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Re: » How Startups will save Venture Capital in Canada | StartupNorth

Bryson — Mon, 18 Aug 2008 17:00:10 -0000

Great slide show with some interesting ideas. I agree with most and disagree with a few. I agree that the current Canadian venture capital model is broken. How do we fix it? Imagine you had $100 dollars to invest. Would you give it to the mutual fund manager that was came from a different industry and was learning the business or a mutual fund manager with a track record? Canada has decided to go with the first choice. I know or have met most of the GPs in Canada and they are ex-entrepreneurs, former bankers, or ex-industry guys. I was trained at a VC fund in the USA and it takes at least seven years to learn the ropes before you become a GP. It also takes at least $30M to train a GP between bad investments, recaps, and workouts. It is hard as hell to break into the business, hard to survive and hard to become a GP.....it is a time proven model. Canada does not have the experience but gives money to inexperienced GPs......STOP!!!!! You have lots of Canadians working at VCs in the USA....lure them back or hire some talent. Okay that was #1. My second point is shut down all the labor sponsored funds....why did the government keep a broken model alive? I have no idea, nor does any US venture firm. You must be saying....great....you've just wiped out the existing GPs and most of the existing funds boy genius. I know from experience that it is much better to start with a clean slate......fund issues, failed GPs, good money after bad are more than enough to guarantee failure. Jevon is correct that there is a lack of seed funding. I believe that EDC/BDC have a role, yes government is good!!! The USA venture industry got its start this way by taking military and other government pet projects and research to build companies. Again, they must be held accountable and hire the right people. BDC's portfolio is in tough shape but they are trying and EDC is just starting. The other gap seldom talked about is beyon series C,D,E. Canadian VCs spread the little money they have across too many deals and run out of dry powder later. They try to get US VCs to invest...who do so happily at a down round and own a big chunk of the company. Therefore, we need a tactical later stage fund to pick the best companies and help them to the finish line. Stop going to the USA market!!!!! Okay....I've got about ten other points (tax structure, tech spinout, etc) but I'm starting to sound 'preachy' and making myself nauseous. Canada is a great country but this stuff is hard and the answers are sometimes painful.

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Will Pate — Tue, 22 Jul 2008 16:12:15 -0000

Great post Jevon. I wish there was audio to accompany the slides. :)

The root of the reason VCs don't do a lot of early stage seed investment is that they are paid a percentage of their fund, so the incentive is to have the biggest fund possible. That creates two problems with doing early stage investments. One, you can't invest a large fund in 10 - 50k chunks. Two, the time requirement to vet and add value to a lot of little investments doesn't scale.

To solve the problem you need to change the incentive model, or come up with a different mechanism...perhaps even both.

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Paul Marshall — Fri, 18 Jul 2008 18:36:13 -0000

100% agree with symbiosis. The solution revolves around business performance.
Jevon made an excellent point around the timing of VC investment and that there may be an opportunity for a microfund where money goes in earlier and smaller. I would say that a fund that issues NO MORE than $500K may merit further analysis to get the VERY early tech opportunities that perhaps would never gets beyond a thought some money and opportunity to grow and develop. Some analysis is required to understdn whether having more money at very early stages (versus bootstrapping) would have any impact on success.

Re: » How Startups will save Venture Capital in Canada | StartupNorth

symbiosis — Fri, 18 Jul 2008 14:22:59 -0000

Startups are having a tough time getting funded because VC's have no money.....VC's have no money because their performance is crap.... VC's performance is crap because the startups they fund don't give them the return they need....startups don't give the returns becuase 1: they sell out too early or 2: they fail...and it just keeps going around.

I'm just calling it like I see it. I don't know what the answer is. But I think Jevon's title is right. Only when Canada produces super companies that generate super returns will local VCs be able to raise more money to fund more startups - money always follows success!

So, get out there and build that next goog/amzn/msft/aapl... 'cause that's what will save us all!

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Taylor — Fri, 18 Jul 2008 10:31:54 -0000

Thanks for a fantastic post. We have just completed our prototype, and we are either:
a) Going to bootstrap it to market (the slow train)
b) Get into bed with VC cash (the scary fast train)
c) To hell with Canada and head to Silicon Valley where access to capital and market is alot easier (the techcrunch train)

P.S. Great blog...thanks for keeping the dream alive ;)

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Eugene Gregorio — Thu, 17 Jul 2008 22:36:41 -0000

This analysis reminds me of Cities and Ambition by Paul Graham

"Great cities attract ambitious people. You can sense it when you walk around one. In a hundred subtle ways, the city sends you a message: you could do more; you should try harder."

Great analysis. Very inspiring!

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Jason Kealey — Thu, 17 Jul 2008 21:24:21 -0000

Great post. This is precisely what we're doing... and not waiting for venture capital :)

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Mark MacLeod — Thu, 17 Jul 2008 20:09:25 -0000

Roger,

Thanks for the list. Given that JLA is lead in my current company I should have known about a couple of them at least. I thought Standout was last year. Glad to see Growthworks is active. Wish you could be in Quebec. We have some interesting stuff going on here.

Mark

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Roger Chabra — Thu, 17 Jul 2008 17:05:24 -0000

I can only speak for myself. I would never try to speak for Canadian VCs in general. “Who is funding what” doesn’t kick-start or dominate my thinking about any particular opportunity. The funding situation of a given company’s competitors is just one of the dozens of things I form an opinion on with respect to the deals I humbly think are worth looking closely at.
R.

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Startup — Thu, 17 Jul 2008 12:28:15 -0000

Roger, thank you for the list.

Being in the VC biz, can you comment on why Canadian VC's tend to (appear to) follow the US lead, meaning invest in sectors that have an established following, and do not venture into unchartered territories? The deals you list mostly sound like betterments/improvements and not industry making/changing investments (not to say they are not good). Are Canadian VC more risk averse than US VCs for a particular reason or is this just cultural? Are Canadian VCs B2B oriented with minimal or no appetite for consumer oriented investments - why is this? Am I miss reading/understanding the Canadian VC?

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Roger Chabra — Thu, 17 Jul 2008 10:45:46 -0000

Mark - I can think of quite a few new VC fundings actually.

A sample of new deals of the top of my head that have closed this year (all from Canadian-based funds I know are very actively looking to invest in great companies with great promise)...I'm sure I have missed a bunch, including those from non-Canadian-based funds...

- Ontogenix (GrowthWorks)
- Receptor Therapeutics (GrowthWorks)
- Impath Networks (GrowthWorks)
- Glassbox (JLA Ventures)
- Netshelter (JLA Ventures)
- Igloo (RBC Venture Partners)
- AideRSS (Tech Capital Partners)
- Standout Jobs (Inovia Capital)
- AdCentricity (Propulsion Ventures)

Nobody will disagree that the Canadian VC landscape has seen better days, but great deals featuring strong people, technology and market opportunities are still getting done.
R.

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Mark MacLeod — Thu, 17 Jul 2008 07:14:46 -0000

Jevon,

Great post! I was just thinking about local community yesterday (http://startupcfo.ca/2008/0...

Looking back, I can't think of one new VC funding in Canada in 2008. VCs are definitely licking their wounds. We can't wait for them to feel better. We need to just get on with building great companies. The good thing is that it's much cheaper to do that than it used to be.

Mark

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Scott Pelton — Thu, 17 Jul 2008 05:16:57 -0000

Love the post, Jevon. GrowthWorks is ready to invest in great start-ups practically anywhere in Canada and we have been pretty active lately with promising companies like Octopz, Ontogenix, Targeted Growth, Camilion, xKoto, Paymentus, Blueprint, PlanetEye, Covarity, Med-Eng, Cythochroma, ... You get the idea and I'm only dropping the names of a few companies managed through our Toronto and Ottawa offices.

Please get in touch with me or any of my colleagues if you'd like to chat about an investment from us. http://www.growthworks.ca/o...

Re: » How Startups will save Venture Capital in Canada | StartupNorth

David Eaves — Thu, 17 Jul 2008 03:41:35 -0000

Sing it brothers... the challenge is Toronto has the critical mass to pull this off. Does Vancouver? Montreal? What about smaller places?

Re: » How Startups will save Venture Capital in Canada | StartupNorth

austin — Thu, 17 Jul 2008 01:10:07 -0000

Great article Jevon. I couldn't agree more.

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Sheraz Mahmood — Wed, 16 Jul 2008 23:19:55 -0000

Very wells said Jevon, very proud to be part of this community.

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Michael Parkatti — Wed, 16 Jul 2008 23:02:56 -0000

Jevon, well said... and count me in. A mess doesn't clean itself -- we have to roll up our sleeves and dive in.

Re: » How Startups will save Venture Capital in Canada | StartupNorth

basilpeters — Wed, 16 Jul 2008 22:55:16 -0000

OUTSTANDING JEVON, TRULY OUTSTANDING.

I applaud your analysis and your attitude.

In the west, something quite different is happening. Angel investing and entrepreneurship seem to be taking off. This post on Techvibes summarizes my recent observations in Vancouver: http://www.techvibes.com/bl...

Anybody have any ideas why this is happening out here, but no so much in Central Canada?

Keep up the great writing and conference presentations - that WILL make a difference.

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Anand — Wed, 16 Jul 2008 22:39:55 -0000

Inspiring. Well said Jevon.

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Sylvain Carle — Wed, 16 Jul 2008 22:22:07 -0000

Wow. Love it. Keep preachin' to the next generation!

Two thumbs way up!

PS. Are we doing this canadian barcamp this fall? Distributed and coordinated maybe?

Re: » How Startups will save Venture Capital in Canada | StartupNorth

Paul Neto — Wed, 16 Jul 2008 22:21:17 -0000

Great call to action. I must admit I haven't been as involved in the Canadian scene as I should be - this should help get me out to a few more community events. Thanks!