in Canada

Canada’s Next Five Years

1997-2012: Fear, Uncertainty, Doubt.

2012-2020: Optimism, Opportunity, Execution.

I’ve been bullish for a while now, it’s no secret. It was 5 years ago that I was writing off VC in Canada and explaining how startups needed to step up to create an environment to bring them back.

And like a bowl of Sea Monkeys, the VCs have emerged from stasis.

Do you realize that I can’t even conjure up a single VC financing in Canada in 2008.

This week OMERs stepped up in a big way with a $20million financing for HootSuite. This, along with the recent $30 million (debt) financing of Halifax based Unique Solutions, represent some of the first real, and stable, “acceleration capital” that we have seen in Canada.

Five years of uncertainty about startups in Canada. Uncertainty about whether we could really start them. Uncertainty about whether we could really build them. Uncertainty about whether we could really scale them.

5+ years that I am happy to say good riddance to.

The last 5 years we have focused on:

  • Seed stage financing
  • Removing section 116 from the tax code
  • Waiting for shitty VCs to go away
  • Welcoming good VCs on to the scene
  • Getting rid of any idea of building a startup “for the Canadian market”
  • Making “Startup” an understood thing
  • Telling good news stories when they came along

When I wrote a the post about 2011 being a big year I was focused on 2012 as the next step. What I realize now is that we aren’t just living year-to-year like we used to, the startup community in Canada now needs to start thinking in larger timeframes, with bigger goals and a far more ambitious strategy.

This is the time to double down.

I believe strongly that the values, infrastructure and growth of Silicon Valley are becoming better understood and slowly commoditized. Our challenge is not to try to recreate Silicon Valley, but to take the elements of what make it good and to apply it in our own communities. We are getting much closer to that.

A half-decade is a long time to think about, especially for entrepreneurs. Here’s what I think we need to think about that we haven’t done much about in the last 5 years. What do you think we need to focus on for the next 5 years?

Education

Children need quality education in the fundamentals of the Web. Right now we have an education system which tried to teach students about computers but almost completely neglects the Web. A shift to Web-oriented education would mean:

  • Understanding the role of many devices (computers, tablets, phones, etc) in education
  • Web-infused curriculum in all topics. Such as: Web-focused research skills in science courses. Social Media in Language Arts. Etc.
  • Programming skills which are introduced early on and are a required component of curriculum.

A focus on education should imply the participation of students in the startup community. We need to find ways to include younger and younger would-be entrepreneurs the web startup community.

Community as the framework

There are a lot of efforts underway to “professionalize” the management of the startup community in Canada. Watch out for people who claim to know what is best for the Canadian startup community but who haven’t felt the need to immerse themselves in it by being a part of it. The reason that Canada has managed to standup a respected and vibrant startup community is largely because the effort has been decentralized and grassroots. It has not been because of centralized programs or PR focused exercises.

We need to maintain this focus because developing a strong social network of individuals who are able to contribute to and support the development of Canadian startups is critical. It’s why I like the C100Startup FestivalGrow Conference, CIX and others. They are efforts that have come from people who are entrepreneurs themselves and who understand that the health of the community is critical.

Tighter Silicon Valley links

The vast majority of startup hub cities in Canada are within a short flight of San Francisco. We need to take advantage of that link and make exposure in Silicon Valley an expected thing for Canadian Startups. This is easier than ever and it is getting easier. We need more Debbie.

Policy

Web Startups are not yet on the radar of policy makers. This has resulted in disjointed policy development which has sometimes harmed startups who develop and compete globally. I believe that the current government has actually made some changes such as the changes to Section 116 of the tax code. Startups benefit from very specific parts of the legislative and tax codes and we must continue to seek as many advantages from these as possible. I mentioned Education above but policy influence also needs to extend to Immigration, R&D programs, procurement and anything else that can be used to give startups in Canada an advantage.

 Grow like hell and don’t stop

The final thing we need to do is to make even bolder moves. We have our feet under us and now it is time to double down again and again and again. Rather than being the companies who are getting picked off for $20million here and $50million there we need to find opportunities that let Canadian startups become the acquirer and growth engine, rather than the other way around. Hootsuite is a start, but we need to chalk up a few more before the process will become well understood in Canada.

 

Welcome to the next 5 years.

  • http://whoyoucallingajesse.com/ Jesse Rodgers

    Hubris will be the enemy here and Canadians seem to have a knack for it (Nortel, RIM, Defence Ministers, etc). We have to celebrate success, have fun, and keep moving. Nice post!

    …and the idea of ‘more Debbie’ scares the hell out of me… but in a good way ;)

  • http://startupnorth.ca Jevon

    re: more Debbie. 

    I’m afraid too. Hold me.

  • http://startupnorth.ca Jevon

    re: hubris.

    Uhg. We do need to stop that cycle. Big fish small pond, etc.

  • http://www.facebook.com/dave.forde Dave Forde

    There are so many successful Canadian companies and entrepreneurs who have made it to the finish line WITHOUT going to the valley or turning to them for support.  The more that we keep saying Canadians need to turn to the valley and ship Canadian talent down there for a day or for good, is the more that we keep de-edifying the successful Canadians who have same community that you talk about.
    Be Canadian, Be Proud, stop claiming that the US will save Canada, great a great product and business model and the world will come find you – is that what Hootsuite has done???

  • http://startupnorth.ca Jevon

    Are you agreeing with me, disagreeing, or making a different point entirely? 

  • http://www.vidyard.com/ Michael Litt

    “It has not been because of centralized programs or PR focused exercises.
    We need to maintain this focus because developing a strong social network of individuals who are able to contribute to and support the development of Canadian startups is critical.”

    We tend to over-leverage government programs and incentives which makes startups focus on getting funding via grants or “special research projects” – detracting from focusing every ounce of energy on the ever important “product-market fit”. This arguably results in talent acquisitions to Valley based giants. I feel as if it will be up to the successful entrepreneurs to give back to the community at large.

    Thanks for writing this hombre.

  • wcg

    Optimism is great and I think the world of small startups might be just the way you see it. However, for the average tech person we are likely to see even more transition of Canadian tech companies as outsourced offices for foreign tech giants. Certainly here in Ottawa, most high tech workers now work for a foreign company if they aren’t part of the Government (or Government related businesses). RIM, which remains independent but struggling, could very well be part of another foreign company before the 5 years are out. 

    So, I’m less optimistic for the average tech worker in the next five years. Canada remains a lower-cost option for many foreign companies with less of the time zone and cultural differences they may have for other countries. For the tech worker this means working as part of a big organization, fairly staid environments and much less opportunity to innovate. 

  • http://chrisarsenault.wordpress.com/ Chrisarsenault

    For me the next 5 years is about getting out of our “Canadian comfort zone” and really build strong acquirers, not just acquisition targets.  As an entrepreneur, making a “dent” in the world is no easy task. Nor is it any easier to realize that the sum of our efforts, our wins as well as our loses; our challenges and achievements over the last decade; and the fact that we actually now have a tech and investment ecosystem is, all part of what makes us who we are today. Stronger.
    I think Canada is getting stronger and more confident it its ability to succeed because of the sum of the efforts we put into making happen. Everything counts, our small exits, our bigger tech companies, our seed investments and our later stage funding rounds. The bridges to the Valley (C100) as as well as the cross-border relationships build over the years, have proven to be of great influence on our ability to drive results. To believe in ourselves.I’m proud of what Canadian tech entrepreneurs have achieved over the last decade in the and I’m looking forward to actively participate in building awesome businesses over the coming 5 years.

  • http://startupcfo.ca/ Mark MacLeod

    Amen brother.

    Lots of reasons to be bullish as we look forward.

    No more excuses. No more being “Canadian” and not thinking big. We have everything we need to kill it.

  • http://twitter.com/edsim Ed Sim

    great post but how about tighter NYC links as well!

  • ptelio

    Always appreciate your posts Jevon.  Agree totally that we have come a long way in the last 5-years.  We’ve gone from learning how to pitch, to learning how to build a startup.  Now is the season to learn how to be awesome.

    The great thing about places like Silicon Valley, NY, Boston and Colorado (to name a few), is that these communities are extremely generous and open, and have helped communities outside these hubs to be able to thrive. There are plenty of examples of how Canadian communities have taken this knowledge and applied it. I look forward to the day when other communities around the world look to Canada for guidance on building a vibrant Startup ecosystem. Confident we will get there, soon for that matter.

  • http://www.RohanJayasekera.com/ Rohan Jayasekera

    Further to ‘Getting rid of any idea of building a startup “for the Canadian market”': Well, now we’ve graduated to building for the Canada+US market (and even then “Canada” is usually just “English Canada”). That’s a big improvement, but when we combine that with getting our learning mainly from south of the border (for good reason!) we end up being largely just like American startups. But products from American startups are often not that suitable for non-US use: they’re English-only, and even in English-speaking countries they assume American users (e.g. their instructions use examples like Hulu and Pandora and Walgreens). I’m sick of dealing with people at American companies who are incapable of understanding where their product fails a non-American like me, even when I explain it to them, and I’m thrilled when I can deal with a company like Balsamiq that is internationally oriented and happens to be based in Italy. But in the English Canada startup world we’re English-speaking and SV-worshipping, plus we’re long used to adapting to American things, so we tend not to notice this issue and don’t realize that it’s far worse for people in other countries (even though we have our own example right here in French Canada).

    Canadian startups are far more capable of addressing a global market than American ones: we’re much more likely to build for an international market from the beginning than to finish addressing a huge domestic market and only then shoehorn in other countries, and to build a multilingual product (especially in French Canada). There’s a whole world market out there that is not being properly addressed by the USA. We have an advantage that I don’t see us using very much, and I hope that will change in the next five years.

  • http://www.RohanJayasekera.com/ Rohan Jayasekera

    The Ottawa experience reflects the past heavy reliance on the telecom sector, where we once did well but that didn’t last. Other areas of tech are very different.

    Also, I lived in Ottawa once, and I found tech workers there to typically expect to work for the government or other huge organization. People with that mindset are far more likely to become outsource workers for a large foreign company, with a reliable paycheque, than to work for a tiny startup that might not be around for very long. I hope that local successes like Shopify will help people (especially younger people) become aware of the existence of the alternative and that in time it will seem more “normal”. Of course this applies throughout the country, but it’s more of a factor in Ottawa and other government-focused places like Victoria because they have the biggest tilt toward “solid jobs”.

  • http://startupnorth.ca Jevon

    I definitely agree on getting out of the  “Canadian comfort zone” — I think it would be even easier if we never let startups get “comfortable” there in the first place!

  • http://startupnorth.ca Jevon

    I wonder if the “openness” is something we are even close to in Canada yet. I guess it falls under “community” but I think you have a really good point and I don’t think we are at all where we need to be in terms of sharing/supporting/etc, especially of new entrepreneurs. 

  • http://startupnorth.ca Jevon

    Ed you are so right. There are guys like you who are already doing Canadian deals regularly and we need to find better ways to connect you in to the ecosystem here. The short flight from NY is much easier than the long day of flying to the west coast!

  • http://startupnorth.ca Jevon

    I think the excuses are done, yup. Time to focus on conversations about the future, we’ve spent enough time griping! 

  • http://startupnorth.ca Jevon

    I think startups are the only way out of that and I think that is something the average tech worker (feels like it is acronym ripe! ATW) can be a part of. It takes that leap of faith to be sure, but I think a lot of folks inside these large orgs are really burning to work in a place where their contributions make a difference. 

  • http://startupnorth.ca Jevon

    Government programs are great when they let you accelerate development and take on more risk than you could otherwise, but they break down when startups use them to simply de-risk and extend runway. 

    “Zombies”

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  • http://engag.io/ William Mougayar

    The future is NOW. It’s in our hands. We can’t wait for the next 5 years. They won’t happen if we don’t make it happen right now.

    As a startup, every day, you have to out-do yourself. Every day, you have to be better than yesterday, and you have to do more than yesterday.

    Canada’s startups are in a big catch-up mode, and still catching-up. We need more bold moves like OMERS + HootSuite.

    It’s time to step-up now.

  • http://engag.io/ William Mougayar

    I agree. The government should work on removing obstacles and regulations so that the private sector can grown on its own. The closer they get to the action, the more they have the potential to slowing it down.

    My current pet peeve is the cost of flying from Canada to the US. Why is it that I can buy a NY-SF ticket for $139 (6.5 hrs flight), and a SF-Tor (4.5 hrs) for $450. Why does it cost $400+ to fly a round-trip to NYC even if you plan 3 weeks in advance? Transport Canada @transport_gc: Do something!

  • http://engag.io/ William Mougayar

    Definitely. That’s been my approach. I’m in NYC every 3 weeks, and building ties and relationships there is easier than the valley.

  • http://startupcfo.ca/ Mark MacLeod

    Totally! I’ve been coming to NYC every month this year and definitely want to see stronger links. It’s a natural fit

  • wcg

    I agree with Jevon in this case. As opportunities arise, people will make the leap of faith. Heck, I have 20 years in the business, I would jump at a startup opportunity. @RohanSJ:disqus you are right to a point but the talent pool in Ottawa is huge. There have been plenty of startups here but we need companies that go beyond the 10 person size to create a critical mass of alternatives to the big shops.

  • wcg

    I regularly get flights for YOW-SFO for $700 (which is crazy high compared to US prices) but if I want to go to Chicago it’s $1400! Even when the YOW-SFO flight goes through Chicago. Personally, we often drive to Syracuse to fly for vacation and save 1000’s on a family of 4.

  • http://www.RohanJayasekera.com/ Rohan Jayasekera

    wcg, you “would jump at a startup opportunity”, but they exist and you haven’t. The problem is that your idea of a startup opportunity is limited to startups that have 10+ people — but those won’t exist except by growing from tiny startups. And lots of startups stay under 10 people for a long time. The basic need is for founders — and most people with an “employee” mindset aren’t going to be founders. It doesn’t matter how huge the talent pool is if hardly anyone is willing to be a founder.

  • wcg

    Wrong, I’ve worked at two startups in my career. Great experience although hard work and long hours were required. 

  • http://www.RohanJayasekera.com/ Rohan Jayasekera

    Excellent. If no startups come along that are a good fit I hope you will consider founding your own!

  • iamjohnstokes

    Hey William – I hear you, but at least you have 3 direct flights a day to SFO from YYZ ;-) A lot of the year there are ZERO direct flights a day from YUL to SFO ! @aircanada :Do Something !

  • valerie fox

    great article and love the comment threads. Just want to put in a big thumbs up on education. I agree wholeheartedly that we need to encourage change in how we educate. And we need to add the necessary digital literacy skills to our education so that our children, our aging population and ourselves are enabled and empowered with the ability to design and determine our futures as opposed to having them determined for us. 

  • http://startupnorth.ca Jevon

    yeah, that is just cruel. 

  • http://startupnorth.ca Jevon

    If I book far enough ahead I get YHZ-SFO for $550 or 600, but often is is double that price when booking 7 days out.

    I’m struggling to understand why we don’t just open up our airspace. We are in a extremely unique position (bordering the largest air market in the world) and there must be better ways to take advantage of that.

  • http://davidcrow.ca/ davidcrow

    Stop spooning @jrodgers:disqus please.

  • http://engag.io/ William Mougayar

    Exactly. I’ve been copying @transport_gc and no response. They just use their Twitter feed to issue their releases. There is no conversation with the public. #governmentfail

  • http://whoyoucallingajesse.com/ Jesse Rodgers

    Your turn?

  • Adam

    Great to bring optimism and recognition for what is happening, I like the forecast and discussion about where we could go and what I’d like us to also be conscious of is integration across Canada – West to East, East to West Venture investing community.  Can we get Canadians – accredited Canadian investors – interested in anything other than resource development and real estate?  Yes we can, I appreciate us all pulling together to help Canada get the recognition it deserves.

  • http://davidcrow.ca/ davidcrow

    Looking to the US for capital or talent or as a market is something a lot of successful Canadian companies have done and will continue to do:

    Hootsuite raised from US investors ($1.9MM in Jan 2010 from Blumberg Capital, Hearst Ventures and Geoff Entress) http://techcrunch.com/2010/01/08/hootsuite-raises-1-9-million-for-social-media-dashboard/

    In 2009, @dossip:twitter and @dayforce:twitter bought an Atlanta based company Workbits (for the technology I think). 

    Hard to ignore the technology, the money or the market south of the border. But it is possible to build a successful tech startup in Canada.

  • http://www.facebook.com/people/Cameron-Chell/1147142775 Cameron Chell

    I agree with what has been written and want to add that we need to get better at “liquidity” and not rely on the good graces of our U.S. neighbour to just buy our stuff at a discount. We need to be mindful of interm steps of liquidity to help encourage Canadain investors to play in the startup game. Seed, A, B round, especially A,B are the chasm and that money is going to come from Canadain investors who need to see shorter and real exit times.

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