This post has gone through a couple iterations before being posted. It started out as a rant, moved to a rant disguised as constructive criticism, now it’s settled down to something a little more readable. I’m still going to say it how it is, but the earlier versions were 80% incoherent rambling, 20% content. Hopefully this is a bit more legible.
First, a little background. My startup, GooseChase, was recently selected for the first ever Spin Master Innovation Fund. Along with 7 other companies, we were selected to receive what was touted as “the financing, mentoring and support to transform our bright, big business idea into a big business”. On the surface it looks solid – $50,000 financing, mentoring and a weekend workshop to get you going. But I have to say, the process for this specific fund, and I assume most of CYBF’s programs, is an absolute mess. Based on my experience, I honestly can’t encourage anyone else to apply to a CYBF program in good conscience.
The first strike
It all started with the application process. Anyone that knows me knows I absolutely hate business plans. I think they are an utter waste of time and aren’t worth the paper they are printed on. The act of planning is critical, but writing out a 20+ page business plan is nonsense. That’s why I, and many other entrepreneurs, use Ash Maurya’s Lean Canvas. It’s short, but you get everything down that you need to without wasting your time. Admittedly, for non-software based businesses that require full-out production facilities, outsourced manufacturing, etc., you might need something a bit bigger. But maybe another page or two, not 30+ pages. With that in mind, imagine my thoughts when I found out the business plan instructions were 13 pages long. Yes, that’s right. The INSTRUCTIONS. It was so long it needed a full-out table of contents. Pages upon pages were dedicated to explaining the exact structure you needed to follow.
When it was all said and done, it took my co-founder Max Spear at least a week to finish it. It was 42 pages just to get everything they wanted in there. What a waste of time. With the Lean Canvas, the content could have been written in a couple of hours and it would have had all the same info. The best part of it is neither Max nor I have opened it back up since then. In fact, by the time it was even finished it was outdated! I’m not even joking. It was actually outdated by the time it was completed.
The second strike
The next thing that got under my skin was the ridiculous application rules for co-founders. Based on the terms of the program*, it gave the impression that if a subset of the team has a majority stake, only those members need to apply as they can speak for the team. After following through with that, we were informed that everyone in the company had to apply. Why? I still don’t know! We were only assured that it was “in the rules”.
Instead of fighting it, we decided to concede this relatively minor point and have everyone apply. This meant each one of the five of us had to come up with two references and fill out a lengthy online form to proceed. The reference form was 12 questions long, not a trivial exercise, especially when you consider it had to be done by 10 people. At this point, I was on the verge of bailing on the whole application. To be honest, if Max hadn’t already spent so much time on the business plan we probably would have.
The third strike
After we got all our references in, things went surprisingly well for a little bit. We went into Spin Master’s offices, pitched GooseChase, and ended up getting selected. We were even mentioned in a National Post article on the fund. Everything was rosy for a while, but it all came crashing down in a hurry. One piece of the down-turn was the mentor orientation program, Ment2B.
What exactly did CYBF think would happen with this program? Picture the brutally cheesy, outdated, boring, moronic online training modules that big corporations use, merge that with a late-night infomercial and a bad business 101 class and you’ll get an idea of this thing. 2+ hours of forced discussion (we’d actually had a good non-structured discussion before starting this beast) with absolutely no benefit to either side. The number of times I heard “the importance of mutual trust” became nauseating. Mutual trust IS important, but you don’t get that from going through a forced orientation. You get that over time and from actual discussions, not forced ones.
This was a pure waste of time, but I could live with it. The loan terms on the other hand…
The final straw
First, the backstory. We knew going in that this was a $50K collateral-free loan. Personally, I don’t think loans are overly valuable for new entrepreneurs, especially those that charge interest from the beginning, but I do get the logic. If a company is successful, that money is better used to reinvest in future entrepreneurs. Whatever, that’s not the issue here. The issue is the ridiculousness of the loan terms. I got halfway down page one and did a double take. This supposed risk-free loan was requiring PERSONAL GUARANTEES from all the co-founders**. That means if our company doesn’t succeed, and let’s be honest most don’t, all of our credit ratings are screwed unless we pay it back from our own pockets. For me personally, I think I have a net worth of about zero so that’s not going to happen, but some of our team members have substantial assets. That means they are on the line for the entire thing or else all of our credit ratings are screwed. Even if the risk was proportional to equity percentage, I’m not going to put my credit rating on the line when there are alternative ways to raise money without risking my future.
Looking at it from CYBF’s perspective, why would a self-professed “go-to place for young entrepreneurs” want to potentially screw over Canada’s best and brightest for the rest of their lives? The fact of the matter is the majority of new businesses fail in the first few years. Often not even by any personal shortcomings, just the nature of entrepreneurship is risky and the market forces can change at any time. So why would a charity like CYBF not just forgive the loans if the company goes under? Comparable loans from OCE do that. Why wouldn’t they? I still haven’t gotten a good response on this. Even two CYBF-affiliated people I’ve talked to were confused by this. They were under the impression that it was a no-risk loan too!
Talk about a mess. The sad thing is I think the Spin Master program still has value and I’d like to stay a part of it, but I’ve been told that the loan and Spin Master program is a package deal. If I don’t take the loan, I don’t get the program. Hmm, so you’ll only help me if you can screw me at the same time? That doesn’t sound like something I want to be part of.
As a workaround I’m trying to take the loan and then pay it back on the spot. That way I’ll only be out the $
150 ($50) administrative fee and get to stay in the program, but I’ll be shocked if they’ll let me. Why would they? That would be actually helping an entrepreneur succeed.
A final plea
CYBF. Your application requirements suck. Your mentor orientation process sucks. Your loan terms are trying to screw me. What gives? I’m just an entrepreneur trying to make it. And here I thought you wanted to help.
Edit: I’m happy to announce that after talking with CYBF, it turns out that we ARE able to pay the loan back right away and we’ll be able to stay in the program. This is obviously great news for us and we are very excited to be a part of the Spin Master Innovation Fund going forward.
With that said, I still believe that there are some major adjustments to the program that are required to make it attractive for future entrepreneurs. I hope that this can serve as the beginning of a discussion that will lead to real change. Entrepreneurs, let CYBF know what is broken AND how to fix it! CYBF, listen to the applicants and consider changing your process to be more favourable to entrepreneurs. There has to be a model out there that works for both sides.
* Terms of application with respect to corporations with more than two shareholders:
“In addition to meeting the basic criteria, if there are more than two shareholders and no one majority shareholder, shareholders who meet the age criteria must collectively hold the majority of the voting shares, be involved in the day-to-day management of the business, and take direct responsibility for operational liability.”
** Applicable loan terms with respect to personal guarantees:
- I have personally guaranteed the subject CYBF loan. Accordingly, as a result of CYBF contractual agreement with Equifax (Credit Bureau), my personal payment record with CYBF will be reported to Equifax on a monthly basis until my liability with CYBF is paid.
- Should the loan be in arrears or in default, CYBF as a result of its agreement with Equifax (Credit Bureau) will be reporting my Personal Information to that agency. I also understand that each of the undersigned are jointly and severally liable for the outstanding liability and the reporting of information to the Credit Bureau will apply to all applicants.