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Direct from The Six, world-renowned, Canada’s largest city with Canada’s biggest thinkers, visionaries, and hustlers, this is Startup Talk episode 18 with Equivesto. The Startup Talk podcast features the founders, funders, innovators, and community leaders who have led Canada’s startup ecosystem right here in Toronto. You’ll hear the challenges, the failures, the successes. Toronto’s Startup podcast gives you the full story direct from the entrepreneurs and influencers who have made a difference. Now the host of Startup Talk, the founder of TorontoStarts, The Startup Coach.
Startup Coach: Welcome back to Startup Talk episode 18, Toronto’s Startup podcast. I’m the Startup Coach. On this episode, I talk to Ryan and Alex, the co-founders of Equivesto, an equity crowdfunding platform. We talk getting investment, creating a platform, startup valuations, and the importance of pitching and more all on this episode of Startup Talk.
Startup Coach: Hey, it’s The Startup Coach here. Welcome back to Startup Talk episode 18. Today I’m with Alex and Ryan from Equivesto. Welcome, guys.
Alex: Hey, Craig. Thanks for welcoming us. We’re looking forward to chatting.
Startup Coach: You both seem to have different backgrounds. Why don’t we start with you, Ryan, because I like to get to know the person before the company. What were you like growing up? Were you studious? Were you into sports music, computers?
Ryan: Sure, yeah. Definitely, definitely an introvert, a geek by nature. I really found a clique with the mathletes and chess club back in school, also been playing piano since I was four like a true geek. But once high school started, I had a desire to be cool, so I took on a lot of sports, mainly soccer. I think I nearly had 40 hours of activity a week at one point. I’m the kind of person to overdo things like that.
Startup Coach: What about you, Alex? Were you a sport person or a geek?
Alex: Definitely, definitely a geek as well. Tried to get high marks. I ran a history club, definitely also involved in music in a bunch of bands and all that sort of fun stuff, but did do some sports as well, TaeKwonDo and was a ski instructor for a while. Recently, I joined a little rec soccer league with Ryan, though I am nowhere near as good as he is.
Startup Coach: Well, it doesn’t sound like you guys were nerds of any sort. Sounds like you did everything.
Ryan: Yeah. That’s sort of our little escape, I guess, when you take on activities. You’re not really socializing. You’re just doing the activity.
Startup Coach: Fair enough, and nerd is not a bad word in our world, right guys?
Ryan: I don’t think so.
Startup Coach: 90% nerds over here. How did you guys meet?
Alex: Yeah, so we met at university. We were close friends studying in the same program and we ended up living together for a few years. We always talked about starting a business. Even though we separated and went our own ways in the early part of our career, we always knew we would get together and do something and now we are.
Startup Coach: When did you decide to be entrepreneurs?
Ryan: Yeah, I don’t think it was necessarily a conscious decision. I think it’s just a circumstance of being really dedicated to a cause. Alex and I, we both had our businesses in the past and tried a bunch of different things. Then sometimes you’re lucky, you fall into the path of hey, there’s nobody else doing something that you really are about out there and the only way to make it happen is to do it yourself.
Startup Coach: Okay, that was good, but vague. Who came up with the idea? Did one call the other person? Were you working on it with someone else and this wasn’t working? How did it happen? Where did the idea of Equivesto come from and how did the two of you decide?
Ryan: Sure, I can answer that. It really, like most ideas, came out of personal need. Like I mentioned before, Alex and I had startups in the past and you know it’s really difficult raising capital for anyone unless you’re well connected or you’re in the right networks. To get that early stage investment, it’s really difficult. We saw the market. We saw that there was definitely a need. This big gap between the friends and family and the venture capital. A lot of those great organizations, even the ones that we’ve ran in the past, never see the light of day.
Startup Coach: Since the audience doesn’t know yet, what does Equivesto do?
Alex: Right. Equivesto is an equity crowd funding platform. Specifically we’re working with exciting and innovative local Ontario companies and soon Canada-wide companies looking to raise capital from their own communities. This platform creates an opportunity for people to invest in these great startups even though they’re private companies for as little as $100.
Startup Coach: That is whether they’re accredited or unaccredited?
Alex: Exactly. Both accredited and unaccredited investors can participate. If you’re over 18, a resident of Ontario, currently alive and have $100, you can invest on our platform.
Startup Coach: This didn’t exist say five years ago, six years ago? I can’t?
Alex: Yeah, no. Definitely not. The rules actually changed in Ontario in 2016. Each province has its own securities regulators. In 2016, the rules changed for Ontario. That allowed equity crowd funding to take place. Since then, Ryan and I have been working on building Equivesto, really making sure we had everything covered. We focused very much on protecting the investors, protecting the companies and remaining compliant with any and all securities regulations.
Startup Coach: You saw the gap in the market. You decided, you saw the regulations. Was it around 2016 that the idea popped in both of your heads? Were you out drinking beer? Were you?
Ryan: Absolutely. Yeah. Alex and I said we wanted to start a business. He came from the corporate finance world and I came from the tech world. Fintech just fell in our lap and we said okay, there could be a tool that could fill this gap for people in a platform. A central location where they could go and find that capital that they need. It doesn’t have to be sourced from accredited individuals. It can be from their own community that believes in them.
Startup Coach: Great. You see this gap and it’s a huge gap for entrepreneurs trying to get funding, get things going.
Startup Coach: You have the idea. You decide we’re going to be co-founders and we’re going to move ahead.
Startup Coach: What’s the next step?
Alex: We actually spent probably most of 2016 thinking about how we were going to tackle this problem. How we were going to get organized. The ways that we would approach it and starting to look into the costs associated of building a business like this. As you already mentioned, the rules and the requirements around that. We built out our full business plan and all those sort of documents before we actually even incorporated the company and everything like that.
Alex: Equivesto incorporated in April, 2017. After that point is when we actually started making progress and going from there. But for the first year, it was really focusing on building the whole idea in our minds and understanding exactly how we wanted to tackle it.
Startup Coach: You got the idea in your minds. You figured it out how you want to tackle it. How did you get the platform? Was it investment first or the platform first?
Ryan: I think it’s both. I think you can’t necessarily focus on one because both are important aspects of the business and I think a lot of entrepreneurs often just focus on one and then all of the sudden the fire starts on the other side.
Ryan: For us, we’re lucky enough to have a co-founder. Be two people and approach it in two different ways. Alex is definitely on the financial side and myself on the technology side. We were piecing this together. Another thing that we focused on right, like Alex mentioned was, building the business plan first. We knew from the ground up that we were going to focus on compliance and security for all people who were going to be on our platform. By doing so, we knew the direction of the technology needed to be built. We incorporated in everything that we used. It made us and helped us make our decisions a lot quicker and easier.
Startup Coach: You’re working on the business plan. You’re working on the platform. You’re trying to get investment. At what point does investment come?
Alex: I think the first round of investment, usually you’re trying to get that from friends and family. It’s important, even though they’re your friends and family, to demonstrate that you’ve really thought through your idea and you’re prepared. Even though you don’t necessarily have money before that initial round, setting up some potential contracts or building our potential partnerships, areas, groups, that you’re going to hire, people you might want to work with, building all of that out so as soon as you do get that initial capital, then it’s easy to hop straight in and get going from there.
Alex: Once you’ve got all that information, then going to the friends and family for that initial round, that can help jump that forward.
Startup Coach: Definitely. That sounds like a very good strategy. Why should startups care so much about equity crowd funding?
Alex: Equity crowd funding for us is really exciting because it changes the investment landscape or any country where it’s legal. Because before that point, capital can only be raised from really high net worth people, accredited investors, venture capital firms. So, you end up with a situation where the types of companies that those investors are looking for are the ones they’re going to fund. Anything that’s outside of that, even if it’s a terrific idea, might get passed over. With equity crowd funding, now only do you have access to a greater pool of overall capital, but you also have the opportunity to engage with and get the support from your own community. You know the people that would be investing in you and they know you. They trust you. They believe in your idea. Not only are you getting access to more capital, but you’re building on that support and that appreciation from your community.
Startup Coach: Just how much capital can somebody, a startup, a company get from equity crowd funding?
Ryan: Sure. It’s extremely regulated in Canada right now. Right on our platform, we accept up to $1.5 million dollars. Our starting is at $100,000. It really fits the gap for a lot of companies who are looking for that either growth stage or last mile investment. That’s a big sector that we’re looking at. The people who have reached 95% of their goal to market but that last 5% they can’t figure out how to get done. They have exhausted their friends and family and VCs are not willing to look at them.
Startup Coach: You’ve built your platform?
Startup Coach: Did you build that in house? Did you outsource it? I ask these questions because a lot of entrepreneurs come to me and say how do I get a platform built? Do I need a technical founder? They go out and they get 10 quotes from $20,000 to $700,000 and they start pulling their hair out. How did it work for you?
Ryan: Absolutely. Like I mentioned before, by deciding that compliance was our core, that security was our core, we knew that technology didn’t necessarily need to be built in a way and in house. It was a difficult thing for me being the technical co-founder. We actually outsourced it. We went and found a team that had been building platforms like this in the past and have already thought of compliance as the basis of their framework. We went externally.
Startup Coach: You went to somebody’s best practices, done this to other people before, is going to make sure they follow the most stringent standards to meet all the compliance rules.
Alex: Exactly. I think it’s definitely important though to have someone technical on your team or in your advisor group who can advise you regarding which of the options you’re looking at might make the most sense. Because I know from my perspective, not being so technical, having those options you mentioned from $20,000 to whatever, $750,000, you have no idea which is the right one or whether somebody’s trying to scam you something like that. Getting access to someone on your team who you really trust who can give you that critical advice like Ryan can, that was really important.
Startup Coach: Yeah, if you don’t have someone like that, finding and advisor, even hiring somebody who does fractional CTO type services, building a relationship with someone’s who has done this before or trust who can be your middle man. I used to be a chief technology officer at Mercer Human Resource Consulting and senior manager of architecture planning at Deloitte. It’s one of those things as a technical manager, everyone’s trying to bull crap you all the time. Yeah, it’s nice to know when to say hey wait a minute, this doesn’t look right and have someone on your team who can stand up and do that.
Alex: No, exactly. Not to toot your horn more for you Craig, but TorontoStarts has some great options to help people get more information on that. People should definitely talk to you if they’re looking for help.
Startup Coach: Yes you should. Thank you for that. Do you have any tips for entrepreneurs? I usually ask for three tips. Let’s start with tip number one.
Ryan: Sure. Pretty high level, but I think perseverance is one of them. There’s a lot of no’s that you’re going to get. I think I talked to you Craig about this in the past, but after exactly how many no’s are you willing to quit? A lot of investors and a lot of people who are going to support you need to know that answer. It’s really easy at first when you’re getting a lot of yeses, a lot of wins, but when you start hitting a couple losses, how far you willing to persevere to get to that goal?
Startup Coach: That’s a good one. Definitely. Tip number two?
Alex: The second tip would be team. We touched on this a little bit earlier talking about advisors or a CTO, but it’s definitely important to surround yourself with people who understand you, understand what you’re working on and can bring a lot of knowledge and information to support you to the table. You are a representation of the five or 10 people that you spend time with and this is an opportunity where you can step that up and help your company succeed that much more.
Startup Coach: I definitely agree. You are the average of the five people you hang around with most. When you say that to people and they nod their head and think that’s okay, those people you probably don’t want to hang around with too much because they oh, that’s great. Tip number three?
Alex: Yeah sure. I think it’s research. I think a lot of entrepreneurs don’t do this enough. Honestly, do you due diligence. Do your research. Do your market research. Look into your business before you actually take that dive. A lot of company and people … I know there’s a lot of mixed messages in the market about oh just go in there and do it. Lots of people, your friends, will tell you oh, it’s great, go ahead. But, actually do your own due diligence before you jump into any venture. Make sure that it’s a right fit, there’s an actual need out there for what you’re doing. Then, everything else will fall into place if you’ve done your research right.
Startup Coach: Yeah. Idea validation and getting problem solution fit really the biggest problem for startups. Making sure they validate their idea. It might be a great idea, but maybe no one wants to pay for it. Maybe the market isn’t big enough. Maybe it doesn’t actually solve that problem.
Alex: Exactly. Well, and that’s way Toronto Starts really steps up and provides a lot of help around idea validation. So, definitely speak to Craig about that also.
Startup Coach: Yes, we run idea validation workshops all the time. Thank you guys for your support, that’s great. Is there any advice you have for startups who are seeking funding?
Ryan: Yeah, definitely there’s a lot of potential options or categories of funding that start ups can get. But at the same time, I think if you look at the numbers, less than one percent of all companies in Canada looking for funding over the last few years actually got that funding. Definitely try to look at all the potential options of what’s out there and how you can get funded. There’s a whole ton of them. They don’t just have to be investment or even loans. There’s grants and all kinds of other options. Find out the ones that work best for your company, your business model. Try to get money from areas where other people might not even be looking. Then, after you’ve figured that out and you have a bit of a road map, then you can go and start actually trying to apply and get the funding from those different areas.
Startup Coach: Yeah, there’s lots of different grants and loans that are available from the cities, from municipalities, from different non-profit and that kind of stuff. They should check out resources like Fundica.com which has a lot of lists of these types of things and you can narrow down what’s available in your area to give you some ideas.
Startup Coach: Some of the advice I’ve had recently is stop looking for funding and start generating revenue, but that just depends on your business, what it is first. Sometimes you need funding because of the style of business.
Alex: No, exactly. That’s actually one of the challenges that we faced building this type of company which is an exempt market dealer. You have to actually build the entire product almost to perfection before you can ever begin to operate. In that sort of scenario, you can’t build it and test the market. You need to raise the capital first and then build it and then you can actually generate revenue. That conversation’s a little difficult with investors, but there’s definitely different ways to go about getting started depending on your business model.
Startup Coach: Yeah, there’s definitely models like that where you actually have to sell the idea and the stuff first beforehand because there’s no way you can build a platform and get it compliant and all those things.
Startup Coach: What are a couple of problems you generally see with startups and their valuations?
Alex: I think there’s definitely, we could have an entire another podcast just chatting about valuations and looking at how different startups arrive at their valuation and all the things involved in that. I think there’s, it’s always a balance trying to determine the value of your company when you’re starting out, especially if you haven’t had revenue because you obviously are working on it all the time. You see the potential, that’s what drew you to this idea.
Alex: The problem is convincing other investors, other individuals that that possibility is there in a realistic way. If you put on your projections that you’re going to have sales of a billion dollars in three years, maybe there’s a chance that that’s true, but nobody’s going to believe you. You need to make sure that you back up any numbers that you’re generating with as much information, data, other things as possible and then use those numbers to generate a fair and smart valuation.
Alex: We also think it’s really important to keep an eye on your costs. If you’re really able to understand all the future costs and project them properly and people can see that when they’re looking at the valuation, then they’ll know, okay, you’re putting a valuation of five million, but I actually do know that this $400,000 or $600,000 that you’re trying to raise right now, I know what you need that money for and I believe you. There’s another way to go about that.
Startup Coach: Oh, definitely because your money gets you to a certain point.
Startup Coach: That’s great. Do you normally see entrepreneurs or startups under value or over value their companies?
Alex: I think that’s a good questions. There’s definitely a wide range. That’s part of what we want to do when we help and we talk to entrepreneurs is really help refine that valuation number and come to one that makes sense not just for them, but also from our perspective, a number that will work well with the market and get engagement from investors.
Alex: There’s definitely some entrepreneurs who are sometimes too conservative, but there’s also a lot of entrepreneurs who are very excited about their idea and they say so oh, it’s definitely worth $25 million dollars even though I haven’t built anything yet. Part of that conversation is something that we like to have so that we can agree on something that everyone thinks is fair.
Startup Coach: That makes a lot of sense. So Ryan, you were at our pitching, coaching session with the Fundica Road Show attendees the other day. How important is being able to pitch for an entrepreneur?
Ryan: Extremely, extremely, important. Every time you meet a new person is a new opportunity to grow your business essentially. Being able to explain yourself, your business and why they should care is vital to the success of your company. Not everyone has that A-type personality and that’s perfectly okay. I don’t have that myself, but it’s really about conveying your mission, your passion to the other person and finding that common ground.
Startup Coach: Fantastic. Any advice for startups seeking advisors? I mentioned that you mentioned that team is so important.
Startup Coach: I always say it’s one of my sayings, entrepreneurship is not a solo sport. I have a lot of single entrepreneurs coming in, their head down in the work and they really need to get out of their own head and talk to people. Any advice for startups seeking advisors?
Alex: Definitely. Obviously, using your own personal network to find people willing to advise you for free or for some other trade off is the first place to start. But not everyone has access to that size of community or group of individuals with a background in the same industry as the company you’re starting. If that’s not working, then reaching out to other members of the startup community. Getting connected. Going to networking events is a great place to start. You’ll usually find like-minded individuals who might have a lot more experience in the industry.
Alex: Also, I know everyone says this, but LinkedIn is always a good place to look. If you go through, and this takes a lot of time, but if you go through the other people you have in your network on LinkedIn and see if they have a connection. One connection separate from you, that you really want to get their advice and you want to connect with them, asking your intermediate connection to make that introduction is definitely another way that you can get advisors. But also, speak to Craig at Toronto Starts.
Startup Coach: Use some of the LinkedIn advance search tools because you can do second connection and narrow it down to investor and this and that with some key words. Actually narrow that search down a fair bit.
Startup Coach: There’s some interesting ways to do that.
Ryan: It definitely helps if you know some key areas where you’re looking for advice. Sometimes at the beginning, you just want help in all kinds of areas and so you don’t know exactly where to go. But, if you’re able to refine that down a little bit and say okay, right now I’m looking for an advisor who has a great experience in marketing, specifically social media marketing for these type of consumers, looking for that helps begin the conversation a bit easier. Because, when you speak to the person, you’re clear, you’re concise. You know exactly what you’re looking for and that makes it easier for them to help you.
Startup Coach: Absolutely. If you’re still just not sure and you’re looking for that general advice, go to a meet up. Go to a networking event. Go to an entrepreneur event. Go to a fintech event, whatever your thing is and talk to people.
Startup Coach: You find someone interested and hey, let’s go grab lunch, let’s go grab coffee and ask them for a chat. Get their advice, that kind of stuff and start getting you on the road. You’ll find people you like. There’s a lot of coaches like myself. There’s coaches all over the city, but sometimes you just need to find someone six months, a year, two years ahead of you that’s been there and say oh, no, you need to go here, do this, sign up there and you’ll be on your way.
Ryan: Definitely. People always like getting a quasi free lunch.
Startup Coach: Yeah, definitely. If you’re asking for help, make sure you’re buying. That’s always a good idea.
Startup Coach: What resources slash communities do you recommend here in Toronto and why?
Alex: We definitely recommend TorontoStarts. It’s a great community. It’s really well connected. They have great meet ups every month and lots of education there. There’s lots of other communities as well all across the city that people can get connected through. Startup Here TO has a list of all the events, a giant calendar. There’s like seven events every day or something so I would definitely start there and look through all that list and you’ll be able to find tons of different communities that you might want to join.
Startup Coach: Yeah, and you can find all of our events on the Startup Here TO site as well, that’s the city of Toronto’s economic development branch and their group is great. I’m on the editorial board of that site if you didn’t know. I’ve been teamed, they’re good partners of mine for four or five years. Yeah, they’re a great resource.
Startup Coach: What entrepreneur books do you recommend and why?
Alex: Sure, I’ll take that one. There’s two books that I’ve just recently read. I think one that everyone’s read is pretty much Start with Why, Simon Sinek. Excellent, excellent book. I think entrepreneurs, they always start with a problem statement. They say hey, this is the problem I’m solving, but they really don’t go down to the core of why are they going after this market. Why are they doing this business? Why are they driven to this space? I think that’s something that’s fundamental in order to connect with customers, to connect with investors. Definitely a great book for that.
Alex: Another one is Founder’s Dilemma. Excellent, excellent book. It really, I don’t know. I just felt I was reading about myself when I was reading about that book. It’s the typical things that entrepreneurs go through. The ups the downs, building teams, all sorts of milestones and then occasional fires. This and that. Definitely a good read. It will walk you through your current life and possibly into the future.
Startup Coach: Very nice. Any others? Or, is that it.
Ryan: That’s pretty much it. I mean there’s tons of resources out there.
Startup Coach: There’s a ton of … Sorry, that’s it. Normally, I only get one, so two’s great. I didn’t ask, but I know a few companies working in a regulated market and the securities commission and OSC, they go cautious is the word. I don’t like to say slow or whatnot. How do you find working in a highly regulated market?
Alex: Definitely, I think it’s important that we have something like the OSC in the industry and in Canada, in Ontario to help protect everybody involved. Yes, I think the OSC goes at their pace and I think operating in a market where there is an oversight like the OSC, actually can be a benefit and can really help improve companies. A lot of people say oh, I’m regulated. It’s so horrible. I think this provides another avenue for you to ensure that the product or the service you’re providing is really protected and the individuals you’re selling to are taken care of. It’s another way to make sure that the industry itself as a whole is really operating in an ethical and a professional way with everyone. There are challenges to operating in a market with high regulation, but we definitely think that there are benefits.
Startup Coach: Definitely. I think most of the companies working around money, crypto currency and all that kind of stuff, definitely need to be regulated in the marketplace when you’re talking about security of any site dealing with people’s money. Just because, exactly, there’s too many things that can happen out there.
Alex: No, exactly.
Startup Coach: A lot of people might complain about it, but I think that’s because they don’t want to follow rules. Don’t want to do the paperwork, don’t want to whatever that is rather than listen, this is what we have to do for the security of our customers and what actually makes this system stable for everyone.
Alex: Right. Exactly. When you’re talking about a financial system, something that underpins all of society like this, it’s important that we keep people safe and people know what they’re getting into. They understand exactly what each company is doing, what they can do with their money and their information. Operating in a regulated environment helps provide a bit more insurance as well to customers.
Startup Coach: What is next for Equivesto?
Alex: Speaking about regulation, the next thing for us is we’re just finalizing our regulation with the OSC as an exempt market dealer. Once that’s completed, we’ll be launching hopefully in the next few months. We’re quite excited about that. Definitely keep an eye on our social media for more information on that.
Startup Coach: Where can people find out more?
Startup Coach: Well, thank you very much for being on Startup Talk.
Alex: Thank you very much for inviting us, Craig. It’s been great chatting.
This has been Startup Talk episode 18, Toronto’s startup podcast with Equivesto. For more exclusive content, the episode vault, and to be part of Toronto Start’s community, visit TorontoStarts.com. Get your name on the newsletter mailing list and check out our upcoming events. For more episodes, subscribe now and please recognize the time and work behind the scenes put into connecting you with the biggest visionaries, entrepreneurs and innovators in Toronto by leaving a five star review. Join us for more next episode from Toronto’s most active entrepreneur and startup community on Startup Talk.