Venture Capital in Canada is in a dismal state of disarray.  With activity at a 14 year low, investment companies have evaporated and funds are simply not being raised. Moreover, despite a resurgence of interest among angel investors, the institutional capital markets don’t show any sign of improving soon.  One angel I spoke with last week opined that series A investments for his companies were most likely to come from Boston or the San Jose / Palo Alto / San Francisco than Toronto.

Yesterday, US Senators John Kerry and Richard Lugar introduced The Startup Visa Act which, if passed, will almost certainly accelerate that trend.  Similar legislation has also been introduced in the US house of representatives by Colorado’s Jared Polis. Supported by more than 100 US vc’s and angel investors, the legislation would grant special visas to entrepreneurs with at least $100,000 from a sponsoring US investor in an equity financing of not less than $250,000. If after two years, the business has created 5 jobs and raised an additional $1,000,000, then the entrepreneur is entitled to permanent residency.

Many countries have immigrant investor legislation, including Canada. The legislation usually requires that an immigrant entrepreneur have a minimum net worth, and agrees to set up a business in the host country.  The Kerry-Lugar legislation is the the first that I’m aware of that allows an investor in the host country to essentially sponsor the immigrant.  That’s an important and useful innovation.  Moreover, the funding requirements are tiny by US investment standards, allowing US investors to cherry-pick the best new businesses from around the world and bring them to the United States.

Will this new process result in a flight of Canadian entrepreneurs to Silicon Valley? It certainly seems likely, but only time will tell.

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Government as Entrepreneur.

by alec on July 11, 2009

n.  A person who organizes, operates, and assumes the risk for a business venture.
The American Heritage® Dictionary of the English Language, Fourth Edition

Blazoned across the front page of the local rag, the Ottawa Citizen, this morning’s headline read Billion-dollar business fund overlooks city tech firms.  It seems the Ontario Government yesterday announced a $263-million grant  to establish a Toronto-based studio for French video game giant Ubisoft.  The funds are coming from the $1.15-billion Next Generation of Jobs fund, announced in March 2008, which has so far exclusively invested in the Southern Ontario cities of Toronto, Waterloo, and Windsor, overlooking the more than 1,800 companies in Ottawa’s tech sector.

Never mind that Ubisoft has more than $100-million in profits annually, or that the $263-million spent creates just 800 jobs over the next decade at a cost of $330,000 per job (after all, that’s cheap compared to the auto bailout), or that Dalton McGuinty’s government will run an $18-billion dollar deficit this year.  No, what really galls is the statement in May by then economic development minister Michael Bryant that “This is government picking winners and losers, government as entrepreneur.”

There is no element of risk in spending the taxpayers money.  Taxing struggling families to fund profitable multi-national corporations is closer to the centrally run economies of the Soviet Union than entrepreneurship.

Government as entrepreneur.  It’s enough to make you weep.

More to the point, however, the focus of the Next Generation of Jobs Fund is on employment in existing established businesses.  The money has gone to players in the plastics, automotive, entertainment, and health care industries.  Big announcements, and good photo ops, but a short term and short-sighted strategy.

What’s needed is a strategy to encourage job creation through new ventures and innovation.  For example, funds in the United States and Israel are demonstrating repeatedly that small investments in promising startups, with significant mentorship (think Paul Graham, or Yossi Vardi) can produce dramatic results (think Twitter).  It’s easy to think of a number of successful Ontario entrepreneurs that might be a homegrown Graham or Vardi.  The incentive to invest would be that much greater if the Ontario government had some programs targeted at encouraging those entrepreneurs to invest their dollars in some real entrepreneurs, rather than photo-ops for the Premier.

“It would be so nice if something made sense for a change”, said Alice.
Alice in Wonderland, Lewis Carrol.

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$300 million in emergency first aid.

May 26, 2009

In It’s time to venture ahead on technology, Barry Reiter makes the distinction between research and development spending and venture spending,  venture spending being the money spent to actually commercialize the fruits of research and development.  Canada tends to fund research spending well but when it comes time to commercialize that research, we come up […]

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Is Canadian tech at a turning point?

May 21, 2009

Recently one has the impression that the Canadian tech sector is willing itself back to life.  After the meltdown last fall, there have been numerous events in recent weeks that seem to be indicators pointing in the right direction.  For example: May 19, the Canadian Advanced Technology Association held its annual award dinner.  Held at […]

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Shore’s Web 2.0 Weekly

April 29, 2009

David Shore’s Web 2.0 Weekly tracks capital in the Web 2.0 market.  Once a week he presents all the financial information that’s publicly available on Web 2.0 markets, including his basket of 92 publicly traded Web 2.0 companies.  He tracks financings, stock prices, news and more for the Web 2.0 world. This week’s edition starts […]

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Suzie’s advice for Ontario entrepreneurs

April 10, 2009

Canada’s venture industry is a mess, especially in Ontario. Venture lawyer Suzie Dingwall Williams recommends entrepreneurs focus on the newly announced Ontario Emerging Technology Fund, and try to ensure that the investment criteria are friendly to the crop of entrepreneurs in Ontario.

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Tech in Canada. The precursors of success are here.

January 20, 2009

Canada has many of the right conditions for a successful technology sector, but funding remains a problem.

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Tech in Canada. Losing our ability to innovate.

January 19, 2009

Saturday’s Globe and Mail ran a piece titled Canadian innovation which focused, in part, on the collapse of Nortel and what that means for entrepreneurship in Canada.  Without a strong research focused market leader, like Nortel, as a breeding ground for new entrepreneurs, where do they come from? The Globe identifies taxation, training and business […]

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Tech in Canada. Can we do more than play hockey?

January 19, 2009

Today’s Ottawa Citizen carries a column by Randall Denley titled Nortel’s failure a depressing blow.  Denley asks if the people of Canada are good at anything but playing hockey, noting that: Many of Canada’s best-known companies have failed to become world-class players and have fallen prey to better managed, more entrepreneurial foreign competitors Denley also […]

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Will mobile rebels suffer the same fate?

November 16, 2008

Doug Mohney’s The Fallen – Crashed and struggling VoIP companies is worth a read, if for no other reason than to learn the fates of some of the companies we have all known in the VoIP industry.  One could summarize what he has written as: the carrier competitors,  excepting Vonage, ran out of money.  Vonage […]

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