- RT @KristaNapier: BumpTop featured on the front page of the business section in the Toronto Star @starbusiness today #
- New job posted: Rockstar Web App Developer / LooseButton / Toronto, ON, Canada http://bit.ly/cjAFYx #
- RT @MarkRuddock: How to nail the five-minute pitch http://bit.ly/a67ayk #startup #mustread #
- New job posted: BlackBerry Developer / Vortex Mobile / Toronto, ON, Canada http://bit.ly/cYU9xz #
- New job posted: iPhone Developer / Vortex Mobile / Toronto, ON, Canada http://bit.ly/bzL1Sb #
- New job posted: Information Architect / Vortex Mobile / Toronto, ON, Canada http://bit.ly/biyblc #
- New job posted: Support Specialist / FreshBooks / Toronto, ON, Canada http://bit.ly/bvnyMS #
- New job posted: Jr. Web Designer / FreshBooks / Toronto, ON, Canada http://bit.ly/boarsS #
- New job posted: API Developer / E-commerce Startup / Montreal, QC, Canada http://bit.ly/ai93dj #
I had a chance to catch up with David Adderley, the Chair of the conference this year, before this week’s CVCA annual conference in Ottawa. I wanted to find out more about what he thought about some of the new fund models that are emerging in Canada and just where the business as a whole is going.
Is Venture Capital in Canada at an inflexion point this year? Will we emerge from these two days with an entirely new business in this country? I think the answer is No — and I think that is a good thing. We have stopped looking for a silver bullet or a dramatic sea change, but from what I can see people are ready to get back to work and to find a way to make this work with a model that makes sense for this country.
On with the discussion:
The introduction to the conference says that the world is emerging from a crises and then says re: VC “In response, new innovative models and strategies for creating value are emerging.” Do you think that Venture Capital in Canada is developing a new model? What are some examples?
The investment strategies that many VCs employed during the bull market for technology venture capital of the late 1990s and for the first half of the past decade—which were arguably focused more on a “gold rush” approach of selling companies rather than building them—do not work in a more “normalized” market.
What we are seeing in Canada (and elsewhere) is venture capital returning to its historical roots, when VCs acted like entrepreneurs and applied their domain knowledge and know-how to help start-ups get off the ground. This means VC firms who have small nimble teams of partners with multiple business experiences and technology domain expertise. The investment projects are generally “local”, with founding entrepreneurial teams that have skills developed around the core technology and managerial competencies of the specific geographic region. Professors Kaplan and Lerner’s recent paper, “It Ain’t Broke: The Past, Present and Future of Venture Capital” is informative on this point.
There should be more focus on investing around the core technology competencies in Canada rather than simply following US trends (e.g. “me too” Web 2.0 companies) without having the depth of talent in Canada to execute. For example, both Toronto & Waterloo have deep domain expertise in Digital Multimedia and Wireless & Mobility around which clusters of VC-backed projects can be built.
As for specific investment strategies, there is renewed focus on the “intensity” versus the “velocity” of capital. This means more of a back-end loaded, milestone-driven approach to investing. Also, the more successful firms are applying a “Seed-to-C” funding approach, with the formation of syndicates that can take companies all the way to cash flow positive, meaning less reliance or no reliance on “late stage” VCs or “B round” VCs.
What do you think the story of Venture capital has been in Canada since the last CVCA?
What we’ve seen in Canada is a restructuring and consolidation of the VC market, resulting in a significant reduction in investment activity over the past number of years. What remains is a much smaller set of mid-sized (sub $200 million) and smaller (sub $50 million) funds. Whether or not this represents the “normalization” of investment activity in Canada remains to be seen.
You’ve seen “declared” interest in Canada by some US funds, but relatively little investment activity from them.
VC plays a key role in any industrialized or emerging economy, driving innovation and job creation in high-growth sectors, as demonstrated by many academic studies. There does appear to be a growing awareness at the government level that action must be taken if Canada is going to continue to innovate and leverage its R&D strengths, and fund its most promising ideas, entrepreneurs and start-ups.
A new crop of micro-funds have started to emerge in Canada. What role will these funds have to play in the future of VC in Canada.
Yes, a number of “micro funds” have emerged in Canada. They go after what they describe as less capital-intensive projects, or projects where the injection of capital can be very back-end loaded, such that a small investment is made at the beginning, allowing the start-up to attract key industry-specific angels and to secure customer traction before bringing in significant money. This sounds more like the historical way VCs acted rather than necessarily a “new” approach.
I’d also ask whether the emergence of new micro funds in Canada is driven more out of necessity, i.e. an inability to raise significant capital in Canada, versus a systemic need to find a new model for VC funding that works.
Will these funds have a real impact in positioning Canada as a leader in innovation? For Canada to develop the next RIM, we need entrepreneurs, start-ups and investors who are targeting the same kind of ambitious, platform technology projects that have made Silicon Valley an engine of growth for the US economy.
- #HackTO http://yfrog.com/cal6aj #
- raising capital is not the most immediate problem facing Canadian startups – http://bit.ly/8Z6GU8 @dmix #
- Indochino gets a shoutout on SeanJohn.com http://bit.ly/cW5hwJ #
- Gore is very compelling sans slides #
- "Since one fails often, address markets that make it worthwhile when one does succeed" Vinod Khosla quoted by @seanellis #meshu10 #
- RT @startupcfo: New Blog Post by @SeanEllis: Want to build a billion $ startup? Here's what you'll need to achieve http://bit.ly/aiieys #
- RT @KristaNapier: #mesh10 & #meshu social events open to everyone: Drake Hotel Monday, Spice Route Tuesday http://bit.ly/dy74zq #
- RT @3rdparty: "Startups search, companies execute" @SeanEllis quoting @sgblank at #MeshU http://j.mp/as7fFj #MeshU2010 #
- New job posted: Senior Software Engineer / IBI Group – Transportation Systems / Toronto, ON, Canada http://bit.ly/bIFvxa #
- New job posted: Marketing Wizard / Eqentia / Toronto, ON, Canada http://bit.ly/abrpqN #
- New job posted: Rails, UX & Design Generalist / Eqentia / Toronto, ON, Canada http://bit.ly/9CXlTb #
- New job posted: Rails Rockstar / Cloud Commander / Eqentia / Toronto, ON, Canada http://bit.ly/bH9IHB #
- RT @aliasaria: Jordan Banks (@jordan_banks) is the new Managing Director of Facebook Canada. Congrats Jordan. http://bit.ly/aEQI1G #
- RT @ptelio: Notman House website launched http://bit.ly/8Y89wY community meeting May 21 register http://bit.ly/9IgR2O #montreal #startups #
- RT @CVCACanada: Startups Wanted for The Communitech Hub: Digital Media and Mobile Accelerator http://bit.ly/dbDejI #waterloo #startups #
- RT @rubsun: VC funding improving in the US, but stagnating in Canada http://ow.ly/1MBOR #canada #startups #
- RT @suziedingwall: head on over to CATA http://bit.ly/b6tWdv & update yourself on the current debate over the future of SRED – danger ahead #
- New job posted: Python Developer / FreshBooks / Toronto, ON, Canada http://bit.ly/aOL5dO #
- New job posted: Software Developer (Python/Django) / Wave Accounting / Toronto, ON, Canada http://bit.ly/aWatzS #
- Congratulations! @Jordan_Banks joins Facebook Canada as Managing Director – http://bit.ly/aYdmuG #
- New job posted: Senior Web Developer / 76design / Toronto, ON, Canada http://bit.ly/d1e8ry #
- RT @startupcfo: RT @CVCACanada: TON Tuesday: New Early Stage Funding Models and Funds http://bit.ly/aTYb2s #startups #
- RT @MarkRuddock: Getting your startup investor ready: @startupcfo's workshop at #Mesh10 today http://is.gd/cgD5Y #
- RT @byosko: hiring a Ruby on Rails dev (w/ mobile experience) for my new startup: http://bit.ly/9R8g7Y #
- Apply by June 4 for ExtremeU 2010 – http://bit.ly/c7dTun @ExtremeVP #
- Québec based VC activity continued to lead the Canadian market in Q1 – http://bit.ly/bdx98L #
- RT @rayluk: RT @Startup Drinks is next week–now in 9 Canadian cities! http://bit.ly/bZ8mVi #startupdrinks #