Let the Sparks Fly

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Earlier this week, Brightspark’s Mark Skapinker got “quoted saying some harsh things” in the Wall Street Journal. The gist of the post was that “the venture capital model was broken in Canada” and that “there are no significant repeat entrepreneurs here.” Understandably, passions were inflamed…

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Wellington’s Mark McQueen took issue with several points in the article. JLA’s Rick Segal likened the WSJ post to friendly fire or getting hit from behind. Mark Skapinker has since posted a clarification of sorts.

While the WSJ post was off message, there really is a problem up here. It is not a lack of good ideas or backable founders. The pool of available financing is drying up. A global problem, sure. But our pond is smaller, so we’ll feel the pain sooner.

There are those who will argue the rules are changing, that to start something less funding is needed than ever before. Maybe so. But there is a difference between running lean… and starving. We are simply not feeding our young. It is beyond short sighted, it is economic suicide.

Provincial governments seem to know this is happening, that there is a risk of losing a generation of entrepreneurs, companies, jobs, growth. They are announcing programs left and right (albeit with seemingly little industry consultation), but letting meaningless paperwork kill cross border deals.

Financiers definitely know something is amiss, funds are not or can not raise another round. Instead of closing on a fresh $100M, they are closing up shop. But if they didn’t deliver returns, can you blame LPs? Typical venture funds need to deploy large amounts of capital to move the needle. They aren’t in the seed stage investing business, their business model does not allow it. It is possible that there just weren’t enough seed stage opportunities to choose from… maybe.

So more early stage financing for more companies, it is easy to like the sound of that. Unfortunately, it is just not that easy. There really is not much money to be made doing this. Run the numbers for yourself, we have, it is not a particularly scalable venture so to speak. And still it needs doing.

One thing is for sure: this problem isn’t going to solve itself…

Comments

8 responses to “Let the Sparks Fly”

April 6, 2009

Brill Pappin

What he says in his article is not really all that new. I keep hearing the same thing from entrepreneurs in Toronto, including StartupNorth.

If it’s only being seen now, them maybe that is evidence that there is a problem.

Reply
April 6, 2009

Brill Pappin

What he says in his article is not really all that new. I keep hearing the same thing from entrepreneurs in Toronto, including StartupNorth.

If it's only being seen now, them maybe that is evidence that there is a problem.

Reply
April 6, 2009

MuffinMan

most of the students at UW either are planning to go the silicon valley or china to startup their ventures, no one talks about starting anything in Canada, quite sad how the gov. isn’t addressing such a critical issue.

Reply
April 6, 2009

MuffinMan

most of the students at UW either are planning to go the silicon valley or china to startup their ventures, no one talks about starting anything in Canada, quite sad how the gov. isn't addressing such a critical issue.

Reply
April 7, 2009

Alex

I thought the best returns were from early-stage investing (according to MaRS)

Reply
April 7, 2009

Alex

I thought the best returns were from early-stage investing (according to MaRS)

Reply
April 9, 2009

MattCope

Attracting and retaining enterpreneurs and VC’s is a problem I’ve been thinking about a lot since I read Paul Graham’s commentary on Boston/Cambridge (my home) as a waning startup hub.

I see the problem as the breakdown of a positive feedback loop. In good times, the presence of talent attracts capital, which attracts more talent, etc. However, when talent expects capital to flee to greener pastures (or capital expects talent to do the same), the positive cycle can quickly deteriorate.

So what’s the best way to change expectations in the entrepreneur and VC communities? Is it the actions of the state? Of a bellwether? Of a university?

Reply
April 9, 2009

MattCope

Attracting and retaining enterpreneurs and VC's is a problem I've been thinking about a lot since I read Paul Graham's commentary on Boston/Cambridge (my home) as a waning startup hub.
I see the problem as the breakdown of a positive feedback loop. In good times, the presence of talent attracts capital, which attracts more talent, etc. However, when talent expects capital to flee to greener pastures (or capital expects talent to do the same), the positive cycle can quickly deteriorate.
So what's the best way to change expectations in the entrepreneur and VC communities? Is it the actions of the state? Of a bellwether? Of a university?

Reply