I figured it would be appropriate to write about the lack of a growing and robust venture capital community in Toronto since it cropped up in three places over the last 2 days – once with several folks at Startup Drinks last night, today over coffee with Jeremy Laurin of OCE’s Investment Accelerator Fund and on Quora (the new social network launched by the ex-CTO of Facebook). On a side note, Quora is actually pretty snazzy with super-high-quality people.
Back to the main point of this thread — I’ve been talking about this situation for roughly 3.5 years now — first in the biotech/life science VC community in Toronto and now with the ICT community. I believe there is one problem at the root of both sectors — we need a kick-start in Canada.
What does that mean, a kick-start? Well, most people believe that there is a fundamental funding gap in Toronto’s venture community between pioneering research (in universities, by startups, etc…) and venture capital finance-able deals. That may be the case, but that is a different argument for a different day. I believe there is a more substantial funding gap that exists once a ’successful Canadian company’ reaches the point of raising a round of capital greater than $15 million. The existing VCs in the community (generally) just can’t get those kinds of deals done. It’s not in our Canadian cards (given the average fund size, risk thresholds, etc…). Canadians need later-stage financing options (or Government money) to back those deals and to create a better later-stage ecosystem.
So, what happens instead? Great Canadian companies knock on the doors of VCs South of the border who are flushed with cash and willing to invest larger amounts in later rounds. For the record, I love US VCs. However, for the purpose of this discussion, or monologue rather, they have tended to bring companies close to home to minimize their geographical risk with the investment. Now, as companies continue to grow and are eventually sold, the successful founders and key employees of those companies often (not always) stay South of the border to further progress their careers — joining US companies, or launching other companies in those locales. Worse for Canada, those successful folks often reinvest in US VC funds or Angel invest in other local US companies rather than Canadian startups.
Envision that cycle reoccurring over and over for the last 30 years. The trend becomes large enough that a substantial amount of capital, and human capital for that matter, gets lost from the Canadian startup ecosystem.
Some say that there is a lack of venture capital in Toronto because there just aren’t great deals. I disagree. I think that there is a lot of talent in Toronto and in the surrounding areas, like Waterloo for example.
Now, the scenario I’ve described may not be the only reason for the lack of capital in Toronto (or Canada), but I feel that it is a significant part of the problem. What are your thoughts?
Larry Cheng updated his Global VC Blog list today (originally posted in May 2009 as top-100 in Google Reader subscriptions) and has re-ranked the global top VC blogs by average monthly unique visitors on compete.com for Q4 2009 (oct+nov+dec)/3.
As per the latest global VC blog listing, Fred Wilson from Union Square Ventures (Blog: A VC) took the top spot, shifting Guy Kawasaki from Garage Technology Ventures (Blog: How To Change The World) into second place.
Here’s the top 1012 for Q4 2009:
- Fred Wilson, Union Square Ventures, A VC (100,279)
- Guy Kawasaki, Garage Technology Ventures, How To Change The World (82,838)
- Paul Graham, YCombinator, Essays (71,924)
- Brad Feld, Foundry Group, Feld Thoughts (45,633)
- Mark Suster, GRP Partners, Both Sides of the Table (39,389)
- Bill Gurley, Benchmark Capital, Above The Crowd (23,084)
- Dave McClure, Founders Fund, Master of 500 Hats (21,462)
- Josh Kopelman, First Round Capital, Redeye VC (12,972)
- Bijan Sabet, Spark Capital, Bijan Sabet (12,451)
- Jeremy Liew, Lightspeed Ventures Partners, LSVP (12,097)
- Mark Peter Davis, DFJ Gotham Ventures, Venture Made Transparent (12,010)
- Larry Cheng, Volition Capital, Thinking About Thinking (11,851)
I kept 12 for obvious reasons. Check out the full list.
Larry, thanks for keeping tabs on all these metrics — it’s a great service to everyone looking to find knowledge in the VC and startup domains. The only problem with this methodology is that compete.com tracks only US traffic, while the blog listing is global in scope. Perhaps your next update in April 2010 can use Alexa rankings or some other novel solution.
Over the last week, I had the opportunity to start and finish Tina Seelig’s new book “What I Wish I Knew When I Was 20“. The book delivers a series of stories — among other things — each seemingly designed to teach a lesson or prove a point; a number of stories discuss very innovative and creative solutions people undertook to solve real-world problems and to create value. Together, these pearls of wisdom can inspire the uninspired, and give a gentle nudge to those needing a push to get going.
In her book, Tina discusses the Stanford Technology Ventures Program (“STVP“), and how it looks to create “T-shaped people” — described as having a depth of knowledge in at least one discipline and a breadth of knowledge in innovation and entrepreneurship. I think this is a fantastic approach, and that this recipe is the right combination to create truly successful entrepreneurs. It would be nice to see some Canadian schools taking that approach. She also discusses her class-turned-global innovation assignments, that have become the Global Innovation Tournament — I’m hoping to participate in a judging capacity for the Toronto contingent this year — but of course, I’d rather be in the competition itself. Maybe I’ll get a chance if I make it into the Stanford GSB next year!?
Later on in the book, Tina begins discussing risk profiles of entrepreneurs (I can relate closely with this), and I found it quite interesting to read that apparently most entrepreneurs don’t see themselves as big risk takers. Only after some reflection did I understand what she meant. To paraphrase her text, “After analyzing the landscape, building a great team, and putting together a detailed plan, [entrepreneurs] feel as though they have squeezed as much risk out of the venture as they can. In fact, they spend most of their efforts working to reduce the risks for their business.”
Wearing my VC hat, this actually makes a lot of sense. We, as VCs, constantly look at how well entrepreneurs de-risk their ventures and we calculate our willingness to invest by how well an entrepreneur has evaluated their market opportunity, filled their management team and advisory board(s) with competent and complimentary folks, and developed their technology to a stage where it can be demonstrable. Essentially, the reward that entrepreneurs can receive for successfully de-risking their venture is generally referred to as a better valuation from VCs, and consequently, higher equity ownerships for the entrepreneur(s) at the table.
I recommend this book to CEOs and decision makers that need to reignite their creativity as well as to students aspiring to do great things, but who are waiting for permission to do so from some authority figure. In this book, the author acts as an agent of empowerment to allow the reader the feeling that they should embrace their skills and capabilities, and act on their desires to create products, services and organizations that can change the world.
What have you envisioned that could change the world? I dare you to chase that opportunity.
Have you recently dropped everything to take on a new challenge? Share your story below! Was it worth it?