The Future of Venture Capital in Canada
One of my favourite Sopranos characters once told Tony Soprano that he was at the "precipice of an enormous crossroads." It's beginning to feel like that in Canadian venture capital. The Canadian Venture Capital Association recently released 2009 data indicating that deal activity was at its lowest level since the mid-1990s. This is not a uniquely Canadian phenomenon, but the drought in new venture financing has seemed longer and drier in Canada than elsewhere. In some sectors, earlier-stage investors have become more visible, but what was once concern in the industry is now escalating to alarm, as more players ask what is to become of the Canadian innovation economy.
What's more, our neighbours to the south continue to lead the way in innovating venture finance. New models of technology incubation and seed finance seem to emerge in the United States every day, as those on the hunt for opportunity continue to explore how best to develop it. Indeed, there is now a move afoot in the U.S. to change immigration law to create a "Startup Visa" that would create new opportunity for immigrant entrepreneurs to remain in the U.S.
Where should entrepreneurs in Canada turn now? We have a national record of innovation that is unrivaled, and our universities are among the best in the world, but without a rich financial ecosystem to sponsor innovation, opportunity will certainly migrate elsewhere. Many Canadians involved in these areas believe we need to act now. In its recent budget, the Federal Government announced revisions to certain aspects of Canadian income tax law that many believe have impeded foreign investment in Canadian innovation. This is a welcome development, but arguably of little relevance to home-grown sources of innovation capital.
Today we turn to an exploration of these issues, and invite you to join with us. We've assembled a diverse group of talented and experienced entrepreneurs, investors, and strategists to give us their thoughts on the challenges we face in venture capital. We hope you'll take part.
Startup Nation
by Mike Lee
Vice-President, New Ventures, Rogers Communications Inc.
- First Posted: Mar 16 2010 15:18 PM
- Updated: 3 months ago
To ensure a healthy environment for innovation in Canada we have to secure growth and new value creation.
We live in an interesting and exciting time. The rate of innovation and opportunity increases with each new platform or technology. It's also a time when being complacent isn't an option – for any business. To secure future growth and new value creation we need to ensure that there is a healthy environment for startups and innovation in Canada. We need a Startup Nation
There are four raw ingredients needed to create a successful Startup Nation – access to capital, healthy ecosystems, innovation, and talent.
Talent is the foundation. Great individuals and great teams are the force behind successful entrepreneurial stories. Find any startup and ask them to tell you their story. Whether it's a great local restaurant or a company that has grown to the size of a Rogers Communications or RIM – inside each is a talented group of committed individuals.
It's no secret: the quality of the team is often the primary concern of venture capitalists when considering new investments.
When you compare Canada to the rest of the world, we are underdeveloped with respect to experienced startup talent. The raw talent is here, but the conditions to help that talent gain invaluable experience managing and operating in startups are sorely lacking.
In Canada, too few of the key business and product decisions are made at home. In addition, there have been too few cycles of startup success and failure (both valuable), to train entrepreneurs in the kind of
Don't misunderstand the issue. Experienced talent does exist in Canada. It just doesn't exist in enough volume to feed the number of startups necessary to yield the few that become truly successful.
Let me propose three areas for focus:
Make smart young students aware that entrepreneurship is a potentially exciting and rewarding career. Not that they should all become founders – that job is not for everyone. But they should know that the pursuit and application of their skills in smaller entrepreneurial companies will lead to highly valuable experience working in dynamic and diverse conditions where their contribution really matters. It is tremendously satisfying to see your day-to-day efforts directly help build the value of the company you work for. By teaching this to our youth, we will give early stage companies a better chance of recruiting the top tier talent as they graduate from school.
Make it simple for startups to find best talent and opportunities. People will argue that this will just drive turnover and costs. But the fact is success in startups depends upon being dynamic. Every day, startups adapt to changing customer demands, market conditions and financing requirements. Having a static talent pool in that context will disadvantage.
Make it easy for the significant number of talented Canadians working in early-stage companies in the Silicon Valley, the Northeast Corridor, and beyond, to find exciting opportunities in Canada where they can put their expertise to good use. You can't bring people back unless they see it as a great opportunity. If we don't make it easy for these Canadians to find the opportunities that match their skill sets and aspirations we reduce the probability of them returning, or worse yet, lose them to opportunities where they can't effectively exploit their experience and skills to help drive the next generation of successful Canadian startups.
Creating a fertile environment to grow the next generation of successful Canadian companies is an important undertaking. Putting the right tools in place to help address the talent issue is not simply a tactic but a critical requirement for success.
Comments
Re:Marks
“ Great article! Last I checked there were around 250 000 Canadians living in Northern California. I'm not saying they are all involved in tech, but a lot of them are. This is a huge problem. Why can't we keep/attract talent to Canadian companies? You hit on some good points: access to capital, healthy ecosystems, innovation, and talent. It all starts with the ability to be funded without a 100 business plan, 50 spreadsheets and a team with 80 years of experience. How do first time entrepreneurs get funded and mentored? Investors in SV get it, they understand what stage alpha or beta companies are at. Canada needs to stop being so risk-adverse and put some capital behind the entrepreneurs that will put Canada back on the map.
Spencer Thompson