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Paul Lem, CEO of Spartan Bioscience Inc., poses with Spartan RX, a box the size of a shoebox that delivers DNA test results. (Dave Chan For The Globe and Mail)
Paul Lem, CEO of Spartan Bioscience Inc., poses with Spartan RX, a box the size of a shoebox that delivers DNA test results. (Dave Chan For The Globe and Mail)

The ambitious turnaround project for Canada’s venture-capital industry Add to ...

Both Mr. Flaherty and Mr. Duboc are quick to point out the vast differences between Israel and Canada, but it’s clear the Canadian program will involve some degree of risk-sharing, with government money released to private VCs that can raise other funds, then invest as they see fit. The idea is that with taxpayers underwriting the risks of sophisticated investors, venture investing will rise and startups can flourish. “At the end of the day, it’s a risk-reward equation for everybody,” Mr. Duboc said. “We have to increase the reward and lower the risk.”

But some say venture capital is just too risky for Canadians. That’s the conclusion Sam Zaid, who started two firms in Ottawa, reached when he set out to launch his third, Getaround. His idea – allowing car owners to rent out their vehicles online – was too “aggressive” for Canada, he decided. So he moved to Silicon Valley in 2011, launched his business and has rolled out in a handful of U.S. cities. Mr. Zaid has no idea if it will catch on or if it can even make money. Canadian VCs have told him, “prove to us you have a business model and can get revenues.” Mr. Zaid instead raised more than $17-million (U.S.) from such U.S. high-tech luminaries as Yahoo CEO Marissa Mayer and Google’s Eric Schmidt.

It takes a strong stomach to invest in startups, but Silicon Valley is full of people who do. “That’s where people dare to dream big and they’ll fund you earlier based on a vision and a dream, rather than proving revenue or a business plan,” Mr. Zaid said. Such leaps of faith have turned out well for investors in Amazon, Skype, Facebook and others. In the Valley, “people want to fund things like behaviour change, changing how people think about things like cars. In Canada, there isn’t investor appetite for that.” If there was, would he return? “Definitely.”

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LOOKING NORTH

Some U.S. venture capital has found its way into Canada, investing particularly in tech companies. Some examples:

Shopping around

Shopify Inc., an Ottawa-based company that provides its online shopping platform for business to sell goods on the Web, counts U.S.-based Bessemer Venture Partners among its funders.

Secure investment

Fixmo Inc., which makes security software for mobile devices and is based in Toronto and Sterling, Va., raised $23-million in new funding last year, with Kleiner Perkins Caufield & Byers of Menlo Park, Calif., among its backers.

Novel idea

New York-based Union Square Ventures, which has previously invested early in online successes such as Twitter, Tumblr and online craft sales site Etsy, recently led a $3.5-million investment in Toronto-based Wattpad, which allows anyone to author an e-book or read one.

Tweet deal

Domestic OMERS Ventures put $20-million into Vancouver-based HootSuite Media Inc. in a landmark deal earlier this year, but the company, which provides a social media management system for businesses, counts San Francisco-based Blumberg Capital among its primary investors.

Seeding the cloud

Desire2Learn Inc., which provides cloud-based online learning platforms and is based in Kitchener-Waterloo, Ont., just last month announced an $80-million round of funding, with U.S.-based New Enterprise Associates as well as Canada's OMERS Ventures.

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