Category Archives: Entrepreneurship

Why an API can be a start-up’s greatest asset

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With a project I was involved in last year, I had a unique chance to work with many Web startups and their APIs ecosystem. An API (or Application Programming Interface) is a set of rules that software engineers create to facilitate the interaction between systems. Most of the time, Web startups use it to provide other businesses and developers some access to their features and data (see Twitter’s API or Facebook’s OpenGraph protocol).

For many Web startups, building and maintaining an open API is a great way to develop relationships with customers, developers, partners and investors. Here is why.

  • It’s good for business development.
    Other startups are looking for features that could boost their value proposition without investing money and developer time in what is not mission-critical. An open API is the ideal opportunity to team up with partners operating in the same field. It can lead to interesting partnerships.
  • It will create a developer ecosystem around your product.
    Such an ecosystem can really boost the quality of your product. Software engineers working all day with your API will find issues with it. They will find bugs you never tough they could exist. They will also come up with recommendations. This is gold, and all for free.
  • Investors are going to want one.
    Simply because your partnerships and ecosystems will bring more value to your product and your business. Facebook wouldn’t be The Facebook without it’s OpenGraph protocol now.

Aside from business and strategic goals, “thinking API” improves the application’s design. In fact, a good API is :

  • Easy to learn, to use and to memorize.
    Your partners should be delighted to save time and energy with your API. It will make their life easier solving complex issues and delivering more value to their customers while focusing on their mission-critical features.
  • Hard to misuse.
    Software engineering is just like product engineering. Mistake-proof design can save you and your developers’ ecosystem lots of time. Well built APIs need little or no documentation to get started. The Yellow API (providing business data in Canada) is a good example of such an API.
  • Is powerful enough to do what is has to do (no more, no less).
    Jack of all trades, master of none. Do one thing and do it well.
  • Is appropriate for the audience.
    Your API is unlikely to have the same specifications and usage if you target small businesses owners or if you target specialized IT departments. Always keep in mind what your audience want and what is their level of knowledge. A very secure but hard to implement authentication system might be too complex to use for beginners while some experienced users might expect such a level of complexity and security enabled by default.

On the other hand, poorly designed APIs can be very dangerous. The fact is that once it’s out, it’s very hard to change it. The ecosystem will rely on it’s design and maintaining useless or resource-intensive features can be costly. You don’t want to end up sacrificing scarce developer energies on stuff that is not creating value in the end. You have only one chance to do it right.

There is no need to say, if some feature can be re-used with an existing API, it should not be recreated. Maintaining many parallel features or a too-fat API can take your focus away from core-business features and prevent you from creating added-value.

An API is a powerful technological asset but it can also be a great marketing tool. A well built API will definitely bring visibility to your business.

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French Language Laws for Startups

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Every entrepreneur starting a new business here in Quebec needs to know the various French language laws specific to the province. It is sad to see many entrepreneurs failing to comply with those, putting their fresh startup at risk. An excellent post (Understanding French Language Laws for Startups) on those laws was posted a few weeks ago on the very well known blog Next Montreal.

A few key points mentionned in the post:

  • Website and other commercial advertising need an equal or predominant use of the French language.
  • Registered trademarks to not need a French equivalent. This is why Best Buy does not have to use “Meilleur Achat” in its commercial advertising

Venture Capital in Quebec

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Last Wednesday (02/02/2011), Pléiade Capital and HEC Montréal were the hosts of a conference on Venture Capital in Québec (in French). This event was the first conference on venture capital organized by students. The speakers were François Gilbert (Anges Québec) and Chris Arsenault (iNovia Capital). This post is a short and simple summary of the topics that have been discussed that evening.

What is Venture Capital ?

Businesses will always need capital. The question is, what kind of capital does my business need? There are many sources of capital (customers, love money, angels, venture capital, etc.) and some of them are not available to everyone (~8 businesses are chosen out of 500 every year for VC). To play big, you need big returns. Investors in the venture capital world are looking for returns on investment around 20 to 30%. In fact, investors need large returns to compensate on losses. According to M. Gilbert, 15% of the investments will generate all revenues while another 25% of the investments won’t come back. This is why investors are so good at evaluating risks : their job is to measure the risks and the possible gains of each project.

Funds are generally specialized to an industry. This allows the investors to make smarter moves, by helping businesses operating in fields where the fund has expertise. One important fact to note, is that investors do not help only by providing capital. They also act as mentors, where their knowledge of the industry can help the entrepreneur. It is common to see investors work with businesses where synergies can be created. This minimizes the risks and creates a environment where entrepreneurs working in similar fields can help each other succeed.

When do they invest ?

Usually, investments are made when :

  • the business is doing well and needs more money to scale (easiest investment, as there is less risk);
  • when things go bad (usually risky, unless there is a good recovery plan);
  • when the business is not running yet (an idea, but no operations yet).

Investors invest in exceptional entrepreneurs

Most of the time, the first business plan never makes it. Ideas and strategies evolve (to fit the ever changing market) and this is why startups need “exceptional” managers : managers that can adapt quickly and reinvent their businesses as soon as the market changes. Entrepreneurs must not be too tenacious. If their ideas do not work out, they must be intelligent enough to understand it, and react consequently (easier said than done).

Venture Capital in Quebec

According to the speakers, Quebec has a pretty healthy Venture Capital ecosystem. However, there are still a few challenges to overcome, including :

  • It is hard to raise money.
  • The ecosystem needs to be less dependent on the government.
  • Good investments need to be recognized.

What do you think?

What do you think the Venture Capital / entrepreneurial ecosystem needs the most in the next years? What do you think will be the greatest challenges for young and innovative entrepreneurs?