can be difficult to find. According to a recent report from Toronto Global, the city has one of the tightest markets for wet lab space in North America. But it’s not impossible. MaRS recently announced the launch of a biotech accelerator that gives early-stage innovators access to lab space. In Guelph, Integrated Explorations offers short- and long-term rentals with access to microbiology and analytical chemistry labs and bioreactors.

More spaces are on the way. In Hamilton, 26,000 square feet of leasable wet lab space is scheduled to open at McMaster Innovation Park this year, while Mississauga will soon be home to a purpose-built life sciences campus featuring 400,000 square feet of lab and R&D space.

How to handle people problems

Companies need human resources pros even before they have the capacity to hire a full-time HR expert, says Daneal Charney, an HR expert and executive in residence at MaRS “Often, founders believe in what they’re doing so much they can’t believe that others wouldn’t. They may be a bit disconnected from festering issues.” But a seasoned HR pro can use tools and technology to identify patterns and flag these issues, as well as advise on how to attract and retain star employees. And, Charney says, there are significantly more part-time or fractional options than in the past, which can be a more affordable way for fledgling companies to bring on HR help.

“A few years ago, the idea of fractional employees was mostly within the finance area, for example fractional CFOs. Now, there are lots of really good HR fractional folks. Search on your LinkedIn or ask your investor and they’ll refer you to someone. Because they’re out there.”

 
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Illustrations by Maya Nguyen