A month ago, I wrote a column lamenting the state of Canada's venture-capital (VC) sector, which has lagged behind as the startup community becomes more active, vibrant and exciting.
Since then, there are indications the situation may be changing, or at least starting to turn a corner. At the Canadian Venture Capital Association's annual meeting in Montreal last month, the atmosphere was buoyant – a stark and refreshing contrast to previous AGMs, which someone described as a "funeral."
A big part of the recent optimism was sparked by two new funds. Ottawa-based Celtic House Venture Partners announced a $105-million fund focused on the telecom industry, while Montreal-based Rho Ventures raised $100-million to invest in early stage startups in mobile, software and new media.
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While two funds does not make for a full-fledged turnaround, it could – and I emphasize could – mark the beginning of a new chapter for Canada's VC industry, which has struggled in the past few years with weak performances, a lack of capital , and arguably an investment approach that has been too conservative and risk adverse.
In the meantime, Canada's startup community has flourished as more entrepreneurs armed with good ideas, lots of energy and lower barriers to entry launch new businesses. Many of them have aggressive global ambitions and $1-billion business goals.
For Canadian VCs to stay relevant, there are two key things that have to happen:
- There has to be more support from institutional investors such as the large pension funds, which have sat quietly on the sidelines. Rather than invest in VCs, they have been content to put their capital elsewhere. This could change if institutional investors gain more confidence in opportunities with potential for good returns.
- Canadian VCs need to become more engaged and bold. In a blog post last week, Mark MacLeod, a partner with Real Ventures in Montreal, said the growing involvement of U.S. VCs in Canada means Canadian VCs have become more active, expanding their networks and doing a better job of building their brands.
If these things don't happen, it will be easy for U.S. VCs to snap up the most promising Canadian startups, leaving Canadian VCs on the sidelines or scrambling to get a small piece of the action.
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In many respects, the Canadian VC industry has come to a fork in the road.
One path leads to a more robust and active landscape that sees Canada's growing number of exciting startups properly supported and nurtured. The other path is the status quo, in which Canadian VCs struggle to stay competitive because they don't have the capital or the will to make deals, leaving the market wide open for U.S. rivals.
Special to The Globe and Mail
Mark Evans is the principal with ME Consulting, a communications and marketing strategic consultancy that works with startups and fast-growing companies to create compelling and effective messaging to drive their sales and marketing activities. Mark has worked with four startups – Blanketware, b5Media, PlanetEye and Sysomos. He was a technology reporter for more than a decade with The Globe and Mail, Bloomberg News and the Financial Post. Mark is also one of the co-organizers of the mesh, meshmarketing and meshwest conferences.
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