in Startups

BrightSpark: Venture Capital is not what it used to be, we are changing

A lot of us like to speculate on the state of Venture Capital in Canada; we all have a vested interest in the existence of a healthy and competitive market. For BrightSpark, the truth has been much more obvious.

brightsparkl.gifBrightSpark, with over $100 million under management, raised its first fund in 1999 and its second fund in 2004. Co-Founded by Tony Davis and Mark Skapinker, the fund positioned itself as a “seed and early-stage software venture fund” for the Canadian market with offices in Montreal and Toronto. They have been active even recently with great deals like NowPublic, b5Media and MobiVox, 9 recent investments, and a few more to make in their second fund.

The BrightSpark team, a bunch of experienced entrepreneurs, was (and is) perfectly suited for the job we have been asking VCs to take on here in Canada: early stage financing with heavy duty support capabilities. It should have been a perfect combination, and one would hope that they could have done quite well in the last few years with the resurgent tech bubble.

I wanted to know what was next for BrightSpark, as I had heard a lot of divergent rumors recently: some said BrightSpark was raising a new fund, others said they were going to close up shop. Earlier this week I had a chance to speak with Mark Skapinker about Brightspark, the Canadian Venture Capital market, and what he might do to fix it all if he could.

Mark came right out and said that the Canadian Venture Capital market is changing and that BrightSpark has been watching this change closely for some time. He believes that a lot of funds are going to face some troubled waters ahead and that BrightSpark is one of the few well positioned funds to survive in this new environment. It was clear from our conversation that BrightSpark believes Venture Capital in Canada absolutely has to change, and soon.

Mark and the team at BrightSpark feel that there, quite simply, just isn?t enough early stage deal flow right now to sustain large funds. They also have the sense that there just aren?t enough repeat entrepreneurs in Canada right now who have the experience to create great startups.

I asked Mark what he would do to improve the financing environment in Canada which led us to a discussion about BrightSpark 3.0, Inc.

BrightSpark 3.0 is a company (not a fund) that will exist to Create, Build and Operate internet businesses. The company will be focused on creating new Internet and cash generative Web-2.0 style startups and is fundraising now.

So what does this mean? For the time being, BrightSpark will focus on supporting the growth of companies already in the portfolio. Over the next year, BrightSpark will make a decision about raising a third fund, which would be in the $50 – $75 million range.

From our vantage point this story is both a bit sad and a bit hopeful. Some of the the top entrepreneurs in the country went out in 1999 and raised a Venture Capital fund so they could change the industry; here we are, almost 10 years later with a market still in dire need of change. The BrightSpark team now has a chance to go back to their roots and build their own startups; hopefully we will see funds stepping up to fill the funding gap left behind.

If we needed a reason to get the discussion about how Venture Capital needs to change in Canada kick-started, this is it. We have a top fund feeling the model is so broken, that they need to fundamentally change the way they operate. What does this mean for other VCs in Canada? What does it mean for the budding and growing startup community?

  • http://aliasaria.ca Ali

    It would be interesting to get a bunch of the old-school champions of the VC industry in Canada — Tech Capital, Ventures West, BrightSpark, EdgeStone — in a room together and document the conversation.

  • http://aliasaria.ca Ali

    It would be interesting to get a bunch of the old-school champions of the VC industry in Canada — Tech Capital, Ventures West, BrightSpark, EdgeStone — in a room together and document the conversation.

  • http://montrealtechwatch.com heri

    i’ve repeatedly blogged about it, that we need more early-stage investors because the market is changing

    since then, i spoke to several investors and what i got is that most of them just want to invest in “the” big deal, they would get less work and believe they would get a fatter return on their investment.

    of course, when i mention how the market is changing, they totally agree we need more angel investors, more people in early stage but nobody wants to take the job because it’s too much hassle and work.

    if this goes on, i feel we just have to ignore the old-school VCs and just build that startup.

  • http://montrealtechwatch.com heri

    i’ve repeatedly blogged about it, that we need more early-stage investors because the market is changing

    since then, i spoke to several investors and what i got is that most of them just want to invest in “the” big deal, they would get less work and believe they would get a fatter return on their investment.

    of course, when i mention how the market is changing, they totally agree we need more angel investors, more people in early stage but nobody wants to take the job because it’s too much hassle and work.

    if this goes on, i feel we just have to ignore the old-school VCs and just build that startup.

  • http://www.j4wad.com Jawad Shuaib

    There is an upcoming event for VCs and entrepreneurs, called the Canadian Innovation Exchange (http://www.canadianinnovationexchange.com). I think Canada requires more events like that to get startups and the VC industry off their back.

    – Jawad Shuaib

  • http://www.j4wad.com Jawad Shuaib

    There is an upcoming event for VCs and entrepreneurs, called the Canadian Innovation Exchange (http://www.canadianinnovationexchange.com). I think Canada requires more events like that to get startups and the VC industry off their back.

    – Jawad Shuaib

  • http://www.klondikeconsulting.com/blog Ian Graham

    Jevon, tried to leave a track back but it seems to be turned off or maybe it is my blog newbness at work.

    Good post and I concur to much to say to fit in a comment box but wrote a post about it here:

    http://klondikeconsulting.com/blog/?p=294

  • http://www.klondikeconsulting.com/blog Ian Graham

    Jevon, tried to leave a track back but it seems to be turned off or maybe it is my blog newbness at work.

    Good post and I concur to much to say to fit in a comment box but wrote a post about it here:

    http://klondikeconsulting.com/blog/?p=294

  • http://www.techcfo.blogspot.com Mark MacLeod

    Our company (Mobivox) is part of the Brightspark family. This is my 4th venture-backed company, but 1st time working with them. I have to say they’re great and definitely earn their reputation as tops in the seed game in Canada. I think it will be a loss for the Canadian startup community if they don’t raise their fund. Still, if they do incubate their own companies in Brightspark 3.0 I am sure they’ll create some good companies and help build the strength of the industry in Canada.

    The VC game in Canada is early stage. All “good” startups will look to larger, better positioned US investors for later stage rounds. The only funds that will be successful in Canada will be early stage.

  • http://www.techcfo.blogspot.com Mark MacLeod

    Our company (Mobivox) is part of the Brightspark family. This is my 4th venture-backed company, but 1st time working with them. I have to say they’re great and definitely earn their reputation as tops in the seed game in Canada. I think it will be a loss for the Canadian startup community if they don’t raise their fund. Still, if they do incubate their own companies in Brightspark 3.0 I am sure they’ll create some good companies and help build the strength of the industry in Canada.

    The VC game in Canada is early stage. All “good” startups will look to larger, better positioned US investors for later stage rounds. The only funds that will be successful in Canada will be early stage.

  • Aby

    The Canadian VC is a follower, not a leader and those ideas that are unproven die in Canada. As the folks at GrowthWorks told me, “we would never had invested in Google, Amazon, eBay”, we just don’t do those types of investments.

    Secondly, Canada would be better served by the government encouraging more Angels to invest. We would have more businesses in this country. While they may not be $100mm business, they would contribute to the economy, and likely the net value created from these multiple

  • Aby

    The Canadian VC is a follower, not a leader and those ideas that are unproven die in Canada. As the folks at GrowthWorks told me, “we would never had invested in Google, Amazon, eBay”, we just don’t do those types of investments.

    Secondly, Canada would be better served by the government encouraging more Angels to invest. We would have more businesses in this country. While they may not be $100mm business, they would contribute to the economy, and likely the net value created from these multiple

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  • Paul

    Neotech Capital in Montreal have an interesting concept to fill the seed funding gap. I think new initiatives like Neotech are good. You should take a look at it: http://www.neotechcapital.com

  • Paul

    Neotech Capital in Montreal have an interesting concept to fill the seed funding gap. I think new initiatives like Neotech are good. You should take a look at it: http://www.neotechcapital.com

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