HelgeSeetzen

Have a look at our portfolio (at tandemlaunch.com). It includes two of companies listed in the article - wrnch and fluent.ai - as well as 20+ others all working on pretty interesting technical challenges in computer vision, AI, sensors, robotics, etc..

Regarding pay, Montreal has a pretty low cost of living so wages aren't huge. If you are looking for Valley-style salaries then you are simply out of luck. But if you are looking for "paying well" in the Canadian/Montreal context then some of our older companies might fit the bill. Airy3D, Aerial, SportlogiQ and a few others have all raised Series A or beyond in funding so wages are fairly competitive. If you are looking for equity stakes instead then of course the younger ones might be a fit for you.

I build startups and teams in Vancouver and the valley, so here is my perspective on Montreal for what it's worth:

Great city to live in. French is a wonderful personal gain but not a professional necessity. Taxes aren't a big deal - especially with the tax holidays for foreign technologists - compared to the social benefits that you are getting. The winter is rough but survivable with the right clothing. The startup scene is growing in leaps and bounds. Super exciting to watch all the progress everywhere.

Overall, I would give it a shot :).

As the previous reply kindly indicates, I am talking about more fundamental technology development. Basically the R of R&D and not just development. For example, our portfolio includes companies like Stratuscent which is using tech from NASA to develop an "electronic nose" using machine learning, Aerial which extracts people's position/activities by analysing wifi signals, Airy3D which is developing a novel image sensor that can capture 2D/3D/lightfield all in one package, etc..

We work with 50+ universities across the globe on the fundamental research and then incorporate the results in new tech companies like those above. Great fun :)

Montreal is a great choice indeed. I am originally from Europe (Germany, short time in Holland) and have built tech companies on the West Coast (Vancouver, SF). After a decade on the West Coast, I moved to Montreal in 2010. Really enjoyable city with a great mix of high quality of life, culture and massive diversity (which in my opinion - even more so that universities - is the cause of the "intellectual" environment that you seek).

My outfit, TandemLaunch, has built 20+ deep tech companies in Montreal with people from all over the globe (some 40+ countries of origin). Depending on your background, there might be opportunities for you in one of those. Our companies range from early stage to those with 100+ employees so there are opportunities along the entire risk/reward spectrum (see here http://www.tandemlaunch.com/#portfolio). Obviously there are plenty of other great companies in Montreal as well.

Happy to help with any local insights if you are considering this beautiful city (including with immigration since we have literally done this 100+ times).

cheers Helge

Thanks for the response Kristy. You are absolutely correct that there are ways to fix these problems if you have good lawyers (and leverage). But in my experience this rarely happens. Conversely, I see the default conversion into the same new share class all the time (as a result of negotiation leverage or just because nobody involved knows any better). How does that compare to your observations with your obviously much larger portfolio? For example, what percentage of yc companies using SAFE did the pref+common conversion that you described?

Of course the other concern is that you actually have to be cognisant of this issue - or have a lawyer who is - to catch it. Maybe the SAFE could just mandate the pref+common conversion?

As somebody who has been on both sides of the investment table, I can confirm that very few founders understand the complexities of convertible notes (SAFE or otherwise). But I think the authors of both the pro and con argument are covering only one of the points. Yes, first time founders often don't intuitively understand the impact of convertible notes on their cap table. But that's not that hard to model. Much harder to understand are the secondary impacts of convertible notes. I have raised, led and participated in dozens of rounds and, frankly, still get caught out by those.

In general, the problem is that most benefits that investors enjoy are properties of their shares rather than the money that they invested. For an equity round this is one and the same. Not so much for convertible notes. A simple example:

An entrepreneur raised a $1M convertible note with a $5M cap. Ignore discount, interest and other factors for now. She then raises a $5M round at a valuation of $20M. That yields a dilution of 20% for the round plus a "hidden" dilution of ~17% for the note conversion (1/6). That's the blurry issue that both authors discuss. But if anything the share rights are even blurrier. Let's say that the equity round came with what is commonly referred to as a 1x liquidation preference (non-participating). So they would get $5M back before other shareholders get anything. Even though I just worded that as matching the money that they put in, it is generally a property of the share class that the investors hold. For example, their $5M might have bought 5M shares at $1/share that each says "redeemable for $1 or convertible to common shares". Our note investors also hold those shares now. But instead holding one per dollar, they now hold four per dollar (since they pay 1/4 the price for such a share). Suddenly, they have effectively a 4x liquidation preference benefit and the company has to return a full $9M before common shareholders/founders see a penny of payout (despite only having $6M in the bank).

Interest rates, pre-round ESOP increases, and many other factors in convertible notes make this problem worse. And it affects just about all aspects of the cap table including voting rights, protective provisions, redemption rights, etc.. Basically, the bigger the gap between the cap and the eventual round, the bigger the privilege the note investors pick up. Not just in economic benefit where you would expect it, but also in power/insurance/protections/etc. where it isn't obvious at all. Nowhere in your term sheet for the note or equity round will it mention 4x liquidation preference. Doing so would cause instant rejection of the deal by even the most inexperienced founder! But that's exactly would is going to happen once all the conversion mechanics are executed. And that can catch even seasoned entrepreneurs off guard (and seasoned investors, including plenty of note holders who never understood that they would get these benefits).

Convertible notes - SAFE or otherwise - have a role to play in venture financing. But they are complex instruments and should be use carefully. Anything else is just a recipe for pain in the long run.

Give us (TandemLaunch) a ring if you want to do "real tech". We admittedly don't spend much time in the coffee shops, but we most certainly do about as deeply technical work as you are going to find anywhere. Hundreds of people working on world-class problems in AI, CV, robotics, sensors, etc. in collaboration with dozens of top universities across the globe. You won't be disappointed :)

TandemLaunch (www.tandemlaunch.com) is a close proxy, though still oriented to ultimately build technology companies (but still very deep tech focused). We are obviously not in the same scale league as yc, but we are in Canada :).

Ahmed, I am assuming that you are following this discussion.

Based on the article, your life probably doesn't feel so good right now. Sorry to see a bright person in such a situation.

Give me a ring if you are looking for an internship, job or start-up experience in Montreal. We are in town (walking distance from Dawson actually). By the nature of our business, we also have good connections with academia if that can help (www.tandemlaunch.com).

My login is my name so you can reach me at [firstname].[lastname]@tandemlaunch.com

I am surprised by the distribution. Does the upper end (>$11M) represent founders or really just non-founding employees (I guess the Google-generation?)? I see 66 votes but not a single comment from anybody in that bracket.

It's unfortunate that ESOP has such a bad reputation. I have never been a non-founding employee, but my last venture paid out about $3M net to about 20 non-founding employees and 30 interns (about $4.5M gross before strike price). Roughly 10%/15% net/gross of the exit value. Ranging from high 66 digit all the way to 3 digits (for late-stage 4 months interns).

In my latest venture we simply give common shares to employees (reverse vesting but otherwise the same as the rest of the cap table).

Depends on the IP policy of your university but generally the IP is owned by them (some universities outside of the US have an "inventor owned" policy). The good news is that you can leverage the university for your start-up in turn.(http://techentrepreneurship.com/2010/11/16/leveraging-the-te...).

There is value in a Masters because it introduces a new mode of research beyond the bachelor (self-directed investigation vs. learning by rote).

The downside of the Masters is that it is a degree without role. It doesn't qualify you for anything more than the bachelor does (e.g. grants, faculty positions, entry to certain "degree conscious" societies, etc.). Those things don't matter in a lot of cases but the incremental time cost is so small that it would seem worth it to do a PhD instead.

Your PhD really shouldn't take 6-7 years. Realistically, the Masters should cover all your course requirements so the incremental time should be 1-2 years. If that's not the case then you have a time management problem which is a major problem for any contemplated entrepreneurial activities as well.

It's actually fairly straightforward to achieve. What you want is a structure that rewards people linearly for the time that they contributed to the company relative to the "duration" of the company. To achieve this you only need two mechanism: 1. All incentive equity goes away if the employee is terminated for cause or leaves during probation (some number of months, we use 3). 2. For all other scenarios the employee gets to keep TE/TC shares (the rest are re-purchased if you are using reverse vesting or don't vest if you use options).

TC = Time of the Company from founding to liquidity event in days (or weeks as long as the unit is small relative to the expected duration of the company)

TE = Time in days that the employee worked at the company

It's actually really that simple. Obviously other factors like impact, performance, seniority, etc. play a role but those get adjusted by the magnitude of the stock grant and not the vesting process. We use a reverse vesting shares to give employees tax advantages but the same concept could work for vesting options.

The advantage of this approach is that everything is nice and linear (expect the 3 months probation cliff). A lot of sneaky behaviour is just not worth it when things are linear. Remember, lack of alignment is the big killer of start-ups.

I moved to Canada some 12 years ago,lived in the big cities and visited every province (except Nunawut, the new north east territory). Can't say that I have any regrets.

The tech scene is decent in the big cities with some strong universities and tech centers. The investment community is definitely weaker than the US (not in volume/assets but in talent: the archetypical US VC partner is a former entrepreneur while her Canadian counterpart is more likely to be a former pension fund manager). It has improved over the years though.

A surprising discovery (for me), was that the most leftist province (Quebec) has by far the most support for tech companies: All the usual Canadian programs such as getting 60-80% of your tech expenses back in tax credits but also some really neat stuff such as a "tax holiday" for foreign developers (that would be you: no income tax for almost 5 years). Oh, and one of the lowest corporate tax rates in North America (coming in around 27% right now).

Tech business aside, Canada is a nice place. A lot less of the steep socio-politico-economic gradient that has become so common in the US. Definitely a good place to raise kids.

The winters are unpleasant though if you are used to the Valley (I cry a little bit inside whenever I go back to SF).

Ask a decent local law firm for a standard partnership or shareholders agreement. Then ask them to handle the incorporation. Neither activity is very expensive (<$1k in both cases usually).

You need to do the incorporation steps anyhow and "internet templates" are never really the best idea for local activities like this (your state/country might have different rules, your personal situation might have different tax implications, etc.)

PS: I am not a lawyer nor usually an advocate of massive lawyer spending. But this is such a key document that messing it up will cause you nothing but pain.

A high GPA bar like this has its benefits: Climb over it and you will share access to higher quality resources (fellow students, profs, likely also higher quality teaching facilities, labs, etc.).

I am not an advocate of achieving high GPAs for its own sake, but there is a huge dividing line between somebody in a high quality CS department and somebody who isn't. Trust me, you will learn more from good teachers than you will ever learn alone (libraby books or not).

If you are are as skilled as you seem to be, why is the CS department rejecting you?

All the benefits of going to university only come into play if you actually leverage your experience (i.e. go to class, work with professors, network with profs and classmates, get decent grades & follow the structural rules necessary to get the right degrees, etc.). Getting into the right departments (and meeting their standards) is a key ingredient of this (sure, their rules might be quirky but they are the established social benchmark right now).

If you don't want to leverage your experience then you are in the wrong place. Though keep in mind that the inability to leverage a opportunity-filled environment like university is also a big warning sign for your future entrepreneurial career.

The early equity distribution is really a measure of future contribution. Vesting (or decreasing reverse vesting) is about the only concept that should the past into account at this stage.

Just watch for tax considerations when you award equity to new people (if you have already created non-zero fair market value for your equity).

A lot depends on the leadership style of an organisation, no so much its size or business. Diversity ultimately creates better organisations, but it's harder to manage every day (that's true for all diversity: gender, culture, language, orientation, religion, "mindset", etc.). So look for organisations where "people management" is recognised as a valuable skill set, not just something that people do after some tenure period at the company. A lot of tech organisations unfortunately fall into the latter category.

A good first-glance indicator is whether the management titles of the organisation are given based on tenure (older people and/or long term employees), domain expertise (e.g. the most experiences developers have management titles) or leadership skills. Try to find companies with the last type of promotion system and you are very likely going to have more gender diversity as well.

The attitude above is the easiest way to ensure that the environment stays all-male.

That's viable in theory but not in praxis. Unconscious decision making bias will creep into everything that you do. That's hard to filter, especially for all those non-binary decisions in between "firing or not" (e.g. promotions, assigning of responsibilities, approval of proposals, etc.).

The bias will be there, it will negatively affect the activities of that employee, and, more importantly, it will negatively affect everybody else in the company. Human beings are extremely sensitive to group dynamics and will (subconsciously) either align with the bonding strategy of the "successful" employee or hate him (or you). Both outcomes are bad for the company.

PS: A lot of these biases are in place all the time anyhow as some amount of emotional attachment always occurs. You just need to watch it fairly carefully.

Your boss can be a respected friends, but not a loved buddy. In other words, you can have all the rational features of friendship but probably need to stay away from the emotional side (and definitely the romantic side).

There are two reasons for this. Emotional attachment creates decision bias which will eventually interfer with the job function of your boss (and/or your own). Leadership often needs detached objective assessment and you want your boss to have that capability.

The second reason has to do with group dynamics. Events play out differently when the boss is in the room (e.g. no venting). Keeping some distance is often the only way that a superior can encourage the growth of good staff dynamics (e.g. formation of informal leaders.

Both of these are good reasons why being a loved buddy relationship is neither practical nor actually desirable for a boss-staff relationship. It doesn't mean that you can't be friends though. Mutual support, assistance to success, (some) shared interests and so forth are all possible (and a usually good thing).

The short answer is to read your employment, consultant or partnership contract (the "loose agreement"). If that's not clear then show it to a lawyer.

General guidelines for the US are that "work for hire" is owned by the employer (whether explicitely assigned in the employment agreement or not!). Other types of relationships (e.g. partnerships, consulting, etc.) only transfer ownership of IP to the company if the contract explicitely says so.

At the end of the day that's all that matters: what was your legal relationship with the company and what did you sign. Writing code, working hard, being kept in the loop, etc. has no relevance at all. So the long answer also boils down to "read your contract". Sorry.

Step 1: Review investment terms with lawyer.

Step 2: Sign term sheet with investor but do NOT take the investment.

Step 3: Incorporate, assign equity to founders (at near zero valuation), sign employment & founder agreements, assign any past IP (if applicable).

Step 4: Execute investment agreement and collect money.

Doing it any other way means that you will be struggling with tax liability issues from day 1. Once the money is invested your shares have a fair market value and any founder equity you assign will create a tax liability for the founder (but without liquidity).

A good lawyer should lead you through all these steps for maybe $2k-$5k depending on the complexity of the terms and your location.

Going against the trend here, but I would suggest finishing the degree. Yes, some drop-outs are successful (and we love to focus on those - American Dream and all that nonsense). But stastically speaking you are much much better off with a degree. Being a drop-out will put a damper on his whole life unless he just happens to be one of that tiny percentange of geniuses that we love to read out.

Maybe an internship in the summer can cure the "start-up experience" itch.

Caveat: I am not a tax lawyer, nor accountant. Moreover, I am writing this from Canada so your local tax law might be different.

It sounds like you have already created a non-zero valuation for your equity (a fair market value established by your funding round). So that creates a corresponding tax liability if you just award equity to your new co-founders (without liquidity).

Option A: If the share value is still fairly low and the amount of equity that you want to award is modest then I would just take the tax hit. The company could cover the employee via an interest free loan that is offset by any future liquidity gains.

Option B: If we are talking about a huge equity/value piece but an early stage company then you might consider setting up a new company, assigning founder equity at near zero valuation and then transfering all assets of the old company to the new one. This creates some accounting and legal work but might be worth it if you are early stage and are looking at major equity changes. Just watch out that previously accummulated tax liabilities, tax credits and subsidies of the old/current company get captured properly.

Option C: Issue stock options at fair market value instead of equity. This is probably the simplest option but won't give your new co-founders as much control (which might or might not be a good thing).

Definitely best to spend a bit of money with a small business tax guy though.

The term "founder" has really no significance in an ongoing operation, other than the fact that it might make a few geeks happy and a few employees unhappy.

Scaling your business usually requires that you bring in more people and inevitably more experienced people in leadership roles. Those hires will need to be motivated through a combination of opportunity (equity, bonus, career advancement), compensation (base salary, benefits, perks) and environment (responsibility, prestige, office culture). You will end up giving some equity to them for that reasons (and only that reason - the fact that they were there on "founding day" is truly irrelevant). How much you give depends on the person, role and state of your company. If the role is important enough and your current status early enough then they might very well end up with half of the equity. Or more. Or less.

So go and hire the right person. The rest will shake itself out when you negotiate compensation...

Internships are about learning, so you need to convince your administrator that you will get a valuable learning experience. "Learning by doing" is a cliche that probably won't be enough for your administrator. Universities have a mindset that connects learning directly with teaching (not doing). They aren't completely wrong on this, in that good learning comes from doing things properly and teachers can often define "properly" for you.

My recommendation would be to join an accelerators or incubator program. That gives you the mentors/teachers necessary to satisfy the "learning" requirements of the university. Alternatively, try to find experienced partners for your stand-alone venture (sort of arranging your own private accelerator program).

As a last resort, maybe you can get a traditonal internship in an established start-up that relates to your space. You could then pitch your project within that start-up. Who knows, they might pick up on it.

We are a bit north of you (Montreal) but always looking for strong interns: http://bit.ly/eCb7FU

I would echo the comments about www.youtern.com and www.internmatch.com though. We get about 1/3 of our intern applications from these websites (the rest comes from direct referals and on-campus recruiting).

Finally, don't underestimate the value knocking on doors. I have hired a bunch of great interns and employees over the years who just "showed up" and pitched themselves into the organisation.

I held a colour 60Hz electrophoretic display a decade ago (first startup). Electrophoretic displays can go at very fast refresh rates if you just zap them hard enough (i.e. high voltage on the TFT). Without higher voltage they can still run fast but at the expense of losing contrast. You basically have little black and white "balls" (electrophoretic particles) travel up and down in the field (in those little e-ink cells). At conventional voltage the balls won't travel the full distance in a single fast image frame, so you won't get full black or full white. The problem is that people want colour, speed and low power consumption. Those are opposing requirements and E-ink made their bet on power (at the expense of colour and speed).

If the sitution is as described then the obvious answer is yes. People don't change, so attitude issues are hard to rectify once the settle (certainly not in the timescale of a young startup).

That said, the big take-away shouldn't just be to change your hiring process but rather to (also) change your management process. I find that staff attitude is set by both sides during the first few months of employment. At that point it "locks in" and is much harder to change later.