venture capital

In 2001, when my family and I moved from Seattle to back to Canada, we had a choice between Ottawa, Waterloo, and Toronto.  At the time, Ottawa was booming.  Venture capital was pouring into the city, and it proudly proclaimed itself Canada’s Tech Capital, and Silicon Valley North. So we moved to Ottawa.

A decade later, the picture is much different, as the Ottawa Citizen has reported in Nothing Ventured this morning.  The graph included in the Citizen’s article paints an ugly portrait. In 2010, Ottawa’s venture funded start-ups are starved for funding, with just $10.8 million raised in the first quarter of this year, compared to $1.38 billion in 2000.  Even worse, it appears that year 2000 hype and rhetoric around Ottawa as Tech Capital of Canada was simply …. hype.  Today’s anemic funding environment appears to be the same as historical pre-bubble levels.

3071032[1]Many will rightly point out that funding is available from other geographies, and that is true.  However, start-up companies need more than funding to prosper.  They need strong boards, good advisors, mentors, access to a talent pool, and world class educational institutions to support them.  Ask a Silicon Valley VC whether or not they would invest in Ottawa, and the answer you will get is a qualified no.  It will be something like “It would have to be an exceptional team, with an exceptional idea, and a massive market opportunity, because we have plenty of deal flow right here in our backyard.” 

Here at home, I’ve travelled to Toronto, Kitchener-Waterloo, and London to meet investors.  Despite their proximity, it’s still a couple of days on the road to meet. Whether you’re in Toronto or Silicon Valley, the economics of sitting on an Ottawa board of directors don’t make sense. It takes two days of travel to have a meeting, whereas you could have 10 board meetings in the same period of time with companies that are local.  

If Ottawa is to be competitive, then Ottawa needs a local venture industry. We have plenty of local entrepreneurs.  Now we need the team at OCRI and our municipal government to focus on economic development for the tech sector — bringing capital to the region, creating support networks for companies that are here, and fostering a competitive environment for Ottawa companies to succeed.

Otherwise, we really will be just that sleepy little ex-lumber-town on the Ontario-Quebec border that Queen Victoria named as the Capital of Canada.


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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fbFund: grants to build Facebook apps.

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It must suck to be Bay Partners or Altura right now.  After tons of great press about their new Facebook specific venture funds, along come Facebook, Accel and Founders fund with a $10 million pot of gold for grants to founders.  That's right, if you're a worthy founder you can get up to $250K from fbFund provided […]

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Thinking about raising a Friends and Family Round?

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If so, you'll want to attend this session being run by my friends Suzi Dingwall-Williams and Naomi Morisawa de Koeven.  By giving entrepreneurs the information they need up front, Suzi and company hope it will cost them less to do the legals in later rounds.  Venture Law Line presents Friends, Family and Angels: How to […]

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