Jevon MacDonald

co-founder of Startupnorth.ca

Canadian VCs are being cut loose, and that’s a good thing

Mark MacLeod just wrote a post about Canadian VC that cuts to the chase

If there are any clouds on the horizon, they relate to the disappearance of the US / Canadian border when it comes to VC. When I first entered the startup World, you had no choice but to raise seed and series A in Canada. Only then could you tap the US funding markets. That’s no longer the case.

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There is a perception (rightly or wrongly) that US investors are better than Canadian ones. And that given the choice, founders would raise in the US. Whether this is true or not is not the point. It’s the perception and with the borders coming down it represents a real risk to Canadian investors.

Mark did it in the nicest possible way, so a lot of people may not have noticed that he just condemned the entire Canadian VC model. It was something I didn’t even have the guts to do lately, so I was surprised to see Mark call the spade a Spade and get on with the conversation.

The border is gone and the game has changed. Mark argues that Canadian VCs need to pay up more, build their brands and build their networks. That’s a great start.

Canadian entrepreneurs have been told for years to step up and build global companies. It was hard and confusing to hear at first, but I think we’ve managed to do it. Whether it is Tobi in Ottawa, Kirk in Toronto, Ryan in Vancouver, Oleg in Toronto, Mike in Toronto, Kenshi Wilkins and Eric in Vancouver, Yona in Montreal, Temo in Montreal etc etc etc [I’ve missed so many here — more to come on David’s Hot Shit List] — I would argue that Canada is producing more world-class entrepreneurs more quickly than ever before.

We’ve spent the last 10 years being told we weren’t bold enough and need to think bigger. The argument has shifted and our startups now know what it means to be world class and they are doing it.

It’s time for the Canadian VCs to step up and do the same.

It doesn’t take nearly as much to get a US based VC to take a look at a Canadian deal anymore. If they have never done a deal in Canada before they usually have a friend who is just a call away who has and it can be demystified pretty quickly. The legal headaches are gone as well.

If you are a VC in Canada, focused on the Canadian market, then you have far more competition for deals now than you did even a few years ago and the job is more thankless than it has ever been.

So here’s the challenge for the the new players in Canada. Rho, Celtic, OMERS, iNovia, Relay, Golden, Klass, Wertz, Round13, etc…

Entrepreneurs are going to start telling a story about under-paying, small thinking and isolated VCs. As US VCs roll off the redeyes in to Vancouver, Edmonton, Toronto, Montreal, Halifax and elsewhere it should be you who is bringing them to town to see great deals which are priced right and which are built to succeed from right here in Canada.

The challenge is that you, like the entrepreneurs you fund, now have to be world class. That probably means being on a plane more often and pulling the trigger on deals within days, not months.

Nobody should start a VC fund in Canada today unless they want to work as hard or harder than any startup founder they will fund. It is no longer a job for ex-bankers and management consulting dropouts. The job is hard, mostly thankless, and more competitive than ever.

That’s why I love this shakeout we have undergone and the one that is continuing today. VC in Canada had to go through the wringer so that we could end up with a handful of the best and most capable operators who can help springboard Canada further on to the world stage. We aren’t going to do it through myopic provincial funds, big corporate funds or economic development agencies.

It’s going to happen through hungry hustler GPs who have something to prove and only a little time to do it in.

Canadian VCs need to be startups themselves, because in the end only Startups can save venture capital 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 C100, Startup Festival, Grow 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.

Ladies Learning to Code is Not About Women

There is this small but fierce not-for-profit called Ladies Learning to Code. It has pretty straightforward but profound ambitions: “designed to help girls see technology in a whole new light – as a medium for self-expression, and as a means for changing the world.” (Girls Learning to Code camp).

I started my first tech company while I was still in grade school. That experience changed the path of my life forever and I was able to do that because when I was in 7th grade I started to learn to program.

My family couldn’t really afford a computer, so I used the ones in the computer lab at school a lot. There was a math teacher, Mr. Murley, who would basically be there to open the lab and help teach programming 24/7. I also had some neighbours who had a computer and I would stay there until midnight many weekend nights.

Learning to code early on taught me a few things I am forever grateful for. I learned that I could create whatever I wanted. At that age and in that time you really did have the sense that you could change the world with a few hundred lines of code. All you had to do was find something that was broken or an idea that had potential and you could just build it. I think you can build even more today and because there are better ways to distribute you can have an amazing impact.

A lot of navel gazing here, I know.

There is no more important challenge for the tech community in the next decade than to find a way to make programming accessible to as many children as possible.

We need to do that for a lot of reasons. We need future employees of course, and we need a more tech-savvy population to market in to, but we also need a broader and more diverse pool of ideas and inspiration.

We need kids to believe that they can change the world so that they can grow in to adults who do change it. There may be no better way to enable them to do that than helping them learn to code.

So, when I saw Ladies Learning to Code for the first time I had no small hope that this wouldn’t be just about teaching women to program. My hope is that we can take the model that works for Ladies Learning to Code and that we can find ways to apply it to help make programming a less mysterious endeavour for every curious mind out there.

It’s true that not every child will want to program and I am sure only a fraction will pursue it as a career choice. I also know however that no child who learns will be unchanged. They will learn that they can create something from nothing, that there is nothing they can imagine that they cannot build, and that every tool they possibly need is available and free.

My home province recently took the X-ACTO-knife to the public school IT budget. As if growing up in the most rural province in Canada doesn’t make it hard enough for kids to pursue a future in startups, software development or IT, now there is a provincial government which is actively dismantling IT in education. (Note: Premier Ghiz– who the hell thought that was a good idea?)

I have little hope that our governments will figure this out in the next 20 years and so while school budgets are slashed by uncompromising governments, we have a job to do.

Ladies Learning to Code gets us off to a fantastic start, but the work is just beginning.