in Canada, Startups, Venture Capital

Canadian VCs are being cut loose, and that’s a good thing

Mark MacLeod just wrote a post about Canadian VC that cuts to the chase

If there are any clouds on the horizon, they relate to the disappearance of the US / Canadian border when it comes to VC. When I first entered the startup World, you had no choice but to raise seed and series A in Canada. Only then could you tap the US funding markets. That’s no longer the case.

[ . . . ]

There is a perception (rightly or wrongly) that US investors are better than Canadian ones. And that given the choice, founders would raise in the US. Whether this is true or not is not the point. It’s the perception and with the borders coming down it represents a real risk to Canadian investors.

Mark did it in the nicest possible way, so a lot of people may not have noticed that he just condemned the entire Canadian VC model. It was something I didn’t even have the guts to do lately, so I was surprised to see Mark call the spade a Spade and get on with the conversation.

The border is gone and the game has changed. Mark argues that Canadian VCs need to pay up more, build their brands and build their networks. That’s a great start.

Canadian entrepreneurs have been told for years to step up and build global companies. It was hard and confusing to hear at first, but I think we’ve managed to do it. Whether it is Tobi in Ottawa, Kirk in TorontoRyan in Vancouver, Oleg in Toronto, Mike in Toronto, Kenshi Wilkins and Eric in Vancouver, Yona in Montreal, Temo in Montreal etc etc etc [I’ve missed so many here — more to come on David’s Hot Shit List] — I would argue that Canada is producing more world-class entrepreneurs more quickly than ever before.

We’ve spent the last 10 years being told we weren’t bold enough and need to think bigger. The argument has shifted and our startups now know what it means to be world class and they are doing it.

It’s time for the Canadian VCs to step up and do the same.

It doesn’t take nearly as much to get a US based VC to take a look at a Canadian deal anymore. If they have never done a deal in Canada before they usually have a friend who is just a call away who has and it can be demystified pretty quickly. The legal headaches are gone as well.

If you are a VC in Canada, focused on the Canadian market, then you have far more competition for deals now than you did even a few years ago and the job is more thankless than it has ever been.

So here’s the challenge for the the new players in Canada. Rho, Celtic, OMERS, iNoviaRelay, Golden, Klass, Wertz, Round13, etc…

Entrepreneurs are going to start telling a story about under-paying, small thinking and isolated VCs. As US VCs roll off the redeyes in to Vancouver, Edmonton, Toronto, Montreal, Halifax and elsewhere it should be you who is bringing them to town to see great deals which are priced right and which are built to succeed from right here in Canada.

The challenge is that you, like the entrepreneurs you fund, now have to be world class. That probably means being on a plane more often and pulling the trigger on deals within days, not months.

Nobody should start a VC fund in Canada today unless they want to work as hard or harder than any startup founder they will fund.  It is no longer a job for ex-bankers and management consulting dropouts. The job is hard, mostly thankless, and more competitive than ever.

That’s why I love this shakeout we have undergone and the one that is continuing today. VC in Canada had to go through the wringer so that we could end up with a handful of the best and most capable operators who can help springboard Canada further on to the world stage. We aren’t going to do it through myopic provincial funds, big corporate funds or economic development agencies.

It’s going to happen through hungry hustler GPs who have something to prove and only a little time to do it in.

Canadian VCs need to be startups themselves, because in the end only Startups can save venture capital in Canada.


  1. Jevon: Couldn’t agree with you more. We’ve collectively spent a lot of time moaning about the inadequacies of the Canadian VC landscape (e.g. not enough money, not enough appetite for risk, etc.), but the game and the rules are changing.

    It has a lot to do with the growing size, talent and sophistication of the startup community, which has evolved over the two to three years. We used to talk the talk…a lot. Now, we walk the walk, and Canadian VCs need to quicken the pace to keep up.


  2. Couldn’t have said it better, Jevon. When I came back to Canada 5 years ago I said that I would never work for a Canadian VC fund because of all the reasons you listed above. I feel fortunate that I found a group of guys who saw things the same way and had a cross-border strategy from day one.

    While the erosion of the border is scary for the Canadian VC market, IMO it is the best thing that could happen to our startup community. Bring it on!

  3. Solid post – I agree that Mark’s post was calling out, but I think you’ve still kept the kid-gloves with your prescription. Being “world-class” isn’t just about traveling more and making faster decisions, it’s also about upping your game when working with entrepreneurs.

    The biggest differentiator that I’ve seen between VCs and Great VCs is whether they’re treating the entrepreneurs as colleagues or just as members of an asset class.

    The be a colleague with someone building a business, you need to be able to function at the same level – so whether the conversations are about the model (e.g. B2B SaaS, mobile gaming, freemium, etc) or about the market characteristics (enterprise financial, buying cycles, key influencers, etc) you need to be able to provide value in the conversation, and not just ask to look at forecasts and a deck. I’d like to see more Canadian VC’s coming with their own experience, ideas and challenges to the conversation – every time you talk to an entrepreneur, you should be aiming to help leave their business in a better place than you left it, even if you aren’t investing.

    Yes, this means you’ll likely need to narrow your investment focus (you can’t be all things to all people), but the net effect is that you’ll be able to provide more value to the entrepreneurs you support. Be that as as an individual (e.g. Mark having solid expertise and brand awareness as a Metrics + CFO guy) or as a fund (e.g. Relay’s new “strictly mobile” position), Canadian VCs need to bring that level of precision and focus.

  4. And Pop goes the world! 
    I was reading this in between doing a call w/strategics for a portfolio company and reviewing closing docs. and my quick first reaction was “hummm, not sure valuation is the issue here…but I did like your comment: …hungry hustler GPs who have something to prove and only a little time to do it in.” I think we need to be hustling for our portfolio companies and working our asses-off everyday. And we do. Thats what creates awesome outcomes. Thats what build BIG companies. Thats why I’m doing it! I do understand where you are coming from with your overall post, challenging us GPs and making a point of the general lower valuations given by Canadian GPs. But, when I put things into context, knowing the details of how some deals got to close, as well as knowing the details of the outcome of some exits, valuation differences where only the issue a third of the time. One of the main point I took out of your post and Mark’s post, is that “perception” is bigger than reality, and we need to up our game even more to overcome that. I’m all in. Picking up the pace. Hustling. Making things happen.  

  5. Joseph: You are stealing the content for my follow-on posts. How is a blogger supposed to eat these days? ;-)

    Really though, this is my next post. You are welcome to write it if you want! 

  6. Interesting posts by Mark and Jevon – when I returned from the Valley in late 2001, most, if not all, Canadian VC’s were bankers and nobody in the Valley cared much or even noticed Canada, except for Ottawa as a telecom cluster. My old firm, Wilson Sonsini, laughed at the prospect of opening a Toronto office because there simply was no venture activity. Fast forward a decade, Toronto, Montreal and Vancouver are all on the radar of Valley VCs with the digital media explosion and the VC market in Canada has also matured with more and more serial entrepreneurs and operators and other folks who have “actually worked with tech start-ups” starting or running accelerators and larger funds (such as Chris @ iNovia and Bruce @ Round13). That is great news. The problem that remains and we have to work on is the “value add” – it’s not about valuations or the money IMO – it’s about the Rolodex and actually doing what a VC in the Valley does, which is to help founders build companies.

  7. Hey Joseph,

    When I first joined the startup World, Canadian VCs invested geographically. A Toronto vc would look at everything around him or her. That’s changing. Matt Golden just set up a mobile only fund. I pretty much only do SaaS and e-commerce (both being data driven). There is so much benefit from being focused. And to your point, the best founders demand that their investors know their shit.

  8. Hey Jevon,

    Thanks for stirring things up a notch. :)

    I wouldn’t say I’m condemning the vc model – just calling it like it is: the border is gone. Canadian vc can’t operate under different rules than US or global VC for that matter. Not unless it wants to fund the also fans. We need to eat our own medicine and deliver the goods just like the founders we back.

    I’m pretty new to the vc thing. I thought long and hard before doing it. I know that as a CFO I could deliver the goods and could compare myself to anyone anywhere. So, I’m challenging myself to hit the same level as an investor. It’s a big challenge. This is an apprentice driven business. You learn by doing.

  9. One more thing: while we can’t give Canadian vc any special protection or rules it’s in all our long term interests that Canadia VC thrives. There would be no Silicon Valley without a local vc ecosystem. Ditto for Boston and any other tech hub. We all need to work together.

  10. I’m the founder of WheretoList and it is Toronto based startup. The main business model of WheretoList is to allow store owners in the Mall conveniently offer online sale to local buyers. In addition, WheretoList offers general listing and within 6 months we have more than 10,000 posts across Canada and US. Check it out and see if you are interested in investing into WheretoList.

  11. Great post, Jevon – I always saw my benchmark being the top tier funds in my sector independent of their location and my investment targets the best entrepreneurs around the continent. Competition will make investors and start-ups better – exciting times for the Canadian tech ecosystem.

  12. Some great comments here.  I agree with Kevin Swan that the best thing for our startup ecosystem is the globalization of startup capital (and also globalization of startup talent).  However this turn of events will most likely not be kind to most Canadian VC firms, so I find the comment ironic.  The best Canadian founders are going to go south of the border for financing, because of the very significant difference in value-add, decision-making tempo, valuation and terms; and I can’t imagine that the best US deals are exactly clamoring for a Canadian investor either.

    Joseph Fung’s comments are on point as well and I think that Canadian VCs would be wise to pay close attention.  The delta in knowledge, demeanor, attitude, process sophistication, and deal terms is just massive – and I’ve raised money for my companies on both sides of the border and abroad, from angels and VCs, so there is a good range of experience to draw comparisons.  Focusing more to increase depth of knowledge, so that term sheets can be provided much faster, and greater value imparted on the entrepreneur pre and post financing, would go a long way. 

    Hustle is great, Chris Arsenault, but I think that the #1 area of improvement would be in attitude.  Entrepreneurs should be thought of as the customer, not the product.  It’s so obvious when meeting with most Canadian VCs that they think of me as a product, like a racehorse, the vehicle by which VCs gain their return.  When I meet with VCs in the Bay Area, and a few select ones in the northeastern USA, I feel like the customer, and as Joseph indicates, whether they are investing or not. That attitude makes it a lot more likely that they will be the investor of choice for the most attractive deals, and as we all know, the most attractive deals drive venture returns. 

    In my view, there will be billion dollar and even ten billion dollar companies being built by the current crop of Canadian entrepreneurs, but these companies may not have that much Canadian VC ownership until they learn how to compete with the elite VCs in the US.

  13. ” We aren’t going to do it through myopic provincial funds, big corporate funds or economic development agencies” 

    Byway of introduction, I am a BC based entrepreneur who has founded and sold two small businesses. I now invest my own capital and assist with some transaction assignments.

    I worked for an economic development agency for two years. I agree fully that most of these groups just get in the way of the free markets. 

    But they can, if used properly, add value. 

    I spent my two years running up and down between Vancouver, Seattle, San Francisco and Palo Alto. I can’t take credit for any specific deals, but we (me and one of the only rock star Trade Commissioners in the federal government) did work with relentless focus on trying to find out what interested US VCs wanted and then we tried to find them deals in BC. I’d like to think that because we hustled so hard and had laser focus we at least helped move the needle a bit. 

    Unfortunately most of these economic trade groups have such broad focus (read lack of focus) from their political masters that they do nothing well. The only way they can help is if they do very few things, service very narrow markets and are disciplined about not taking on too much.

  14. Equity funding is a saturated global arena with thousands of players.  As a Vancouver startup I personally went to the states and succeeded in getting a seed round and series A.  I could have taken money from Singapore, London, Gibraltar or L.A.

    We would like to think these commenter guys below could step it up and make things happen but its unrealistic.   money is cheap,  there is mountains of it lying around and the instant a Canadian says no or is too impatient to see the value, there is another competitor waiting to scoop up the deal.

    you have to love supply side economics!

  15. I totally agree, the reality is people in the US right now are willing to quickly see value, make a deal and start connecting you to the right people. I just spent a week and New York, and let me tell you there are lots of opportunities for people with a good idea and a good team to do a raise.

  16. There is no doubt the world is changing Jevon (and Mark). Everyone has to adapt or die.  Not just VCs and entrepreneurs, but lawyers, M&A advisors (me), public relations and any service providers in Canada. If you can mix local presence with world-class advice and service, you have an unbeatable mix, because dealing with VCs or lawyers or advisors 2000 km away is difficult.  The reason they (US VCs for instance) live where they live is quick access to the best opportunities. Getting their attention for long periods of time on the phone or video conference when they are looking out their window at a shiny new deal running down Sand Hill with a fistfull of term sheets… well, let’s just say that their attention can be fleeting.  It would be better if you could get the best in your back yard.

  17. Jevon, Mark, all other contributors…..

    Terrific posts, thanks for getting the conversation started.  I couldn’t agree more that VCs in Canada need to be startups themselves…….  Entrepreneurs are not horses to bet on, they are exceptional partners that we, as VCs, have the privilege to support and assist.  Just like the companies in Canada who are striving to be the top in their industries, I can assure you that there are a number of Canadian VCs who will not rest until Canadian VCs are consistently included in the top tier list.  This will not come from sitting back and passively picking horses…..

  18. that I’ve seen between VCs and Great VCs is whether they’re treating the
    entrepreneurs as colleagues or just as members of an asset class.

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