Startupping in Canada is lame … or NOT (11)
Over the past week, there has been lots of discussion around about early financing deals in Canada. David Crow began by listing venture funds which explicitly does seed or early-stage financing, and it seems there isn’t any shortage of it, although everyone agrees there is a real lack of activity. Commenters on his blog post mentionned lack of management talent, tax issues, lack of “boldness” and entrepreneurship in Canada, too much hassle for VCs to create seed funds etc. Also mentionned are Labour sponsored funds in Canada (such as FTQ in Québec) which don’t have enough expertise to invest with confidence in new technology startups.
Later, Mark Evans, formely editor at Maple Leaf 2.0, said Canada needs a Peter Thiel. This was his reaction to the Wall Street Journal piece where investor Peter Thiel, member of the Paypal “Mafia”, says he invests little money for smaller stakes (5 to 10%). Peter Thiel only invests in projects where he knows personally the entrepreneur and team; and also doesn’t demand as much control as “traditional” investors usually demand. Mark Evans envisions a Canadian fund of $50 million, which also provides value-added services to entrepreneurs.
Mark Evans is now involved as community manager at the Toronto-based startup planeteye, and it might explain why he now wants the balance to tip in favour of entrepreneurs. Every other Canadian entrepreneur would wish for such a fund too I guess. I noticed however Ashkan Karbasfrooshan, CEO and founder of media startup watchmojo.com, said Canada doesn’t deserve it, with very harsh words about the state of technology entrepreneurship and investment in Canada:
… financing in Canada is pretty lame. By the time Canadian entrepreneurs strike it big, they have given up and forgotten about Canada because when they needed help from the financing community, the moneymen were nowhere to be seen. It becomes a vicious circle, because the best and boldest entrepreneurs understand this and bolt before sticking it out in Montreal…
Those posts reminds me of a ridiculous Chilly Beach episode where it was proven that you had to move to the US to have any degree of success and where anything that came out of Canada was automatically lame. Of course, the episode’s authors are ironic but when you see what Canadian bloggers are writing, you sometimes wonder if this isn’t after all the truth.
It’s true that we don’t have enough activity. There isn’t enough boldness, not enough entrepreneurship. Here in Montréal, I meet everybody people who don’t have a very high opinion of technology entrepreneurship, but as I wrote yesterday, we have come a long way, and I am sure the best is yet to come.
Again, I wish you a great 2008 year, with lots of exciting projects, lots of hard work, but also lots of success.
/back to work
Heri,
I think the Canadian tech scene is far from lame. In fact, there’s lots of exciting things happening that could flourish with just a little seed capital. Like you, I’m optimistic that things will improve in 2008!
hey Mark
Well by Canadian bloggers i was refering to Ashkan’s post. I saw David Crow is optimistic too
hey Heri and Mark,
If you see my comments, nowhere does it say “tech startups in Canada are lame”.
I said *financing* for tech and new media startups is lame.
Mojo Supreme (WatchMojo.com) is the first company I start but I have worked at two rather successful and VC-funded consumer web startups.
Neither company was lame or lacking in ambition, but despite the relative successes each company had, both companies fell far short of their potential.
The main reason was because the city and country’s financiers did not share the risk-taking, business sense and vision of the founders, entrepreneurs, management and employees.
Ash
The research body ranked Canada fourth from the bottom in terms of innovation, saying Canada’s “failure to innovate” largely explains “a mediocrity that is hampering what we can do and what we can be.” “We’re not a risk-taking country because of our history, because of our nature, whatever,” Golden said. Read more:
http://www.cbc.ca/money/story/2007/06/13/report-economy-070613.html
More risk takers, and technology-knowledge start-up operations in Venture Capital funds could improve Canadian performances. Today business plans are old-fashioned. You need to move fast, and see beyond factual and analytical data.
I agree it is NOT lame, and that is part of the problem, people keep crapping on progress! Bottom line there needs to be more action and less talking. Stop trying to compare Canada to other places, stop trying to compare Toronto or Montreal and just get you axx in gear, “Just Do It”
The discussion began with the statement “Canada needs a Peter Thiel to rewrite the rules of VC investing”…
To which I answered “by the time we come close to having one, they are gone to places where entrepreneurship and risk taking are welcome and encouraged”.
So in all fairness, we definitely should compare Montreal to other cities and Canada to other countries because that is where the best and brightest go.
More importantly, we should stop patting ourselves in the back despite poor track records.
Montreal is ridiculous for its “big dreams but small mentality”. For example, this summer the city tried to spin getting the United Nations HQ to come here from NYC even though the UN itself was saying “thanks, but no thanks” and the Quebec government was saying that if you don’t speak French you should not be able to vote.
There’s a small problem with pretending to be big leagues or aspiring to be a major global city, you actually have to back the talk and walk the walk.
I argue that our focus should be on the credit crunch, caused by the sub-prime loan debacle. The losses sustained by the major Banks and Financial Institutions significantly reduced their capital. Reduced credit availability, which have a higher cost, is one effect. Higher barriers to entry into the financing market is another effect. This impacts Canadian high tech entrepreneurs, who compete for scarce capital. The consequence may be higher quality investments (measured in terms of lower risk, higher returns) but at the cost of excluding new start ups that would otherwise gain finance.
[...] a debate brewing on the state of startup funding in [...]
What would happen to Google, Apple, Facebook, YouTube if they did not receive any funding?
Look at the Ottawa Capital Network:
http://www.ottawacapitalnetwork.com/entrepreneurs/fundingRoadMap/chooserVC.asp
You can see that reaching expansion requires at least $10 MM to $20 MM. Unless you are in service business, you’ll need a serious capital to start, develop and market products.
[...] minds) will work for free. So some serious networking and elbow-rubbing is required ’cause tech startup funding is still kinda flaky in Canada. Also, it’s probably easier to obtain funding for products with large [...]
[...] a debate brewing on the state of startup funding in [...]
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