Startup Leaders: Are you a Missionary or a Mercenary?
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Category: Startups
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$205M Ontario Venture Capital Fund
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.
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Lessons in Social Media, with MediaScrape
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.
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NYC Seed versus IAF
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 NYC Seed - A team (2+ people) with a compelling idea that makes sense today.
- Your team should be technically savvy, with members possessing a proven record of completing complex technology projects.
- We will ask to review a prototype of your product.
- Company must be based in NYC.
IAF - Technologies or intellectual property (IP) the company intends to commercialize must have
unique and protectable aspects that establish a sustainable competitive advantage - Full and unencumbered legal right to the commercial use of the company?s technology or IP
- The products and services the company intends to bring to market must meet a defined
market need and have a significant and sustainable advantage over competitors - The addressable market should be at least $20 million and clearly defined
- The management team must have the skills and domain expertise to be successful,
or be willing to replace or augment the team as necessary - A clear path to commercialization and a plausible plan to support it
- The company must be incorporated, or be incorporated by the time of IAF investment
- Total revenues should be less than $500k from the time of incorporation
- Intend for at least 50% of salaried employees to be based in Ontario
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.
- What?s the idea?
- Why now?
- Who are your competitors?
- How will you make money?
- How will you use the funding?
- Please describe your product development roadmap. How long will it take to complete your first version?
- Please provide bios for each founder.
- Please provide 3 references for each founder.
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Founders and Funders Toronto Wrapup
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
Founders and Funders Vancouver
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.
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Third Tuesday NB: Venture Capital, Startups and Social Media
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!
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Weekend Reading – June 7, 2008
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:
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Mercury Rising: Watch a Startup reinvent itself
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.
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StartupCamp Waterloo 3 Recap
This is a guest post by Mic Berman, one of the instigators of StartupCamp Waterloo. Thanks Mic!
We had great turn out and interesting crowd, lots of new startups first time demonstrating in a public forum. The event was sponsored by TechCapital, WatStart, CommuniTech and SunStartup – thanks to those folks for supporting the community.We tried something different and hosted a panel at the start made up of Iain Klugman , Larry Borsato, Ali Asaria, Melanie Baker, Sandra MacDonald, and Gary Will. The basic question was “why, why do a startup?” The answers varied from why not to do one to a very philosophical approach by Ali that centred around passion and drive.
The start ups that got to present (based on audience voting and time available) were:
Semacode (on StartupIndex) – Simon showed off his technology for the first time. A fully integrated viral marketing based service integrated into FaceBook as a great way to manage events and conduct mobile marketing campaigns. The issues that came up in discussion were privacy (how does the user control information that is captured in their barcode/name tag), which target market they should go after (i.e., advertising/marketing/event type companies or the end user/enterprise running the event). Simon has partnered with SuitedMedia Inc to help them sell the service.
Navarra run by Avery Pennarun was a somewhat controversial concept for outsourcing development of your founder ideas. The concept being they would charge a flat rate to develop against particular specifications provided by the “business founder”. Avery figures lots of business people/founders with great ideas need a good development shop to develop out their ideas. Issues that came up were: “are you mad?”, “that will never work”, and ” how will you ensure specifications are crystal?”. Maybe they are on to something (as is typically the case when faced with great controversy)?
Clutterme presented by Mark Molckovsky & Alex Curelea was a totally fun demo of a cool technology that enables you as a user to instantly create a webpage that effectively becomes your “cork board” online. Great job to whomever did their brand and logo, as it so clearly defines what they’re up to. Their key questions of the audience were “what’s your business model?, how will you make money?”, usability issues, and how to get the word out there. They’ve asked for community support on testing their beta about to be released in 2 to 3 weeks. Check them out 🙂
UbietyLab – Developed by local Waterloo professor, Todd Veldhuizen, demonstrated some very powerful visualization technology that quite frankly the audience was very impressed by with folks throwing out many many applications for its use. Hence the professor’s problem. What market with what offering, considering “I’m really doing this in my spare time and not really as a business person?”
AdvertisingShowdown.com – I’m sorry guys, I missed this one because I was in conversation at the time (oops). The just is a powerful new online advertising metrics application. You can check out the recording of the presentation on www.spaetzel.com
Let’sCube (which is currently a Firefox plug-in you can download) is an instant sharing technology for cool sites you want to share with your friends and for which you can receive results as the owner of the site that’s being shared. Differences between StunbleUpon, Digg, Twittr, etc and their service is they aggregate your interests into your own let’s cube page – so it pulls for you and filters by your friends. Does it go both ways? Can you share and pull? That was the biggest issue posed by the audience and yes, it does. Lots of other ideas about how to leverage the Firefox plug in to test additional features.
IndigoFire presented by Karim Shaehata is solving the problem of website registration and sharing among friends real, business and otherwise. His product is not yet live (powerpoint presentation). Solving the problem of how you create differentiation among your usage across community sites like Facebook, Flickr, etc. for the people you want to share with and the public at large. Good questions and may be interesting technology yet to come 🙂 Kareem’s basic question was what are the potential business models for which the audience offered several alternatives e.g., server side, small user charge, middleware approach, etc. and would you use it?
The audience participation rocked, thanks everyone who came and asked and offered great questions, suggestions and comments. You can check out a recording of the event on spaetzel.com
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Mesh Conference – 15 Minutes of Fame
One of the startup-focused parts of Mesh is the 15 Minutes of Fame they do evey year. Each day of the conference 3 companies are given 5 minutes each to pitch themselves or their product to the audience.What I love about it is that it really is completely open to whoever applies, and it is not an opportunity for the conference organizers to just give stage time to whoever will pay. (paying to do something like 15 minutes of fame is far more typical than you might realize)
The lineup this year was solid, with some new companies and some more established startups.
15 Minutes of Fame is a great way to get your startup in front of a new crowd in Canada, so think about doing it next year.
- Carbonetworks, which has developed software that helps companies create effective carbon emissions strategies to reduce costs and capitalize on emerging global markets.
- GigPark, a place to receive recommendations about a wide variety of services from friends and their friends.
- AidesRSS, which has created technology to make reading RSS feeds more effective and valuable.
- Well.ca, an online health and beauty store that ships across Canada.
- OverlayTV, an interactive media company that provides a video commerce platform that lets Internet users, content owners and e-commerce sites to monetize and customize their video assets.
- Enomalism, an open source consulting firm that focuses on solving the cost and complexity for enterprises that run large technical server infrastructures.
