Startup Leaders: Are you a Missionary or a Mercenary?
An issue close to all our hearts… Regulation, Monopoly, and The Beer Store.
SmartHippo is looking for a Ruby on Rails Developer.
Funding for emerging Ontario companies dropped from $1.5 billion in 2000 to $236 million in 2007. The number of Series A rounds has reached a 12 year low. Clearly there is a problem, one with long term implications. And so the Ontario Government has stepped up to the plate, investing $90M into a fund of funds in partnership with OMERS Capital Partners, RBC Capital Partners, Manulife Financial, Business Development Bank of Canada, and TD Bank Financial Group for a total commitment of $205M.
This fund of funds will be managed by TD Capital Private Equity Investors who will in turn spread the $205M across Ontario venture capital and private equity groups who will be responsible for making direct investments.
A minimum of 80% of the funds will be invested into Ontario companies. 75% of funds will be allocated to venture funds who invest in emerging companies, the remainder being set aside for private equity funds who invest in mid-market companies. It is anticipated that the fund will be invested over four years starting this year. All this translates to approximately $123M to be invested in emerging Ontario startups.
“The decline in Ontario venture capital has coincided with greatly lowered investment by institutions such as pension funds and insurance companies. In 2000, institutional investors represented 21 per cent of venture financings. This has dropped to one per cent or less in the period from 2005 to 2007.”
It is rumored that the capital co-invested by the other limited partners is secured by the Government of Ontario’s $90M. If this is true, what the Ontario Venture Capital Fund is really addressing is the unwillingness of Canadian institutional investors to continue supporting Ontario’s venture capital funds. It seems dismal returns have soured LPs on the asset class or perhaps the venture funds they had previously invested in.
In the last three months two funds have closed rounds almost as large or larger than the OVCF. In March iNovia closed on a $107M fund and in May JLA closed on a $150M fund. Unfortunately, the $123M is likely to be spread across the same old funds. No one ever got fired for making the safe bet. The question is, what does an additional $20M in five preexisting funds do for Ontario? I would hazard to guess that the best possible result of the OVCF would be the creation of 1-2 new venture capital funds based in Ontario.
Ever the optimist, I suggest we focus on the bright side, three good things might come of the OVCF:
1. Institutional investors rediscover Ontario’s venture funds and pleased with returns from the OVCF decide to increase the amount of capital they commit for investment in early stage growth companies.
2. $123M is invested over the next four years across 15-30 Ontario startups. Some of who might not have been able to raise money otherwise. More money = More startups.
3. A new crop of venture investors emerge, with greater skill, luck, or just plain old good timing and reinvigorate the ecosystem, going on to raise new funds to provide all the growth capital Ontario startups need.
Ultimately the onus is on Ontario’s entrepreneurs to build companies that can scale. Money is everywhere. 59 per cent of foreign venture capital invested in Canada is invested in Ontario. Ontario’s venture funds are only as good as the companies they invest in. So get back to work! There is $123M more now available to fund your startup.
Michael Parkatti and Michael Marrone, both from Calgary, have recently gone to Cambridge, Massachusetts to join the latest group of startups at YCombinator.
They will be keeping a diary on globeandmail.com as they go through the journey of building their new company.
We have also arranged with the guys to do a series of interviews with them here on StartupNorth. The first interview will be done by Austin Hill. Keep an eye out for it.
We have covered MediaScrape a few times, and when I joked that they might be the next Capazoo, their CEO came through with a great reference to Cocain.
Well, they are back. Since this post is not an opinion piece, I will just link you to a recent Montreal Gazette article and quote a few bits. In the interest of presenting the other side of the startup-ecosystem argument, I present the one… the only…
He’d rather make deals with media conglomerates and Silicon Valley giants over fancy lunches than share ideas over blogs or hobnob with venture capitalists at technology happy hours.
He doesn’t go to local networking events where entrepreneurs talk about their projects and share feedback:
“Why would I go? There’s no money – there’s no content at those things. I’m busy. I’m making deals. And the times I did go I just heard a lot of whining that there’s no money in Montreal.”
He doesn’t have a blog where he logs his company’s progress, details its challenges, and invites dialog from the tech community, in the hopes of increasing his Google cred:
“I don’t need to be a destination site. For us to use social media gimmicks, to drive traffic to our site would put us as competitors with our clients.
“We’re a behind-the-scenes enabler.”
Yet this hardly seems to faze Cavell. He doesn’t feel he needs to satisfy doubting bloggers.
“Screw them,” he said. “We’re a private company. I don’t have to tell them shit.
“Blogs are great for open-source editorials, but they’re no substitute for researched journalism.”
One could chalk up Cavell’s philosophy to his lineage. He’s the son of Charles Cavell, the former head of what is today Quebecor World Inc., when it was still a mighty printer, and former chairman of tabloid chain Sun Media Corp.
An in case you are wondering, yes: Comments are turned on.
Wow, NYC Seed is an interesting fund focused on seed-stage technology companies in NYC. It sounds familiar to the IAF program by the Ontario Centres for Excellence.
The NYC Seed fund is a joint venture between ITAC, New York City Investment Fund, The New York State Foundation for Science, Technology and Innovation, New York City Economic Development Corporation, and PolyTechnic University. In addition to investing up to $200,000 per startup, the fund aims to give entrepreneurs support via a network of "notable entrepreneurs, technologists and venture capitalists," and plans to help the companies it funds seek series A round funding when they reach that stage?
The fund currently has $2 million under management.
The Investment Accelerator Fund (IAF) is similiar, it allows up to $500,000 in the form of convertible debt for early-stage companies.
Fund | Requires |
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NYC Seed |
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IAF |
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There?s not a huge difference in the funding, or the requirements. But the NYC Seed option just feels cleaner. The IAF eligibility requirements are verbose and at times a little obvious. The big difference might be in the size of the fund, NYC Seed is just $2M where IAF is a $29M fund. And the differences in focus, NYC Seed is focused strongly on ?software and web-oriented technologies?, the IAF fund is part of the Centre of Excellence for Communications and Information Technology covering diverse areas as wireless and wireline communications, the Internet, human-computer interaction, health and medicine, software design, network planning, education, security, among others.
NYC Seed aims to provide ?entrepreneurs support via a network of "notable entrepreneurs, technologists and venture capitalists?. Very similar to the Business Mentorship and Entrepreneurship Program provided by MaRS.
There?s a different feel in the web copy used to describe each program. The IAF program just feels more cumbersome. However, it offers many of the same advantages for Ontario companies.We need to do some work to help local entrepreneurs understand the availability, benefits and people at OCE to connect with John MacRitchie, Bryan Kanarens and Charles Plant.
I think all entrepreneurs looking to raise funding should be able to answer the questions on the NYC Seed application form. My offer, any Ontario-based entrepreneur that wants a connection to OCE, just send me an email with the information from the NYC Seed application (see below) and I will forward it to John MacRitchie.
Founders and Funders Toronto took place this week and we had another sellout. We had just over 100 people who came out to hang out, pitch their startups and find fundable companies.
A lot of food went cold however, as people could barely stay in their seats. The room was buzzing and so far the reviews have been great.
Ali Asaria, from Well.ca, sent us a note that I think summed it up:
“This was the first time we as a company were approached by investors, instead of us having to approach them. The atmosphere was relaxed, but at the same time there were always four simultaneous, deep discussions happening at our table on the subjects of investment, entrepreneurial stories, and industry trends.
In one single night I was able to talk directly with five different VCs, and we had the time to talk about details of our business, without the “what’s your pitch?” awkwardness. I had the chance to sit next to some of Canada’s most successful entrepreneurs from whom I learned so many lessons. What a great event — it’s the next day now and I return to my desk energized!”
A big thank you to our sponsors
Boris has announced Founders and Funders Vancouver for June 17th. If you would like to attend the dinner, please fill out the following form and let us know who you are.
As with the Montreal and Toronto dinners, Microsoft was gracious enough to sponsor Vancouver as well. These dinners really would not have been possible without them taking the lead and having a vision to help Canadian early-stage companies.
I am heading to Moncton next week to hang out and give a quick talk on the state of Venture Capital in Canada and what that means for Startups. The meetup is on Tuesday, June 17, 2008 at 6:30 PM.
I am looking forward to meeting as many startups as I can while I am in Moncton, so if you are going to be around, please drop me a line. I will be getting in early in the day on June 17th.
I will have some new data in hand about what is going on with VC and Angel financing in Canada, where startups fit in to the picture and my argument for why Social Media is the savior of us all.
See you in Moncton!
Some record breaking and recordings:
David Crow celebrates 1 year at MSFT.
Pema Hegan, cofounder of GigPark, scored a wicked short domain: http://pe.ma.
Watch BrainPark’s pitch at StartupCamp Toronto 2 on YouTube.
And a launch:
The guys at MercuryGrove, who last year came out with a product called Web Groups are now reinventing themselves as a multiple product company. In the next few months they will be re-developing Web Groups and introducing a new set of products, including a CRM, an E-Mail Campaign Manager, and finally something called a “Customer Page“, that provides an easier way of working with customers.
I have had the chance to get to know Scott Annan over the last few years, and he has been one of the guys behind StartupOttawa, so it is cool to see him show some of the inner workings of MercuryGrove.
There is no doubt that this is partially just a PR stunt, but that is fine with me, because Scott has all the street cred he needs and I know that he does the right thing for the Ottawa community every chance he gets.
I’ll be watching along, and we will post some updates here. Follow along on the blog.
We have some really great stuff cooking and we want to get more people involved.
Our goal with StartupNorth has been pretty simple: We want to write about great startups, help some get funded and also throw the occasional party.
The truth is however that sitting here in Toronto, we have a tough time covering the great stuff that is happening East to West and North to South. I have written a bit about how much I love Canadian cities and how I think that each one is unique and ready to do great things.
If you are like us and want to do something great for the startup community in your city, then please get in touch ASAP. I’d love to tell you what we are cooking up.