The next episode: We are living in a period of great change. New media pioneers have struck deep at the heart of traditional empires, and ushered in a brave era of social interaction. Fleet-footed titans—Amazon, Google, Facebook, Twitter—have, in just over a decade, established themselves as some of the world's most valuable companies and delivered a monumental summons to their forebears: Innovate or die. But while old and new media tangle for survival, a fresh wave of start-ups has appeared on the horizon, each founded on ideas that could only have existed in a post-social galaxy. Will some of these nine Canadian rebels rise to become the new new media establishment, or will they be swallowed by the very companies they have come to disrupt? Either way, a win.
ALLEN LAU Wattpad (Toronto) Allen Lau doesn't look, talk or act like the publishing industry's next great kingmaker. The 43-year-old entrepreneur has neither Jeff Bezos's swagger nor the literary airs of a New York editor. But Lau, founder of Wattpad, has built an online community of eight million readers and writers. His site, which allows users to publish their stories online, has been described as the YouTube of writing, though Lau stresses the formula is far more interactive: Readers can comment on stories as they're being written. Wattpad users, he says, "socialize a lot." Indeed, with up to 400,000 new stories posted each month, Wattpad has become a massive online literary salon.
The idea for Wattpad came at that ripe moment just before the iPhone and Kindle, and Lau admits that his first version was "a little bit early." But he and co-founder Ivan Yuen stuck it out, raising $600,000 from angel investors in 2009 and, in September, 2011, a more serious injection of $3.5 million led by Union Square Ventures, the bright minds who backed the likes of Twitter and Foursquare. Because it draws impressive numbers of smartphone-wielding readers in our apparently post-literate society, Wattpad has even begun to gain the attention of dead-tree publishers. (At least one Wattpad author has been offered a deal with a six-figure advance.)
Lau allows that the site's most disruptive feature is its ability to attract large audiences to works by authors no one's ever heard of—a trick that has eluded the book industry for years. "No offence to Amazon, but if you look closer, they have only changed the output format from paper to files," Lau says, politely. "We're re-engineering the entire process by bringing readers and writers together." —John Lorinc
MICHAEL DE MONTE AND JONATHAN KEEBLER ScribbleLive (Toronto) Michael De Monte has something to tell traditional news organizations: "If you're not publishing in real time, your audience is going somewhere else." As far back as 2006, De Monte and Jonathan Keebler began to notice that Twitter and other social media sites were leaving conventional news sites in the dust when it came to delivering information about fast-breaking events. Both men were working at CTV's online division at the time, and began pondering ways to make online news delivery both less static and more collaborative.
Today, ScribbleLive sells its live-blogging technology on a white-label basis to a growing roster of media organizations (including The Globe and Mail, CTV, Reuters, Associated Press and the Hearst media empire). And with backing from Rogers Ventures and Summerhill Venture Partners, the company has grown from nine employees to 24 last year.
The way De Monte sees it, his company's service is designed to disrupt the disruptors, that is, Twitter, Google News and the ubiquitous RSS feeds. "We're empowering publishers who felt they were becoming less and less relevant." —J.L.
SARAH BANCROFT Vitamin Daily (Vancouver) Like many great notions, the idea for Vitamin Daily took root at a dinner party, recalls Sarah Bancroft, whose network of in-the-know online lifestyle magazines is rewriting the way publications gain and monetize readers. In the mid-2000s, Bancroft was working as the West Coast editor for a Toronto fashion magazine when a PR specialist, Tara Parker Tait, offered a provocative proposal: Build a website that does nothing but curate and disseminate street-smart recommendations on events, cool stores and neat products.
They began small, juggling the venture with their day jobs until the site's word-of-mouth popularity (a mention on one of VD's lists can drive hundreds of customers into a local store) got back to Bancroft's boss. She was given an ultimatum—the site or her job. She chose Vitamin Daily. That was in 2007.
Armed with two rounds of funding from angel investors (whose spouses loved the site), Bancroft and Tait have built a 55,000-strong subscriber list and launched local versions in Toronto, Calgary and Montreal. The now-profitable company has a staff of 18 and a two-pronged approach to generating revenue and profile: It eschews banner ads in favour of sponsorships ("Our demographic is banner blind," says Bancroft), and makes a point of hiring local editors who bring their own social media followings.
Early on, Bancroft says, advertisers turned them away, dismissing VD as too niche: "Now, we're the 'niche with reach.'" Bancroft tells potential advertisers that it's cheaper to lock in early because the subscriber base has been growing at a rate of 10% a month. —J.L.
KUNAL GUPTA Polar Mobile (Toronto) The Apple App Store didn't yet exist when Kunal Gupta launched Polar Mobile in 2007. Few knew what an app was, yet Polar was trying to sell a customizable mobile publishing platform to magazines, newspapers, TV networks and even professional sports leagues. "It was a totally different time, and it was only five years ago," says Gupta. "People asked us why anyone would download software to their phone."
The 1,200 apps Polar has created since—for customers including Condé Nast, Time Warner, CNN, Shanghai Daily and The Globe and Mail—have been downloaded by 11 million users and served up 1.6 billion articles. But the media business has also become enormously more complicated. The universe of connected devices has exploded (Gupta carries around at least seven phones and tablets, and uses them interchangeably), and the way users get news has changed irrevocably. "More people are getting their news through an intermediary: Facebook, Twitter and other social networks," says Gupta. Then there's that old problem of figuring out how to make money delivering news online. Gupta thinks he's cracked that one with Polar's new MediaEverywhere technology, which allows companies to create a seamless identity for users that follows them from phone to tablet to computer screen. "Now apply that to advertisers," says Gupta. "I should be able to 'buy' a reader through the newspaper and interact with him wherever he is."
As MediaEverywhere rolls out, Gupta expects his 45-person head count to double. And he insists he won't be tempted to follow many of his tech friends to Silicon Valley. "Toronto and Waterloo are becoming farm teams for companies like Google and Microsoft and Zynga," he says. "These companies are purchasing our start-ups"—at least 19 in 2011—"and leaving Canada with no ecosystem for fostering the next big thing." —Dawn Calleja
RYAN HOLMES HootSuite (Vancouver) The headquarters of Canada's next tech superstar has bars on the windows. Just a few blocks from the East Vancouver headquarters of HootSuite Media Inc., the social media management tool favoured by U.S. President Barack Obama, the United Nations and some three million other clients worldwide, people sleep in doorways, bundled up in dingy blankets. "It's actually a great neighbourhood," says 37-year-old founder Ryan Holmes. "But we're looking to move into a bigger office."
Holmes is squarely to blame for his company's cramped digs. Last year, he quadrupled the size of HootSuite from 25 to 100 employees, boosting revenues from next to nothing to $10 million. He expects his work force will reach 250 in 2012, conservatively forecasting $68 million in revenues. For now, Holmes must weave past a sales meeting staged around a foosball table and a stuffed cheetah wearing a pirate hat to find an empty boardroom. "We aim to be Canada's next billion-dollar company," he says, reaching down to pet the Lab/Rottweiler mix sleeping under the table.
Grandstanding like that doesn't come naturally to Holmes, who grew up in rural Vernon, B.C., in a household with no electricity. (Holmes famously powered his Apple IIc with car batteries.) Early forays into online paintball sales, a pizza franchise and a brief, aborted stint at the University of Victoria led him to Vancouver, where, in 2000, he established a local tech incubator. After nearly a decade of duds, he found a winner in HootSuite, a web-based dashboard that enables social media power users to monitor multiple channels and accounts, including Facebook, Twitter and Foursquare. HootSuite's "freemium" model means it's free for most, but companies can pay anywhere from $5.99 to more than $1,000 a month for beefed-up versions with extra support and analytics.
"It's getting to the point where a company that doesn't have social media and a tool to manage it is like a company that doesn't have a phone system," Holmes says, adding that HootSuite recently received a $100-million purchase offer. He turned it down. —Remy Scalza
ERIC DIEP A Thinking Ape (Vancouver) Like a proud homeowner, 24-year-old Eric Diep shows off the amenities in his company's 10,000-square-foot Gastown headquarters: the Ping-Pong room, the band room and the nap room, containing the largest beanbag he's ever seen. The company's dorm-room ambience belies an ambitious vision. "We want to build the most respected technology company in Canada," Diep explains.
They're off to a good start. Since it launched in 2008, A Thinking Ape has earned a reputation for designing some of the most addictive mobile games on the planet. (The company's flagship, Kingdoms at War, was the 13th-highest-grossing app in Apple's App Store in 2011.) Diep won't disclose revenues, but admits they are in line with other top developers, who earn between $1 million and $3 million a month, exclusively through the sale of virtual items that users can use in their games.
A Thinking Ape is also a rare beast in that it was founded in Silicon Valley, then moved to Vancouver. Having dropped out of the University of Waterloo's math program in 2007, Diep was developing Facebook apps from his San Francisco bedroom (if you've ever taken a quiz on Facebook, you might have used his technology) when he joined forces with a pair of fellow Canadians and ex-Amazon engineers who were working on Internet chat technology. They decided to fuse the world of gaming with the world of chat to create a new kind of highly social gaming experience, the result of which would form the basis of A Thinking Ape. "That's our key," Diep explains. "Our millions of users are very sticky—and they stick around largely because of the social element." —R.S.
BORIS WERTZ W Media Ventures (Vancouver) "I'd say 90% of consumer Internet projects in Vancouver come through me," says Boris Wertz, the 38-year-old CEO of W Media Ventures. "I wish it weren't that way. It's not healthy." Originally from Germany, Wertz came to Canada in 2002 to manage a Victoria-based online bookseller. When Amazon snapped it up in 2008, Wertz opted to stick around, leveraging his Internet savvy by plunging into the world of angel investment. "Three years ago, there were virtually no Internet start-ups in Vancouver," says Wertz, who' in jeans and a crisp Oxford shirt, looks the part of a tech elder statesman. "But we're now witnessing a new wave of innovation." At last count, W Ventures' portfolio embraced "a few million dollars" invested in 30 businesses, from online custom tailors to a tool described as a Facebook for teachers. Among Wertz's greatest early successes: Summify, the social news aggregator founded by Cristian Strat and sold to Twitter for an undisclosed sum in 2012. Behind his investments is a profound faith in the levelling power of the Internet. "When you find models that take out the middleman and basically give power to people who really care about a particular space, that's exciting to me," Wertz says. —R.S.
STEWART BUTTERFIELD Tiny Speck (Vancouver) The éminence grise of Vancouver's tech scene is in his late 30s, wears Converse sneakers and plaid flannel. Stewart Butterfield rocketed to tech stardom all the way back in 2004, when he launched Flickr, the site that ushered in the era of digital photo-sharing. He sold it to Yahoo in 2005 for a rumoured $35 million (U.S.). Flickr today is likely worth many, many times that. Butterfield doesn't mind.
"If I could be doing anything right now, I would be doing this," he says. This is Tiny Speck, the 40-person company developing Glitch, a web-based multiplayer game involving giants, elfish avatars, barnyard animals and a mission to save the future. He thinks it'll make his Flickr sale look like small change.
"There have only been a few massively multiplayer online games that have been really successful," Butterfield says, listing World of Warcraft as an example. "If it catches on, we're talking billions of dollars from one game."
For now, Glitch still has a few, well, glitches. The game officially launched last September, only to unlaunch in November after amassing roughly 150,000 users. Uniquely free of combat or bloodshed, Glitch proved so addictive (players were spending up to 40 hours a week navigating and co-operating to build its virtual universe) that users burned through years of programming in just months.
Today, inside Tiny Speck's open-plan Yaletown office, a young designer with her hair in a ponytail works on freehand sketches for new game elements. Butterfield inspects one drawing, a house shaped like a frog with an uncoiled tongue for the doormat. "This is awesome," he says, breaking into a big smile. —R.S.
CRISTIAN STRAT Summify (Vancouver) Two years ago, when search engine designer Cristian Strat was 26, he left behind his native Romania for a unique boot camp on the west coast of Canada. At Vancouver's Bootup Labs, he got a crash course in the heady world of Internet start-ups, in exchange for an equity stake in any future company he created.
Less than a year into the program, Strat and his Romanian associate Mircea Pasoi struck gold. "We were trying to keep up with tons of news sources—blogs, RSS feeds, Twitter, Facebook. It was frustrating to sift through hundreds of posts just to find a handful of interesting ones." Their solution was Summify, a nifty tool that uses proprietary algorithms to identify only the most relevant, widely shared posts and deliver them directly to users.
Summify quickly attracted a loyal following, as well as attention from the company whose content it was sorting. In January, 2012, Twitter bought Strat's company for an undisclosed but presumably handsome sum. Users, who had come to depend on Summify's tidy daily digests, were crestfallen. Strat, who packed his bags to join the Twitter team in San Francisco, was not. —R.S.
Show me the money
Fast and cheap to develop—that's what these mobile-focused seed funds are looking for. The major players take an active role in their portfolio companies—and hope for a tidy profit when a bigger player swoops in. —Dawn Calleja
MANTELLA VENTURE PARTNERS (Vancouver) Who Backed in part by Toronto commercial real estate developer Robert Mantella, and run by Ventures West alums Robin Axon and Duncan Hill. Range Up to $500,000 Big hit PushLife, which manages iTunes libraries on non-Apple phones. Bought by Google in April, 2011, for a rumoured $25 million (U.S.).
GROWLAB ACCELERATOR (Vancouver) Who One of the four founding partners is Boris Wertz, who sold rare-books dealer Abebooks.com to Amazon in 2008 and runs W Media Ventures, an Internet-focused angel fund. Range Up to $25,000 Big hit None, yet. GrowLab's next 12-week start-up session begins in May.
GOLDEN VENTURE PARTNERS (Toronto) Who A solo operation run by former BlackBerry Partners Fund exec Matt Golden. Range $50,000 to $500,000 Big hit Golden teamed up with Google Ventures to fund Yesware, which makes e-mail productivity software.
EXTREME VENTURE PARTNERS (Toronto) Who Amar Varma, former director at VenGrowth Capital, and Sundeep Madra,computer engineer and former Cisco Systems geek. Range Up to $200,000 Big hit BumpTop, acquired by Google in April, 2010, and J2Play, a mobile gaming platform acquired by Electronic Arts in 2009.
$1.5 Billion Canadian acquisition activity in 2011
34+ Number of Canadian start-ups purchased in 2011, including sales to Google, Facebook, Zynga and Salesforce.com