Some companies can boostrap by being lean, some by dipping into their own pockets, but the vast majority need a support network: active angels, VC's willing to make a bet on an 'unproven team', or a 'emerging/potential' market.

Once again, what I'm saying is not new, it just feels like some of that infrastructure is missing in our ecosystem. It's a chicken and the egg problem where one cannot exist without the other.

I think you've hit a very important point. Exits. What are possible/potential exits for Canadian startups?

* IPO – NASDAQ vs TSX vs TSX-Venture
* Acquistion – Who in Canada is buying companies? Who in the US is buying Canadian companies?
* Operate profitably
* (the worst case scenario) go under

I think the think many early stage entrepreneurs and students I talk to in Toronto and Waterloo is that they get enthralled by the raising of venture capital and the perceived ease of access to capital. There is a need to understand about building successful, sustainable, profitable companies. Having customers. Building a product. Growing a business. These are good things and should be celebrated by entrepreneurs.

I'm absolutely 100% behind the premise of a seed ecosystem with a strong cohort (essential) and mentor program. However, it also seems to me that the entire model (Y-Combinator, Techstars, etc) is predicated on the “graduation” phase. It's one thing to get the entrepreneurs working on their ideas under a “ramen profitability” model, but there needs to be a path and ecosystem beyond that.

Based on all of my conversation with YC founders, it was the introductions and network that they ultimately found most valuable, and I'm afraid we're lacking in that department. JLA, Edgestone, TCP, etc. are all great funds with great people behind them, but reality is.. they can only do so many investments. Canada-US is also a thorny issue. I'm continuously amazed how much pain and suffering a company has to go through (visa's, investment barriers, etc) to attract external investment.

I guess I'm not saying anything new here, but it feels like there is a missing piece there: getting started phase is critical (cohort, mentors) but somehow we also need to figure out how to lower the graduation barriers, because otherwise.. the whole thing might fail.

The debate through the comment stream is fascinating; finding the right place for the seed fund to sit (literally and physically) in the city and the community will be critical for framing the investment theses and creating the type of secondary non-financial returns needed to attract the right kind of financially-oriented follow-on investors.

I wonder what the implications for investors are, my guess is that this would constitute selling securities, and we'd be shut down by the OSC in about 4 seconds.

Joyent, aka TextDrive, did a VC-Customer Campaign back in 2003-4 to raise $40,000 of capital costs to buy new servers. http://photodude.com/2004/06/01/textdrive-or-ho... but this was done by offering lifetime services, not by offering equity or debt in the company.

It is an interesting question that I think others like Michael Garrity at CommunityLend http://communitylend.com/ are better able to answer than I am.

I do not think that MaRS is currently a tech incubator. They are a real estate play with value added services. My initial thoughts on this http://www.startupnorth.ca/2008/11/19/mars-phas... .

MaRS has the potential to be a home for a tech incubator, mainly because of the lack of demonstrated financial returns from early stage funds and the assumption of an IRR of zero in Rick's FTF http://ricksegal.typepad.com/pmv/2009/04/the-fa... there needs to be a spot that has a public policy mission to support entrepreneurs.

MaRS has many of the pieces to be a key player in Toronto and Ontario.

* Real estate for companies & events
* Training programs (that may need a refresh)
* Venture advisory services available to entrepreneurs at various stages http://marsdd.com/mars/advisoryservices.html
* Strong ties and relationships in municipal and provincial governments for funding and policy making decisions

But would I describe Y Combinator & MaRS as similar entities, NO WAY!

I think the non-financial returns aka the secondary effects associated with activities: the cohort, training & mentoring, & the publicity/attention grab (think launch events); but they are used to continue to drive financial numbers. Let's be honest this is a financial game. The question for me is how do the investment timeframe for the limited partners and timeline required for significant impact by the secondary effects.

Not every incubator/accelerator will have the immediate PR and follow-on investment potential of Y Combinator (supported by acquisitions and divestitures like Reddit). Most will need to hit a few singles and doubles. But the secondary effects of the activities start the process of attracting additional entrepreneurs, bringing more press and attention to the launch events, and hopefully finding additional investors or acquirers.