The Creative Destruction Lab (CDL) at the University of Toronto's Rotman School of Management is looking for what Andrew Peek calls "people with a technically ambitious moonshot idea." He should know a thing or two about that. He had a pivotal role in one of Canada's most notable startups, Shopify.
Today, Peek is the co-founder and CEO of Delphia, a startup at the intersection of blockchain and artificial intelligence (AI) technologies. He believes that the "tech incumbents of the last decade were built off a value proposition that benefitted the businesses, not the users" who were unknowingly providing a good and a service – in the form of their data.
Peek believes that a consumer's own data can be used by that consumer to make money. In fact, Delphia is already on it. Peek's company, which sports a stand-in currency called Karma, has shipped a mobile app that lets people decide on the spot whether to monetize their personal data. Delphia's consumers earn Karma, which can be exchanged for fiat on a periodic basis. "We take the data you provide and model it inside a factor, which we then sell to, say, hedge funds, large asset managers, or insurance companies," says Peek. The factors help these entities improve the accuracy of their market forecasting. "We use the factor to give them insight on macro or micro trends, whether it's the evolving attitudes toward climate change or body image," says Peek. "The insights are critical to their sales performance."
Peek turned to Rotman's CDL nearly a year ago, after Delphia had already raised a round of seed capital. Peek explains that his company is "heavy on AI but needed to grow in the realm of blockchain." Looking to tap expertise from a network of successful entrepreneurs and financiers, Peek joined the new incubation stream as a cohort (a company founder) at the CDL, a development program for massively scalable, science-based seed-stage companies. Its 10-month program pairs cohorts with experienced entrepreneurs and investors to set focused, measurable objectives with the goal of maximizing equity-value creation. The Blockchain-AI program tranche is one of eight currently offered by the CDL.
According to William Yin, one of the CDL's senior venture managers and a proven tech founder in his own right, "What we're really interested in is the convergence of the two technologies. Blockchain is going to enable low-cost storage and verification, and AI is enabling low-cost prediction." Ultimately, he adds, "what powers AI is data and that is what blockchain is going to be providing. There are endless opportunities based on how these technologies can [conceivably] work together."
Yin explains that the CDL tries to assemble a stream of cohorts that represent "a good distribution of founders tackling problems in both the public and private blockchain realms. We have founders with high-level projects for a place in the consumer- and user-facing areas, and then we have founders from the lower-level infrastructure and protocol-layer projects."
Be Focused, Be Fast
The most important role played by Yin and other venture managers on the CDL staff is:
"[T]o keep these companies focused on meeting the objectives set with their program mentors. We help them to prioritize how they spend time and resources so they can get from A to B the fastest." For example, a cohort may be trying to figure out how much capital it has to raise. A venture manager can help the cohort with the financial modelling for that. "Our founders can basically use us in a way they feel is most valuable to them, but the focusing is crucial."
Delphia's Peek signed on to the program's 2018-2019 cycle, which features the CDL's first Blockchain-AI program. The point, says Yin, is to "bring together experienced entrepreneurs, angel investors, and a community of visionaries in the fields of blockchain and AI."
This CDL program consists of five in-person sessions designed to hone cohorts' (founders') judgment "by immersing them in a community of accomplished entrepreneurs, experienced operators, and active angel and venture investors. Sessions are built around one-on-one meetings with mentors to discuss progress and challenges, followed by group meetings focused on finalizing measurable, deliverable two-month objectives."
The CDL prefers cohorts that have advanced beyond the concept stage and that have developed or are working on a prototype. Truly desirable are startups that plan to raise a seed round (US $500,000 to $5 million) within 12 months of applying.
Cohorts have a powerful incentive to demonstrate performance – the program's fellows (successful business creators) and associates (venture capital providers and other financiers) elect which ventures they would like to continue to work with. These mentors pay their own way, no doubt delighted to have a view of new investment opportunities. Yin is quick to point out, however, that the CDL offers a lot more than the incubators that mainly center on finessing pitches for funding.
Yin and the CDL's other venture managers also ensure that each cohort is teamed up with one of Rotman's MBA or executive MBA students who can help to develop business models, evaluate potential markets, and fine-tune strategies for scaling. What do these students bring to the table? "It varies based on student backgrounds," says Yin, "so when a founder joins, we work to match him/her with the right person." It's often the case that the student has valuable industry background and contacts.
Yin believes that Web 3.0 will result in "a lot of commercial value flowing out of and into Toronto. After all, the earliest developments in deep [machine] learning came out of this university," he notes. "And we are certainly immigrant friendly."
Toronto has been enjoying something of a brain-gain of late. The city's tech scene got an inadvertent boost from Donald Trump's stance on US immigration, which includes reducing the H-1B work visas coveted by non-US code dreamers. Last month, The Financial Times reported that "Canada's largest city created more tech jobs than San Francisco – or any other US metropolis – in the preceding five years." The report went on to note that this came as a surprise to many industry watchers south of the border. Toronto's gain is Silicon Valley's loss. The big dreamers at Rotman's CDL are counting on it.