Portraying a start-up culture in rapid transition

There has never been a better time for start-up tech companies, especially in Alberta, two Alberta-based serial entrepreneurs told a recent Alberta Innovates conference in Calgary. Modern cloud service, open AI, and access to government grants have dramatically reduced costly barriers to entry, so it takes significantly less capital to get products to market.

“If you’re a couple of guys who are willing to hustle — like go sit in a room with no windows — in Alberta right now, and work your asses off for six months, you need almost no money to get a start-up up and running, and get to the early-stage product market fit,” said Hanif Joshaghani, co-founder and CEO of Calgary-based Symend, a customer engagement platform.

He noted that Symend’s experience was that it used to cost $2 million to build and bring a product to market, then validate its fit, but today that process can be done for as little as $250,000.

“It is a fundamentally different environment, which for young entrepreneurs is incredible,” said Joshaghani. “But for people who spent $2 or $3 million a year ago trying to do the same thing, it’s going to be a real threat, and they have some adjustments to make.”

In Alberta, he explained, start-ups can access grants and subsidies from provincial and municipal governments, along with the federal government’s Scientific Research and Experimental Development (SR&ED) program. “On top of that, you have lowered barriers and every cloud provider is providing compute credits back to start-ups, because they have a start-up program where they're trying to catch a tiger by the tail.”

Joshaghani was addressing a standing-room-only crowd for a conference session on the evolution of company building and growth investing. He was joined on-stage by Cory Janssen, co-founder and co-CEO, with his wife, Nicole, of Edmonton-based AltaML, a venture studio that is a combination of an incubator and an early-stage venture capital firm.

Janssen, an early stage investor and company builder who works with large enterprises building out AI labs, described how law firms are adopting a VC-type model, offering programs for $5,000 or $10,000 to provide Calgary start-ups with the legal assistance they require. “They're just trying to build a portfolio of companies, because every one that heads out, they’re going to make their money later on.”

Joshaghani had some more advice for prospective entrepreneurs. “If I was starting a company right now, I wouldn’t raise money; I wouldn't have a board [of directors], I wouldn't take a couple million dollars of other people's money before I even validated that this idea of mine works. Not in this environment.” 

Instead, the Symend CEO said he would sign up for a bunch of accelerators, learn and sign up for mentors on his own. “And if it fails, so what, I’d do another one.”

In the meantime, the cloud has provided a major boost to the start-up ecosystem, he suggested. Over the past six years, said Joshaghani, of the US$150 million Symend has raised, the company has spent US$50 million to $60 million on R&D. What the company has built would have been nearly impossible without the modern cloud, which makes it possible to leverage other services.

“To build what we've done without the cloud would have probably have cost $500 million,” he said. “So a lot of the components, despite all that code, and all that software that took hundreds of engineers years to build, we leverage a ton of micro services that are only available on modern cloud, and a ton of other people's services, and then we build on top of that.”

Janssen points to Chat GPT, which contains little in the way of new technology, but “it is a genius in product design. It means there's so much opportunity because now, if you're a young entrepreneur and you're starting out, you can build it so much faster, so much cheaper, and the possibility is far greater than it was even six months ago.”

Similarly, the machine-learning his company is using today has been around for a while, he noted. What has changed is the money and computers being put into expanding the number of parameters and training these systems on a far more extensive data set, then enabling wider access to that training.

“The barrier to building AI capability into your tools has been lowered substantially,” said Janssen. “And the domain expertise that you need to leverage AI has been lowered substantially.” 

Joshaghani predicted that the rate of innovation — featuring apps just being released into the wild to be tested and tuned — is going to accelerate dramatically, while the cost of getting basic software will decline significantly.

“Because they now have access to open AI and Chat GPT …  they're able to build and launch software on top of it very, very quickly, and if they find a niche, they can monetize it incredibly fast,” he said.

“I know of a dozen examples of guys — one-person shops — that have built Chrome extensions using AI and within days of putting it into the wild, they're making thousands of dollars a day, and they can sell it for hundreds of thousands of dollars a day. So basic applications, this speed, the productive velocity with which you can put it into the market is being transformed, because now you have access to this modelling, and this tooling.”

AI-driven productivity could also release latent demand in the energy sector, Janssen told the conference. “Every single one of our partners in the energy space is looking at being more efficient and it usually involves a reduction in carbon,” he said. “And so Calgary and Houston should be the best places in the world to build new tools for being carbon neutral.” 

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