Memo to Canadian bankers: Show your local startups some love

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This has been a landmark week on the Canadian start-up scene: Not only did Ottawa e-commerce software firm Shopify Inc. become the first Canadian Internet company since the dot-com crash to be valued at $1 billion – but its $100-million "Series C" financing was led by a Canadian venture capital outfit, OMERS Ventures.

So is Canada ready to proclaim itself a start-up nation, like the U.S. or Israel? Not quite. While there is definitely a good base of smaller seed investors and venture capitalists – such as Matt Golden and Boris Wertz – ready to fund Canada's busy array of promising tech startups at early stages, Canada still has an underdeveloped ecosystem to season and nurture tech entrepreneurs into major forces.

Ted Livingston, the 26-year-old founder of hot Waterloo, Ont., instant messaging startup Kik Interactive, made the point in an interview this week. Mr. Livingston, whose firm now has more than 100 million users and has raised $32-million (U.S.), mostly from American investors, said he has already received dinner invitations from managing directors of private wealth at "almost every major U.S. bank." The banks south of the border can obviously sniff the big money that Mr. Livingston could be worth if Kik continues to grow. "Americans have seen this story," he said.

Have senior Canadian bankers rolled out the red carpet as well? Not a one. "There is huge potential here and yet we are completely under the radar in Canada," he said.

In fact, other than OMERS, one of the only Canadian-based institutions prepared to write large, later-stage cheques, there is little apparent infrastructure up Canada's financing food chain ready to shepherd its growing class of successful, largely U.S.-backed startups into larger forces. Startups including Kik still talk about the difficulty in attracting Canadian VC money, our investment banks are still dominated by natural resources-focused deal makers and most of the local funding comes through governments with money to spend, but poor track records.

As Mr. Livingston sees it, "You have to have a very thick skin to invest" in a consumer-oriented company like his. "A lot of it is the Canadian mentality of 'let's play it safe, and this doesn't look safe' – and it's not. If you are playing safe, you won't win the big deal." Part of the problem: there isn't enough deal flow – yet – in Canada for Canadian-focused VC firms to make enough bets to yield one or two big winners out of 10 to succeed. "If one of these Canadian VCs wants to compete at a global level, they'll need a calling card, and it will only be a calling card if it's a big, bold bet."