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Lemons to lemonade: Turning a setback into a comeback

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Lemons to lemonade: Turning a setback into a comeback

We’ve all heard the famous saying, but when’s the last time we put it into practice?

Turning life’s lemons into lemonade is obviously easier said than done, but it’s impossible to cash in on business milestones without laying down the right foundation.

We asked our founders to share their recipes for taking the sour setbacks thrown at them and how they bounced back to create sweet, tangy successes.

Make sure to keep your ingredients handy and follow along with our tried and true recipe!

  • A bowlful of lemons
  • A juicer
  • Ice
  • Sugar, zest instead of spice, and everything nice
  • Glasses, straws, mini umbrellas

Lemons to lemonade blog - Step 1: Gather your lemons

What setbacks have you faced as a founder? How did you overcome them?

“Too many setbacks to count but I think the biggest ones have always been knowing when we’re ready to move to the next level (hire a development team, work with a larger client, release a product, etc) and missing out on the opportunity to do so.” – Evan Sitler-Bates, XpertVR

“The business nearly went bankrupt and I lost half of my team during the pandemic. It felt very lonely and I’d say I was missing opportunities because of that. However, daring to dream despite everything allowed me to connect with friends, family and even customers. My hope ignited theirs. I may be sad and feel defeated but I’ll never lose hope.” – Hudhaifah Zahid, econommi

“[During the pandemic] we used our newfound time for something that often falls to the wayside when a business starts gaining traction. Something vital to product-market fit for any startup: customer conversations.

We picked up the phone and we dialled our customers. 100 to be exact. We took our time during our conversations, speaking to our customers for up to 90 minutes each and asked them to walk us through their unique parenthood journey. We listened intently to understand the challenges they faced. 80% of the customers we spoke to opened up about their mental health in some way, shape or form. A topic that is traditionally “taboo” was bubbling to the surface — we took note. If we hadn’t conducted these calls, we never would have founded Alli Therapy.” – Sarah Rennick, Alli Therapy

Lemons to lemonade blog - Step 2: Juice 'em, add sugar and ice.

What did you learn in your journey of transforming lemons into lemonade?

“What I’ve learned is that the universe offers unlimited opportunities to those who are putting in the work. So if you miss one opportunity, be patient and the next one will swing around soon enough. And by the time it does, you’ll be even more prepared and have more to tackle it than before!” – Evan Sitler-Bates, XpertVR

“Cash is king, people are forgetful, and always have a backup plan.” – Hudhaifah Zahid, econommi

Lemons to lemonade blog - Step 3: Stir and serve

What advice would you give to an early-stage entrepreneur who’s trying to overcome an obstacle?

“Patience. You always have to keep up with the work but when things aren’t going your way or aren’t moving as fast as you’d like, remember that greatness takes time.” – Evan Sitler-Bates, XpertVR

“The obstacle is the way. What is meant to happen, will happen – it’s a matter of perspective and intention. Leave yourself room and time to grieve, then carry on! Therapy does wonders for connecting and driving people through hardship.” – Hudhaifah Zahid, econommi

“Learn to embrace the pain that comes before success and that there is no one solution to any obstacle. Look around, there is always a way out. Network and seek advice, there are people who have faced similar issues in the past.

The harder the obstacle, the sweeter the lemonade.” – Abiodun Adekunle, SleekScore Inc.

Ready to quench your entrepreneurial thirst? Check out the DMZ’s startup programs here.

Hear from the DMZ’s first-ever unicorn founder for his advice on building a billion-dollar company

Event recap: The DMZ’s Founder Dinner

Co-founder and CEO of brand interaction platform Ada, Mike Murchison, spilled the entrepreneurial tea at the DMZ’s Founder Dinner earlier this month, sharing lessons learned from scaling the first-ever DMZ unicorn company the ground up.

Empowering brands to automate customer interactions, Ada brings a VIP experience to every customer and employee through its platform. Since 2018, Ada has increased its revenue by 764% and in 2021, raised its Series C at a valuation of $1.2B, officially achieving unicorn status.

The first in-person DMZ Founder Dinner since 2019, the events are designed to bring the larger DMZ founder community together for an evening of food, drinks and connections.

We thought we’d share some of Mike’s insights and how he built the first-ever DMZ unicorn company for other founders looking to build the next big thing. Watch his full founder talk below to learn more about Ada and Mike’s journey, or keep reading for a recap of the tips and learnings Mike shared with the audience during his talk.

Entrepreneurship is a deeply personal experience

“We in this room are all united by this shared dream of building something important, big and world-changing. The journey that we’re all on is a very, very unique one, but we’re all unified in that shared ambition.”

The value of improving your rate of learning

“I think the single most important thing I’ve learned over the course of this journey has been a deep inward focus on improving my own rate of learning.

I think that’s one of the things I so admire about the community here at the DMZ, is that we’re all committed to learning. We’re all highly curious people who are eager to learn new things.

I encourage you to ask yourself, ‘What is piquing my curiosity? What problem am I facing that may seem insurmountable that I may be able to learn something new from?'”

Founders have a responsibility to support one another

“We all have a responsibility as founders to support one another in our own growth. I encourage everyone making progress themselves to share it with others.

We’re not competing against one another, we’re supporting one another. We all win when a startup in our ecosystem succeeds.”

Mike Murchison talking with another guest. - DMZ Founder Dinner recap

Sometimes the easiest path IS the right path

“I was dealing with a hard problem and someone asked me, ‘What if it wasn’t hard? What if it was easy?’

I’ve grown up and trained myself into thinking I need to do the hardest things, and what I’ve learned in the course of building Ada is that sometimes the easiest path, where you’re feeling the pull, is actually the right path.”

Don’t take yourself too seriously

“Looking back, something I would’ve done differently is not taking myself so seriously.

I wasted a lot of energy thinking about what the ideal path was meant to look like. I wish – earlier on – I would’ve let go of my perception of the right path and been more excited about the path that was unfolding before me.”

DMZ card that says "Changing entrepreneurs' lives." - DMZ Founder Dinner recap

Want to have a front row seat at the next DMZ Founder Dinner to hear from other founders who have made it? Apply to our upcoming Incubator cohort kicking off this fall at dmz.to/incubator.

Startup legal 101: 8 common mistakes you might be making

Hear from startup lawyers on the top legal mistakes that new startups make – and how to avoid them


This is a DMZ guest blog by Konata Lake and Edward Fan of
Torys LLP

Portrait of Edward Fan in Business wear featuring a grey blazer, a checkered red tie, and a white button-up.
Edward Fan
Portrait of Konata lake in business wear with blue tie, black blazer, white button-up and glasses
Konata Lake

 

As startup lawyers, we work with founders across all stages of growth — from incorporation, to raising the first funding round, to IPO’ing or being acquired. We provide strategic and legal advice to startups as they grow, giving market perspectives and connecting clients with the broader ecosystem, including VCs and other advisors. 

Unsurprisingly, there are many legal issues that arise as your company scales. While it is your legal counsel’s job to help you navigate those obstacles, it is important to understand what may lie ahead. It is much cheaper and more time efficient to get things right at the outset rather than fixing expensive mistakes down the road.

Let’s walk through some of the most common legal issues that startups face, and how you can avoid them.

#1 – You don’t have the correct legal structure in place


A common question early-stage founders have is whether incorporating their company is worth the money—especially when they are bootstrapping, or in cases when funding is low. The general answer to this question is: yes, it is important to incorporate your startup as soon as possible.

When you incorporate your company, it will help ensure that all the work done is held in and owned by the corporation (reducing potential diligence issues later during funding rounds), and that the liability and risks of operating the business are with the corporation and not with you personally as founders. 

For example, if you are hiring an employee or contractor, you will need to make sure that the IP they create rests with the company and that a formal agreement between the corporation and the employee accomplishes this. To enter into this kind of agreement, you need a corporation. 

Another reason you should incorporate your startup early on is to better attract investment. VCs will expect your company to be incorporated on market standard terms, so being properly set up makes you much more appealing to investors.

When deciding the best legal structure, it is important to determine where you want to operate and whether you have any plans for expansion, as this will determine if you should be federally or provincially incorporated.


person signing contract

#2 – Your startup doesn’t own all its intellectual property (IP)


Not clearly showing that your company owns its IP can be a deal breaker for investors. A significant portion of your startup’s value comes from your IP, and so you should make sure you are the proper owner. This means that your company—not you, your co-founder, advisor or employees—should own all the intellectual property that it is developing, and this ownership should be fully documented. 

Everyone who works for, advises or consults with your startup should sign an appropriate confidentiality and IP assignment agreement. As a founder, you are not exempt from this requirement: you will need to assign all IP, including any pre-incorporation IP, to the company. 

If you started working on your company as a side gig while being employed elsewhere, it is important to ensure that your previous employer doesn’t have any claim over the IP you developed during that time. 

Another mistake is not employing the correct IP protection strategy for the kind of tech you are building. For example, if you have a SaaS business, you are likely hyper-focused on protecting your source code, so you may keep parts of the code a trade secret. This differs significantly from what a D2C eCommerce business selling products through Shopify might consider, which would typically focus more on trademark protection of their brand and products.

#3 – You’re not documenting your equity distribution


One of the most common mistakes for founders, especially in the early days, is to promise equity t
o individuals or companies who are helping the company without properly documenting and tracking it. This can result in a misunderstanding of the company’s ownership should a liquidity event take place. 

To avoid this, it is important to track the distribution of equity. Common documents used for this are employment agreements, board resolutions, and option grant agreements. Equity granted to employees, advisors and consultants is often subject to vesting. Vesting means that equity will be granted/released to stakeholders on a pre-determined schedule, rather than in a lump sum. If an employee leaves before their equity is fully vested, they forfeit any unvested equity back to the company.
signing a contract

#4 – You’re not properly mapping out founder shares 


Founder shares
need to be clearly documented. Don’t assume a 50/50 split or that a verbal agreement is enough. Unfortunately, disagreements among co-founders happen, including issues over ownership which can result in legal action. It is also important that vesting schedules are clearly documented and tracked, and that the recipients of the equity understand what the vesting requirements are. The standard vesting schedule for founder shares is four years with a one-year cliff. This means no shares vest for the first full year, 25% vest immediately following the one-year “cliff” period, and the remainder vest monthly or quarterly in equal installments until all the fourth anniversary of the vesting start date. 

Documents that are often used to show issuance of founder shares include a board resolution authorizing issuance of shares, a share purchase agreement or payment for shares.

You should also keep in mind that any options issued to employees should be properly approved by your board of directors and issued under a formal option plan. All options should be broken down and documented in employment agreements and option grant agreements. The standard vesting schedule for employee options is the same as that for founder shares.

#5 – You’re not complying with securities law


Every bit of equity in your startup needs to be issued in accordance with a valid securities law exemption. This means that, depending on the relevant exemption, you may need to prepare and file certain reports with the securities commission or pay related fees. 

Most startups rely on the “friends and family”, accredited investor or private issuer exemptions; however, it is important to have a solid understanding of what these exemptions entail.

 

#6 – You don’t consider how your first financing round can impact future rounds


You need to not only consider the legal and economic implications of your first financing round but also how the structure of that inaugural round can impact your ability to close future financings.

You should be focused on what rights are being granted to investors in these early-stage rounds, as mistakes can haunt a company going forward. For example, if you agree to a liquidation preference that is greater than 1x, or if you grant a preferred share class seniority over other preferred share classes, that is likely to be replicated in future rounds. Counsel with VC experience will help you avoid these pitfalls.

woman working in office#7 – You’re complicating your cap table with multiple valuation caps


Adding a valuation cap is a common way to structure convertible securities (convertible notes and SAFEs). Under this structure, investors cannot get less ownership than what’s calculated by taking their investment amount and dividing it by the valuation cap. However, having multiple valuation caps complicates your cap table. 

That is because of a combination of unfair economic treatment of investors and the nuances of corporate law. Your counsel should advise you on how to avoid this issue, or how to resolve it if it’s already happened.

# 8 – You’re not fully complying with employment laws


One of the most common diligence issues we come across is the misclassification of contractors as employees. The contractor versus employee distinction is based on several factors, including the nature of the working relationship, the level of control the contractor/employee has, and ownership of tools and equipment. 

Misclassifying contractors as employees will make you liable to the Canada Revenue Agency for failing to make the proper source deductions. In addition, you may become subject to claims from misclassified employees. 

 

Are you a startup founder with legal questions for Torys? Reach out to get your questions answered. 

Public relations 101: Our top 4 tips for success

The DMZ’s top 4 insider tricks for startup public relations success


Public relations (also known as PR) is a vital component for growth in any startup. PR helps you define your company’s narrative for the world by putting a spotlight on what your business provides as well as your success stories. 

For startups, good PR can drive brand awareness, put your name out in front of potential investors and partners, and help you become an industry leader.

Crafting a successful public relations strategy does not happen overnight. Laying the groundwork for a successful PR campaign takes time and love, which is why the DMZ is here to provide you with 4 of our go-to tips for PR success!

 

A startup founder working on PR

 

Ensure your brand and online assets are up to par

Before engaging with the media, ensure your startup is ready to show the best version of itself. That starts with an optimized website that effectively communicates who you are and what it is that you do. It is also important that your company’s social media features engaging content that is appropriate for your target audiences. 

Ask yourself, “Do I have a professional and clean website?” “Do my readers walk away with content that is worth the time they spent reading it?” Crafting a narrative for your brand at an early stage will elevate your media outreach efforts in the future.

public relations newspaper


Maintain a pulse on your industry

Media monitoring is an important part of managing how you, your competitors and/or your industry is being portrayed in the media. Google Alerts is a great free resource to scan the media for recent news and updates in your specific industry. This is one way to easily stay on top of conversations or advancements taking place in your field

Pro Tip: Add your company’s name, key updates you want to follow, and a few relevant competitors, to your Google Alerts.

If you’re setting up alerts for a health tech company, you can include relevant keywords. For example, try using ‘virtual health + Canada’, ‘e-health + Canada’, ‘digital health + launch + Canada’ , ‘competitor 1’, ‘competitor 2’  to keep an eye on industry updates and competitor milestones.

Twitter is also a great channel to monitor since most journalists are very active on Twitter. Not only do journalists amplify their own content, but they are connected to the topics and community that they cover. Take your media list one step further by following your target journalists on Twitter to monitor their content.

Make your media announcements meaningful

Have a story you want to share with the media? This is where media pitching comes in. A media pitch is an attempt to get a journalist or media outlet interested in your announcement so that they decide to cover it. Media outreach is traditionally done via email, but nowadays you can reach out to journalists via social media as well.

Ensure your announcement is newsworthy. Ask yourself these questions before you even begin to think about pitching to the media:

  • What makes my news actually newsworthy? How does it stand out from what competitors are putting out there?
  • Is my news presented in an exciting way that people will get people interested?
  • What’s a timely or enticing narrative you can tie into your announcement to elevate its attractiveness?

A startup team brainstorming PR

Be purposeful about crafting your media pitch

When it comes to media pitching, try to pitch journalists with a background in your sector. In the industry, this is called pitching to journalists with relevant ‘beats’. 

Avoid spraying your announcement to all journalists from major outlets. It’s important for you to take the time to research journalists who are writing about your beat and provide them with new perspectives or advancements in the space.  

Further, avoid attaching additional documents — unless absolutely necessary —within your pitch email. The less the journalist has to click through, the better. 

Never underestimate the power of your networks; remember to leverage them when amplifying an announcement. Provide your partners with the tools and assets they need to amplify the announcement, like social media sample posts, key messages, graphics, etc.

woman working on PR strategy
Final considerations

When looking at public relations as a strategy for your startup, ask yourself, “What is my goal in gaining PR?” Is PR a vital component of your growth because it can lead to more customers in your funnel, or are you viewing media exposure as a vanity metric? 

Oftentimes, founders look at media coverage as a silver bullet for non-related issues they may face:

  • An article in a major publication will help us acquire investment 
  • Having more “As seen on” logos on our website will help us close deals 
  • My competitors are featured in the news, so I should be too 

This is not PR as a core strategy, but the need for PR driven by fear: fear of not getting investment, losing deals, or dragging behind your competition. This is often why most startups’ PR efforts fail because it is not viewed as a means to an end, but the end goal itself. 

Understand that if you are looking at PR as a strategic objective, you are committing to focusing on it just as you would if you were to begin fundraising, hiring, or growth. Part-time focus will give your startup part-time results.

 

Looking for more PR or marketing support? Check out our programs for more insights into the support we provide our founders.