Chris Arsenault (LinkedIn, AngelList, @chrisarsenault) sent me a message yesterday about writing about the CVCA conference. And I was looking at the conference trying to figure out why as an entrepreneur that I might want to attend this event. It is “the premiere networking and professional development event for Canada’s venture capital and private equity industry”. Well I don’t work in venture capital or the private equity industry, and the professional development I can get that at Ladies Learning Code or Udemy or O’Reilly. So why should I care? Maybe a “free Blackberry Playbook” would get me to pay for the registration. Disclosure: RIM is a sponsor of StartupNorth, though we don’t have any free Playbooks. 

Then it struck me.

1. FounderFuel DemoDay
2. AccelerateMTL
3. CVCA

My goodness, this is an incredible opportunity for Canadian entrepreneurs. If you plan this correctly, you can connect with investors, other founders, folks form NYC, Boston, the Bay area. While the specific sessions at CVCA aren’t necessarily my cup of tea, you could sit in the lobby at the Fairmont Queen Elizabeth and meet every investor in one shot.

CVCA attendees will have a “free Blackberry Playbook” . Just like LinkedIn, I’d be building an HTML5 optimized version of my application and making sure as hell it works like gold on a Playbook (which has a great implementation of WebKit browser). You could call the Fairmont and set up an espresso stand and give away coffee to everyone that demos your application. Hell if nothing else a big sign with “Free Latte” for all of the hung over CVCA attendees and have a student running to a local coffee shop for fulfillment. Great opportunity to get out and hustle.

On top of all of this you get to see some brilliant demos at Founder Fuel. This is going to be a killer event, and you could make it a very interesting opportunity to get in front of potential investors, partners and folks from outside Canada for relatively little cost.

Editor’s note: This is a cross post from Mark Evans Tech written by Mark Evans of ME Consulting. Follow him on Twitter @markevans or MarkEvansTech.com. This post was originally published in February 14, 2012 on MarkEvansTech.com.

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First, the good news about Canada’s venture capital landscape. In 2011, investment activity climbed to the highest level in four years ($1.5-billion), a 34% increase from 2010, although it is still significantly below the record activity ($2.1-billion) reached in 2007.

The bad news is there’s still not enough supply to meet rising demand, plagued by “continued weakness” when it comes to fund-raising.

The good news-bad news scenario was spelled out in the Canadian Venture Capital Association’s annual report. For those of us in the glass half-full camp, the increase in investment and the number of deal is cause for optimism.

As well, 2011 saw a spike in M&A activity with 34 deals, including two each by Google, Facebook, Zynga and Salesforce.com. And there was a flurry of incubators and accelerators established, including Extreme Startups last week.

Before anyone gets carried away, Canada’s venture capital landscape is a long, long way from being solid, let alone robust. There’s still not enough venture capital for seed, series A or major rounds. And don’t expect U.S. investors to pick up the slack.

In a press release, CVCA president Gregory Smith said there is concern about whether enough fund-raising can be dong to support the demand for investments. This situation was illustrated by the fact new commitments to Canadian VCs were flat last year at $1-billion.

“Canada has a historic opportunity to become an innovation leader,” Smith said, adding that “in order to act decisively on this opportunity, we must first overcome challenges to supplying VC funds that, in turn, supply entrepreneurs.”

So what’s the solution? How can Canada’s venture capital community do a better job of supporting the startup community? There is not easy answer to a problem that has been around a long time and doesn’t look to be changing any time soon. It’s not going to be an easy fix from government or U.S. investors or institutional investors waking up to the idea of venture capital investing.

Perhaps the answer to the problem is this: success. If more startups and mature high-tech companies are acquired, that could (emphasis on “could”) encourage investors (angels, VCs and institutional) to get more involved. Success has a strange way of helping people to see the light or new opportunities that they otherwise would have dismissed or not seriously considered.

That said, success is a double-edged sword. Without enough financial support, it is hard for startups to have enough powder to become acquisition targets. If they’re not interesting targets, there’s no acquisitions and, likely, less interest from investors.

So which side of the fence do you sit on? Are you bull or a bear about Canada’s VC landscape?

Editor’s note: This is a cross post from Mark Evans Tech written by Mark Evans of ME Consulting. Follow him on Twitter @markevans or MarkEvansTech.com. This post was originally published in February 14, 2012 on MarkEvansTech.com.

Rob Lewis and TechVibes is reporting that ExtremeU (you can read our past coverage 2009, 2010, 2011) has launched a new Toronto based incubator that leverages their experience over the past 3 years. Mark Evans provides additional details that includes “$7-million in funding from Extreme Venture Partners, OMERS Ventures, Rho Canada Ventures, BlackBerry Partners Fund and BDC.”

Extreme Startups includes a who’s who of  the Toronto startup scene as mentors:

• David Ossip
• Daniel Debow
• Anand Agarwala
• Michael McDermentt
• Ameet Shah
• Albert Lai
• Leila Boujnane
• Ali Asaria
• Noah Godfrey
• Ray Reddy
• Rick Segal
• Salim Teja
• Derek Seto
• Nick Koudas

Congrats to Andy Yang, Sunil Sharma and Amar Varma in getting this thing launched. Plus how can this not be awesome with Andy Yang as Harold and Sunil Sharma as Kumar in Extreme Startupping.

Looks like US VCs are continuing to look at deals in Canada. Wave Accounting announced a $5MM Series A led by Charles River Ventures (CRV) with follow on participation from OMERS Ventures. It is great to see Devdutt Yellurkar (LinkedIn) looking north of the border. Devdutt has an amazing track record at CRV and previously at Rho Ventures, Sterling Commerce and Yantra Corporation. Guessing based on the press release that Devdutt will join Peter Carrescia (LinkedIn, @pcarrescia) from OMERS Ventures on the Wave Accounting board.

Great news for startups, we’ve now seen Matrix Partners (TribeHR), Union Square Ventures (Kik & Wattpad), CRV (Wave Accounting), Bessemer (Shopify), Freestyle/Greylock/Embracardo (GoInstant) and one other Sand Hill Road firm all make active early investments in Canada. This doesn’t include the Canadians that have raised during stays in the Valley during YCombinator and 500Startups – Vidyard, Upverter (True Ventures), BackType (True Ventures), Kiip (True Ventures), Rewardli (500Startups) and others.

This is great for Canadian entrepreneurs.

Yesterday and today I’ve been trying to make sense of two different data points that came out on the Canadian business scene.

One data point confirms that we are having a banner year across Canada. Check out the numbers:

* Q2 private equity deals worth C$5.7 bln in Q2
* Total deal value more than in all of 2010
* Deal volumes up 40 percent over Q2 2010

(Side nostalgic note, I love that Berkshire bought Husky, it was actually my first co-op job and I have always had huge respect for Robert Schad – a giant amongst Canadian entrepreneurs)

As you know from several of my posts on exits, this and this, the startup high tech scene are big contributors here.

So, this means that we are returning capital on investments made into companies in Canada, right? Which means, since there is a healthy market for exits, folks should be willing to supply funds to VCs to start companies…. right?

Well, according to CVCA, it looks like VC fundraising fell flat on its face.

Smith said slow fundraising by venture capital funds was undermining deal-making, with new commitments sliding to C$132 million in the quarter, from C$308 million last year.

“VC investment, which has historically been the catalyst for knowledge-based economic growth, cannot effectively do this job until we take determined steps to ensure more stability,” Smith said.

Falling fundraising is part of a continuing trend.

In 2010, new commitments fell 24 percent from the previous year to their lowest level in 16 years. They fell further in the first three months of 2011 against the first quarter last year.

WTF!?!?! Did VCs forget to cut cheques to their LPs? Are the companies getting bought out not VC funded? Something feels out of whack here. Are there simply not enough fund-makers ala Radian6 to make a reliable return on investment? We are doing some digging to get to the bottom of this. It does resonate that entrepreneurs should focus less on VCs for funding and need to be looking towards angels & incu-ellerators for their early stage funding needs.

UPDATE: This article from the Globe really outlines how VC funds have been in long decline.

Year VC invested/Companies Financed
1998 $1,511,000/807
1999 $2,617,000/810
2000 $5,876,000/1,007
2001 $3,747,000/720
2002 $2,583,000/663
2003 $1,613,000/615
2004 $1,677,000/545
2005 $1,699,000/558
2006 $1,701,000/406
2007 $2,051,000/402
2008 $1,406,000/388
2009 $1,039,000/337
2010 $1,129,000/357

These numbers tell something interesting – apparently in Canada its gotten more expensive to start companies??? In 1998 $1.5mm resulted in 807 companies getting financed, while in 2008 $1.4mm results in 388 companies getting invested. What gives?

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I love when entrepreneurs tell me that raising capital in Canada is hard (it is). I love it even more when they tell me that they think “they should move to Silicon Valley” because raising money will be easier (it isn’t). It helps me determine which entrepreneurs are too egotistical, too delusional, too uninformed to really be effective raising money.

There is a venture capital scene in Canada. It’s different than the scene in Silicon Valley or New York City. But there are people making investments in entrepreneurs. According to the CVCA in 2010, there was $484MM invested in IT in Canada (2010 Q4 VC Data Deck from CVCA [PDF]) with $271MM going to software & internet companies. There are issues like US Funds making larger investments than Canadian funds (looks like $2.5MM vs $1.1MM average deal size) or that US companies raise more ($8.2MM vs $3.6MM). But these are just the nature of the game. There are structural issues. It could be better. But to say it is nonexistent, that’s just wrong or lazy. And both are bad qualities in early stage entrepreneurs.

I was asked by an entrepreneur about who where the funders in Canada. Here is my short list of companies that are writing cheques or are in the process of doing diligence on companies, i.e., prepared to write a cheque. There are a lot of companies like OMERS that are stage agnostic, but I’ve put them in the growth side given their deal history (in the case of OMERS it’s $1.5MM in WaveAccounting).

So if you think it’s easier raising money in NYC, Boston or California. My advice is get your ass on a plane and try. Because it isn’t as easy as you might think.

But don’t say that there is no Canadian VCs or venture capital money. Because that just makes you look like a moron.

Suck it up, it’s hard raising money. Maybe you should talk to the Canadian investors and figure out why they don’t want to write you a cheque!

Seed ($25k – $500k)

• Extreme Venture Partners
• Mantella Venture Partners
• Grassfed Capital
• Golden Venture Partners
• Innovacorp
• Investment Accelerator Fund
• Golden Triangle Angel Network
• Maple Leaf Angels
• New Brunswick Innovation Foundation
• W Media Ventures
• Anges Québec
• York Angels
• Initio Group
• FounderFuel
• GrowLab

Growth ($500k – $5MM)

• GrowthWorks
• iNovia Capital Partners
• Summerhill Venture Partners
• Rho Ventures
• Real Ventures
• OMERS Ventures
• Vanedge Capital
• Klass Capital
• BlackBerry Partners Fund/ATP Venture Capital/Clairmont Capital
• BDC

Expansion

• Tandem Expansion Fund

Who else is actively placing money with Canadian startups? No grant money, we’ll do that in a separate post, but who else is actively doing convertible debt or equity placements? How to define active? Either >3 deals in diligence or has deployed more than $50,000 ($25,000/placement * 2 placements). That seems fair.

Who did I miss?

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Baby Steps By San Diego Shooter

Once upon a time @jevon wrote a vision on how to rebuild the startup scene in Canada (below). Its relatively amazing how spot-on Jevon proved to be in hindsight, and how much the Canadian eco-system moved in that direction – more smaller funds with a incubator/accelerator look and feel, and lots more community.

For instance, check out David’s post on the explosion of incubators in Incubators, Incubators Everywhere. 18 new ones!

But, anecdotaly, despite some great new sources of funding, we aren’t quite there yet. When I get asked about the latest, greatest startups in Toronto (here or abroad) I end up pointing at a lot of companies that are yesterday’s news, 1-2 year old companies now. Partly my fault as I need to get out and network a bit more, but regardless – we need more. More companies being founded. I know some great folks who are still sitting on their asses getting underpaid at their shit job full of bad office politics. Well the time is NOW. You gots to do what the late Michael Ignatieff told you to do – RISE UP:

Great – you are motivated. Watching Michael Ignatieff will do that to you. So now what? How do you approach the super early days of starting a company?

I’d like to pass on a framework that I picked up from founders I’ve worked with over the years. Its not quite as thorough as anything Steve Blank has written on the topic. But it also doesn’t need a 2 hour lecture and/or a $50 purchase of his (very good) book – Four Steps To the Epiphany.

Basically divide your idea into 4 big areas – product, people, market, financing. Each of these has a burden of proof for you to iteratively solve as the founder. You keep iterating, from baby steps, through to giant steps. Ta da – that is it, the whole framework in two sentences! Taking that framework, the below is how I’d start to tackle the first 90 days of my brand new idea.

The Baby Steps – Day 1 through 90

Things will feel messy, you won’t even have realized that you took the heroic step to do a startup. If you’re a coder, you’ll start hacking away at something new at night. If you are not, you’re probably talking to folks and sussing out how to get it done. The biggest goal here is taking the big emotional leap of “doing a startup”. You have to start telling people you are doing a startup, even if you haven’t quite left your current job. And you need to get yourself personally ready for the leap.

In the four areas I mentioned above, here is what you need to get done:

1. (Finance/Product/Market) Start putting a pitch deck together – principally put together three things:
-The Problem Statement: what is the problem you are trying to solve?
-The Customer: who has this problem and needs it solved?
-The Market Size: try and take an approximate guess at the size of the market you are chasing.

2. (Product) Start on a very raw prototype. For a web app I’d usually get the single core feature done + some lightweight graphic design. For hardware, I’d buy a MakerBot and get a 3D printing done. NOTE – if you are a not a technical co-founder, pay somebody to build the prototype. You don’t need to have a full engineering team in place to get a prototype built.

3. (Finance) Figure out if you need financing, how much financing you need to get to a certain stage ($50k to build a prototype, $400k to launch for instance), and then list who can finance this idea. Light manufacturing & SaaS web businesses are going to have very different funders. Figure out that list, do some deep digging and find out who the angels are for a given category.

4. (Finance) Get your personal financial situation under wraps. Most of your initial costs are going to be the cost of your own time, so make that time cheap. Also, make sure you have ample time. If you are getting married, renovating a house, planning to climb Everest… you probably shouldn’t do a startup.

5. (Market) Think about who your customer will be and talk to some of them. Email them a survey and get some quantative feedback. Hang out with them and ask them to use your newly awesome prototype (which probably sucks, but don’t worry, get them to use it anyways). Ask them how they solve “problem x” and get some qualitative feedback/notes.

6. (Market) Do some really quick tests of the idea in the market. This is called Minimum Viable Product. Setup a Google Adwords and a landing page website. See how much click through you get for a given idea/wording and see how many get to some sort of “commitment form”. You could go as far as letting folks sign up for beta access for your product.

7. (PEOPLE) THIS IS THE MOST IMPORTANT ONE – network, network, network. Email anybody at startupnorth, we have good networks, especially David Crow, (@davidcrow). Go to every startup event possible in your area. If you live in Moose Jaw and there is no Startup Drinks event, create one. You may have to drink alone for a few weeks, but drinking alone is GREAT PRACTICE for your upcoming startup.

8. (People) From the above, you need to build a solid list of mentors, advisors and folks you can talk to about building your own business. Meet with them as often as you need.

This is the list. I’m not even telling you “go get a co-founder, go get $20k in funding, hire a great engineering team, etc”. No, start with baby steps. Get yourself motivated, get networked, prove to yourself that you can build something and meet influential people… these are the baby steps to get over the emotional hurdle.

Let us know what your first steps were and how you got your business going.

PS This note is doubly intended for all the RIM employees who just got laid off. Please go start something new, don’t join Manulife.

Snow Angel by Syymza

Today, the National Angel Capital Organization (NACO) released statistics regarding Canadian Angel group investment activity in the Investment Activity by Canadian Angel Groups: 2010 Report.

This study looked at the ‘visible’ portion of the Angel investor community – those that are members of Angel groups – as it is almost impossible to survey the entire Angel community. Different countries estimate the visible Angel community represents between 3% (US) and 12% (United Kingdom). Understanding this,  the findings presented below represent only a fraction of the actual Angel investment across Canada. They do, however, provide us with the most accurate snapshot of the activity in the community that we have today.

Significant findings of this report include:

• 90% of companies funded by Angel groups in 2010 were new, not follow-on.
• Angel groups collectively received around 1,850 business plans. 14% were considered in detail, 32% received investment.
• Angels groups invested CAN$35.3 million in 88 deals; an underestimate as some groups did not report the amount invested.
• Co-investors were involved in 58% of investments and invested at least a further CAN$29.4 million.
• Angels invested in a wide range of industries but with a strong technology focus: ICT sector (43%), Life Sciences (18%), and Clean Tech (16%).
• 74% of funded businesses had revenue in 2010.

Download a copy of the full report here: http://www.angelinvestor.ca/2010_Investment_Activity_Report.asp

Some rights reserved photo by Chealion

Ask a miner “What is Canada’s most precious natural resource?” and you’ll be sure to stump. The answer is easy… Canadians.

One of the tricks to Silicon Valley’s winning streak is that they back not only repeat entrepreneurs, but repeat teams. Just like one of those wonderful chocolate fountains you occasionally fortune upon at weddings, Silicon Valley recycles people. A team forms, builds a successful enterprise, people move on to try some new things, and projects that find traction attract back the core crew.

Is Canada effectively recycling people? Think long and hard, because if we aren’t the fountain is drying up – end of the party. I can name a handful who have ventured abroad and returned: John Green (@johnphilipgreen), Malgosia Green (@HeyGosia), Dan Morel (@dpmorel), Farhan Thawar (@fnthawar), David Crow (@davidcrow), Jeese Rasch, Zak Homuth (@zakhomuth)… the list goes on, but it could be longer. Maybe our friend Howard Lindzon (@howardlindzon) will start his next company in Canada?

What is bringing them back? Visa issues, sometimes. Spouses, more often. Schools for children, okay I’ll take it. But it would be much better if what brought our best and brightest home was opportunity. And the crazy part is, it is knocking. We have a safe multicultural inclusive country, close to major markets, with investment matching funds up the wazoo, and here is the most beautiful part – our nation is brimming with high caliber engineers (who are getting scooped up by Twitter, Facebook, and Google as you read this post).

Part of the challenge is funding. Canadian entrepreneurs are picking up and moving to New York, San Francisco, Boston, Boulder, and even Santiago (yes you read that right, Chile – in the southern hemisphere) for minuscule sums of seed financing so they can focus 100% on their startups vs their day jobs. Just ask Ken Seville (@civisidedotcom).

Myopic policies might attempt to discourage cross border exits, which are vital and create deep new linkages. Instead what we need to learn is that the opportunity is keeping the founders engaged once they head for warmer climates. I can guarantee, foreign direct investment will not thrive in the absence of results. To generate returns we need to recycle teams.

I am particularly excited about a handful of intiatives that address this gap including: Toronto Homecoming, C100, and Startup Visa. Let’s find ways to support their efforts.

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Remember Ted Livingston’s insanely great donation to UW VeloCity, well it looks like it is being put to good use. The VeloCity team announced The Velocity Venture Fund. The University of Waterloo and the team at VeloCity are working to put that capital to use for students in the VeloCity residence. It looks like they are both testing their ideas (love this) to make sure students are interested before the full launch of a fund. They are running a contest for UWaterloo students that provides a seed grant of $25,000 + office space + incorporation.

It’s pretty cool. I am hoping to learn more about the Fund that is launching in the fall. Jesse Rodgers is a huge asset to UW.

What does this first version of the funding contest look like?

• A hack weekend followed by a pitch night where 5 teams are selected and given $500
• Those 5 teams come back in a month or so and have a chance to compete for $25 000 + incorporation + office space on their next co-op work term or following term (so for spring that will be fall)
• That is all.

To qualify for the competition:

• A current student at the University of Waterloo
• Do you have to live in VeloCity? No. But it would give you an advantage.