Canadian VCs: Wake Up!

Canadian entrepreneurs give Canadian VCs a really hard time. Suzie Dingwall Williams on the CVCA blog, VC Rants (which at the time of writing was not responding to http requests), puts forth a great challenge to Venture Capitalists. 

If Canadian innovation is to scale, there needs to be a call to action for all participants in the ecosystem. This is a marketing exercise that needs to be led by you, the VCs. When was the last time you went to a bootcamp? Provided sponsorship dollars to entrepreneur-generated initiatives? Extended your channels in the US to provide a broader network for your portfolio? Many of these events are not immediately accretive to you, but they are vital to community creation. Let me re-phrase that; there has never been a more vital startup community, but it is one being fostered largely without VC involvement. This must not continue. The need to take a long-term approach to deal flow has never been greater.

This is the reason that Jevon attended the CVCA conference. It is the reason we supported the Canadian Innovation Exchange. It’s the primary reason that we decided to host Founders & Funders events. There are a lot of potential misunderstandings between the people that start high-potential-growth technology companies and the people that fund them, it’s about bringing them together that these differences begin to resolved. Rick identifies VC’s and entrepreneurs need to talk early, these helps work out the kinks (I also love the tension between VCs and angels identified in Rick’s observations).

I’m unfortunately not at StartupCampWaterloo tonight. The only VC present was Peter Frisella of TechCapital. I love the Waterloo events, they are small, they are focused and there is a lot of feedback for entrepreneurs. I attended StartupCampMontreal last month, which is a totally different experience for me than a Toronto event (as I’m pretty quiet and reserved mostly due to my perceived language concerns). There is a definite understanding by the Montreal VC community that there is a lot of talent and potential dealflow that happens at these events. There were 32 submissions for the last event, with 5 presenting companies. The benefit for Montreal is the facilities provided by SAT, we’re just missing a common gathering venue in Toronto. Yeah, same old rant. Maybe a challenge to my colleagues at MaRS and BOT to move beyond breadth/reach events and to let us focus on a couple of depth events. Or maybe a challenge to the local VCs to help sponsor a series of events in FY08 and FY09 in Toronto.

As entrepreneurs we give Canadian VCs a bum wrap. Suzie makes a great point about innovation, wealth and the responsibility of entrepreneurs to be aware of impact on local innovation.

Every dollar of investment that comes from outside Canada ultimately leaks profit and wealth creation outside of Canada. There cannot be sustainable growth if the benefit of local innovation is reaped beyond our boundaries by private equity tourists. Every entrepreneur should feel a moral (if not economic) imperative to include Canadian VCs as part of its growth plans, and to serve as ambassadors for you abroad, directing deal flow from beyond your way (leak unto others as they leak unto you).

Canadian VCs are good people. They’ve build some great companies. The last 10 years haven’t been kind to them. An average 10 year return of 1.8%  when compared to the US average 10 year return of 18% (thanks Heri) coupled with the strong community connections being built to the US, is shifting the mindset of entrepreneurs south. However, Suzie has done a great analysis about the mindset of the Canadian VC community.

Many VCs will tell you that their job is to deploy capital, not to support the entire startup community. They cannot monetize spending significant portions of time with entrepreneurs and companies that may never need their money. Fair enough, in one sense. In another, it represents a huge lost opportunity.

Canadian entrepreneurs are in serious need of help in understanding how to build a $1B business (well even a $100M business would be great). As Canadian entrepreneurs we should by reaching out to our local VCs.