Month: December 2023

It is Time to Convince Canadians Canada is Great!

I was reading a report from the investment firm LetkoBrosseau, which highlights how minimally the Canadian pension system is investing in Canada. Their headline caught my attention:

“Canada Has Cut Back On Investing In Its Greatest Asset – Itself.”

Canadian pension funds largely invest our money outside of Canada. Given Canada’s population size, it’s not unreasonable for our pension funds to look abroad, but the pendulum may have swung too far. That’s a topic for another day, however.

One particular slide, slide 4, jumped out at me, presenting several not-too-fun facts:

  • Canada’s GDP per capita has steadily declined to 75% of that of the United States, down from near parity 40 years ago. One of the main reasons is Canada invests substantially less in our own startups, R&D, and our workers.
  • In 2023, American investment per worker is 2.25x that in Canada. It was near parity 40 years ago.
  • In R&D intensity (the ratio of a country’s R&D expenditures to its GDP), the US is at 3.5, Japan at 3.3, Germany at 3.1, the G7 average at 2.6, France at 2.4. Canada lags at 1.9.
  • Canada is underinvesting in its own startups: For every dollar Canada invests in venture capital, Israel invests $2 (despite Israel’s economy being a quarter the size of Canada’s), and the US invests $39. This means that on a per capita basis, Israel invests 8 times more than Canada, and the US 4 times more.
  • Moreover, Canadians only provide about 33% of the funding for their own startups, with the remaining 66% coming from other countries. At Wattpad, we observed a similar ratio. Our largest investors were Union Square Ventures (NYC), Khosla Ventures (Silicon Valley), OMERS (Canada), August Capital (Silicon Valley), and Tencent (Asia). As you can see, most of them are not Canadian, highlighting a limited appetite for investing in our own innovative ventures.

But it’s not just about pension funds. The awareness and appetite to invest in venture capital as an asset class are significantly lower among family offices and endowments in Canada. For example, in the US, it’s not uncommon for university endowments to allocate over 20% to VC. In Canada, many are at zero or in the low single digits.

But it all depends on whether you’re a glass-half-full or glass-half-empty person.

I’m a glass-half-full person. This is clearly a market gap, and market gaps create opportunities.

A decade ago, when Wattpad began raising capital from Silicon Valley, Valley VCs didn’t ask me ‘if’ I would move the company there; they asked ‘when.’ I told them, ‘I won’t move.’ They were all surprised to hear from me that building the company in Canada would be far better due to less competition for talent, paradoxically allowing us to hire and retain top talent more easily. Wattpad was one of the first to commit to scaling our company in Canada, successfully proving (to them) that a world-class tech company could be built here (obvious to me). The Wattpad team played a part in reshaping the narrative of Canada’s innovation ecosystem.

I am very committed to doing it again. This time, I’m not convincing people in the Valley that Canada is great; I’m convincing Canadians that Canada is great! My goal is to encourage more attention towards VC as an asset class. As a VC myself, I’m putting my money where my mouth is, and I will let our results speak for themselves. For many decades, Americans and Israelis have known that investing in top-tier VCs can help create world-class, iconic companies, benefiting their local economies significantly while also generating consistent, outsized returns. Canada can undoubtedly do the same.

This is my last post of the year. I’ll be “off the grid” until the new year, recharging for what promises to be a super busy 2024. Happy holidays!

P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.

Masterclass Series: Lead by Only Doing What You Can Uniquely Do

As a refresher, a CEO does only three things:

  • Sets the overall vision and strategy of the company and communicates it to all stakeholders.
  • Recruits, hires, and retains the very best talent for the company.
  • Ensures there is always enough cash in the bank.

These responsibilities might seem straightforward, but they encompass a vast array of tasks and decisions.

For instance, ensuring there is always enough cash in the bank could imply that a CEO needs to double as a CFO, but clearly, CEOs should not be CFOs. Similarly, hiring the very best talent could include all people functions, but of course, it should not.

In other words, even with just three things, CEOs will never run out of things to do. So how should they prioritize?

One guiding principle is that CEOs should only do things that they can uniquely do. Let someone else take care of the heavy lifting.

When Wattpad started to scale, this mindset shift really helped me prioritize. This problem is much more common than you may think. Based on my observations, I would even say that at some point, most inexperienced CEOs spend too little time on things that they can uniquely do. Failing to do so, the problem could manifest itself as people in the company chronically waiting on you before they can take their next actions on projects. You lose all the leverage you have in hiring a team.

You already paid them so much money to do the job for you. Don’t do their job for them!!!!

Although this lesson is mostly for CEOs, the same principle also applies to other leaders and managers. There is a bucket called ‘only you can do.’ Note that this bucket is not called ‘I can do it better‘ because who can do a better job or who can do it faster is not the issue here. Resisting the temptation to take on a task when your team can (should!) handle it can greatly help you improve your productivity and turn you into a much more effective leader.

P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.

Masterclass Series: What a CEO does

I’m a 3x entrepreneur. I was the CTO of my first company, which failed. I was the CEO of my second one, which was acquired when it was still very tiny.

Wattpad was my third and last company, but it was my first one as a scale-up CEO. It was a very different beast. The learning curve for me was extremely steep.

Thankfully, I was very privileged to have many world-class VCs and their firms invested in Wattpad. Being surrounded by world-class investors and their network not only helped me surmount that learning curve but also helped TSFV become a much better VC firm. More on that in a different post.

One of these firms is Union Square Ventures. The first and most important thing I learned from USV’s Fred Wilson is, “What does a CEO do?”

A CEO does only three things:

  • Sets the overall vision and strategy of the company and communicates it to all stakeholders.
  • Recruits, hires, and retains the very best talent for the company.
  • Ensures there is always enough cash in the bank.

A CEO should delegate all other tasks to his or her team.

In my experience, it’s rare to find great CEOs and consequently, great companies, not getting these three things right. Conversely, dysfunctional companies usually get at least one of these three things really wrong.

I frequently talked about these three things with my team at Wattpad. My leadership team and all the employees knew what to expect and could hold me accountable. And they did.

So much is packed into these three things. They are deceptively simple, and yet they are extremely nuanced. There’s enough material here for a book! So, expect multiple blog posts in the future on this topic.

However, this post alone is already a great guiding post for any CEO whose company has achieved (or is beyond) product-market fit, or the team is ready to scale, say, roughly 10 people, and even for companies of much larger size.

This post is the foundation of CEOs’ leadership, and everything flows from here. I learned it, I lived it, and I can testify that this is the first thing that any CEO must get right and keep getting right throughout their tenure.

And that’s precisely why this is the inaugural post in the Two Small Fish Ventures Masterclass Series.

P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.

Allen’s Thoughts 2.0

One of the most unusual practices I used as CEO was writing an internal blog called “Allen’s Thoughts” on Wattpad every day. My preferred form of communication is the written word, a key reason behind co-founding Wattpad.

Although it might sound time-consuming – and it is – blogging helped me tremendously in clarifying my thinking. More importantly, context matters. The 30-60 minutes I spent each day aligned and interacted with hundreds of employees, arguably making it the most effective activity in terms of leveraging time. Here’s what I explained on Allen’s Thoughts about why I needed to do this:

“Wattpad is an incredibly complex company. We are a tech company, a media company, a book publisher, an advertising company, an influencer network, an AI company, a movie studio, a social network, a community, and also an entertainment company that makes people happy.

What links us together is our common vision, mission, values, and culture. Allen’s Thoughts is less about the numbers and company updates, which you can get on Slack, email, Google Docs, or other channels. This blog is more about sharing the context, the whys, and the intangibles in a narrative that helps you navigate that complexity so that you can make the best possible decisions and do your best job.

This blog is one of my unique superpowers that connects everyone.”

I started Allen’s Thoughts in 2013 and stopped daily blogging after stepping down in May 2022. My final post, “IT’S THE FINAL CURTAIN CALL. A NEW STORY BEGINS,” was shared publicly on allensthoughts.com.

Do I miss it? Absolutely, yes. However, after writing half a million words, I became too mentally exhausted.

After a long break, I am fully recharged and ready to reactivate my public blog. Although the Wattpad story is well-documented, many challenges and triumphs weren’t shared externally. These backstories are valuable case studies in business, leadership, entrepreneurship, venture capital and even time management. Re-reading my old posts, I realized they are a startup treasure trove, offering insights from scaling from two co-founders to a scaleup with hundreds of employees and 100 million users. I plan to share these lessons, along with many new topics.

Of course, I will also share my perspective on the startup investment landscape, our investment thesis, and our areas of focus – i.e., AI, protocols, and sustainable computing – among other topics.

This material will be part of our “School of Fish” Masterclass Series, more on this later.

I don’t plan to write daily. Frequency is not the most important aspect; it’s more about when inspiration strikes. My goal is to share high-quality, high-leverage, and impactful content. I will use Allen Thoughts to think things through “in public,” writing for my own enjoyment and hoping it benefits many others. After a hiatus, I’m eager, hungry, and excited to do it again!

P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.