Re-post by Chris Arsenault, Managing Partner & COO at iNovia Capital

Definitely, this is great news for the Canadian VC industry and for tech entrepreneurs alike. Today, Teralys Capital was born, with at its helm Mr. Jacques Bernier (an experienced entrepreneur, executive and investor), and with $700 million in capital (as a first closing), making it the largest Fund of Funds of its kind in Canada.

The Caisse de dépôt et placement du Québec (CDP), the Fonds de solidarité FTQ (the Fond), and the Québec government (via Investissement Québec), announced the creation of Teralys Capital, a new Quebec based Canadian Fund of Funds, which will invest in private venture capital funds (VC Funds) that in turn will invest in technology companies in sectors that include Infotech, Cleantech and Life Sciences. CDP announcement here (link).

The Caisse de dépôt et placement du Québec and the Fonds de solidarité each contributed $250 million and Investissement Québec contributed $200 million to Teralys Capital, all as part of the Fund’s first closing. Mr. Bernier expect to raise an additional $125 million from other institutional and private investors, bringing the first fund size up to $825 million.

The Government versus the role of the VC Fund in funding entrepreneurs.

I don’t believe in having our governments involved in every aspect of our businesses and especially not calling the shots on who should receive funding and who shouldn’t. And I don’t believe in bailouts per say. I believe in intelligent investments that can generate strong returns by enabling and by levering, knowledge, networks and expertise.

We live in a very competitive technology driven environment that requires our best entrepreneurs to not only have the best ideas, the best innovations but also the best business models and a unique competitive edge that is, more often than less, far from obvious to the venture capital firm looking to invest. Canada needs a strong community of privately driven VC Funds with industry expertise and broad networks of partners and co-investors to provide the insight and support our Canadian entrepreneurs need to succeed. These VC Funds need capital (just like entrepreneurs do) and today’s announcement will somewhat facilitate, for the few, their fund raising efforts and will hopefully create more awareness and interest towards this investment class.

Over the last 12 months, many provincial governments (British Columbia, Alberta, Ontario) and even some cities (Ottawa) announced their intent to actively support the Canadian venture capital industry by playing a direct or indirect role as an investor or co-investor in existing and upcoming VC Funds.  It was refreshing to start hearing about their concrete investment commitments into VC Funds, and not just read about it in the budgets! You can read more about the positive impact of these initiatives in an article ported on the Montreal Tech Watch blog (link).

But today’s joint announcement from the CDP, the Fond and the Government of Québec I believe is setting new standards in Canada by all means. And I think they are calling it right!

• First, they put together a substantial amount of cash for this type of activity to be effective;
• second they named an experienced management team, making the fund privately managed in its self, that can lead    the investment process without the direct involvement of the government  (and I expect this to be the first of many  Funds to come under Teralys Capital’s management);
• And finally, they acted fast (within 2 months from the Government of Québec 2009 budget).

So with this announcement, we can expect Teralys Capital to announce its first commitments into VC funds within the two quarters. This is great, but let’s not forget that these VC Funds managers will likely be required to attract further capital from other Fund of Funds, Pension Funds, Institutional and Private investors before  themselves start investing into tech companies. Therefore, we should see the first few $ in the hands of promising technology companies and entrepreneurs by this time next year.

Now, we haven’t seen any traction from the Federal Government front yet, nor do we see enough traction for this class of investment from Canadian and Foreign institutional investors. The CVCA also welcomed the Quebec Fund of Fund initiative today, but highlighted the situation our industry in their press release (link), stating: The Canadian venture capital industry has endured several years of declining fundraising. Thus, the industry raised $1,718 billion in 2005 and only $1,028 billion in 2008, a precipitous drop of 41%. So allot still needs to be done.

Yet, I applaud today’s announcement and welcome the path of action taken by the Government of Québec, by not trying to substitute itself for a VC Fund manager, but instead, by acting quickly, partnering up and leveraging the expertise and knowledge of industry leaders in order to have a more substantial impact.

Expect to hear more at this year’s CVCA Annual Conference, to be held in Calgary on May 27-29th, where the likes of Jacques Bernier – CEO of Teralys Capital, Ian Carew – Vice President, TD Capital Private Equity Investors and other Fund of Funds managers and VC Fund managers will share their thoughts, vision and action plans.  LINK TO CONFERENCE PAGE

Other related posts:

$5 billion to end up in the hands of Canadian entrepreneurs, nothing less!

CVCA’s Comprehensive Study on The Impact of Venture Capital in Canada on Economy, Jobs and Innovation

CVCA English press release  Communiqué en Français ci-joint

Caisse de dépôt et placement du Québec press release

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By Stephen A. Hurwitz

Canada’s venture capital industry is in trouble. That industry is seriously underfunded, while Canada’s emerging technology and life sciences companies are so capital-starved they risk being uncompetitive in the North American market. At the same time, much needed and sought after US capital that could richly fund that industry and those companies is being blocked by Canada’s cross-border tax laws.

In just how much trouble is Canada’s venture world? Given the size of Canada’s GDP and population relative to those of the US, Canadian venture capital firms and Canadian venturebacked companies should be receiving approximately 10% of the total funds invested in those entities in the U.S. In fact, in 2008 Canada’s venture capital firms received only approximately 4% of all funds invested in US venture capital firms, and Canada’s venture-backed companies received only approximately 4.5% of all funds invested in US venture-backed companies. These are devastating shortfalls.

 In 2008, venture capital investment in Canadian companies was at its lowest level in twelve years. In the same year, Canadian venture-backed companies raised, on average, $3.6 million, as compared to $9.5 million for US venture-backed companies. Yet these undercapitalized Canadian companies must directly compete in the same North American market with these farbetter financed US companies. Hobbled by having a fraction of the capital of their direct competitors, many Canadian companies are forced to be sold early in their life cycles long before they obtain industry leadership. These sales are frequently to large US companies, and often at low prices.

The result – Canada is losing much of the benefit of its outlay each year of approximately $9 billion in direct funding to universities and hospitals for R&D and in indirect funding of Canadian businesses through R&D tax credits. Rather than ultimately benefitting Canada, this extensive R&D funding has become, in effect, a subsidy to US businesses that acquire these promising Canadian companies cheaply, then reap the financial rewards when those companies achieve industry leadership. Worse still from a Canadian perspective, these companies are often then moved in their entirety to the US, resulting in loss of Canadian jobs and Canadian tax revenues. While public concern is sometimes expressed as to the perceived “hollowing out” of Canada with respect to its large resource/infrastructure industries, a very real and persistent “hollowing out” of Canada is occurring through early acquisitions of its most highly promising technology companies representing the future of Canadian innovation.

In addition, fundraising by Canadian venture capital firms in 2008 was at its lowest level in thirteen years. Because Canadian venture capital firms lack funds to finance Canada’s emerging technology and life sciences companies in amounts needed for them to become industry leaders in North America and beyond, the investment performance of Canadian venture firms – ten-year horizon returns of 1.7 percent – dramatically lags their US venture capital counterparts’ 18.1 percent returns. Because investing in venture firms involves greater risk than investing in the public stock markets, a country’s venture industry  must achieve returns exceeding those of such markets to compensate for that risk if it is to be sustainable. Canada is failing that test.

This pervasive underfunding at every level is a cause of a dangerous downward-cycle in Canada’s venture capital and emerging company worlds. The less funding Canadian venture capital firms receive, the less they have to invest in Canadian emerging companies. The more these emerging companies are underfunded, the less competitive they are. The less they succeed in their marketplace, the worse the resulting performance of the venture capital firms that fund them. The worse the performance of those venture firms, the greater their difficulty in securing their own funding from institutional and other investors. And so this toxic downward cycle goes, continuously reinforcing underperformance for Canadian entrepreneurs and venture capitalists alike.

But, Canada has a giant US neighbor with billions of dollars of institutional money that can contribute to the funding of its venture industry and billions of dollars in venture capital that can help fund its emerging technology companies, not to mention the accompanying human capital in the form of extensive knowledge of the vast US market and broad network of significant US customers, distributors, suppliers and executives. Rather than capitalize on this opportunity and welcome this money, Canada’s cross-border laws thwart them at every turn.

How are Canada’s cross-border laws thwarting entry of this much needed foreign capital? The Canada – US tax treaty provides that investors of each country, when investing in the other, will be taxed on investment gain only once – in the investor’s home country. For example, a Canadian venture capitalist investing in a private US company will be taxed only in Canada on its gain upon sale, and not in the US. The US strongly encourages Canadian investment in the US by automatically recognizing a Canadian investor’s treaty exemption from double taxation – no paperwork – no delay – no withholding – and the Canadian VC is immediately free to take its sale proceeds back to Canada.

In sharp contrast, US venture capital firms investing in Canada face nightmarish red-tape and delays to achieve the same reciprocal treaty benefit in Canada. When selling shares in a private Canadian corporation, they must apply for a “Section 116” clearance certificate to one of 45 Canadian government offices that grant it. An application is required for every investor in a US venture fund, and many funds have dozens or even hundreds of investors. A single stock deal can literally require hundreds of applications and hundreds of signatures. One US venture capital firm in a single transaction had to obtain almost 900 signatures in connection with a Section 116 processing.

Inconsistent practices and procedures in these 45 Canadian offices, wholly unpredictable in their timing and requirements, often lead to protracted waits of up to four or eight months (waits of one to two years are not unheard of) for US venture investors. Further, 25% of the gross sale proceeds must be withheld by the buyer from the outset until the Section 116 clearance certificate is granted and the proceeds then released to the US venture firm. When those withheld proceeds are in stock of a listed public company buyer, the stock value can plummet if during the long wait there is a decline in the public market, which can cost US investors thousands, if not millions, of dollars. To add insult to injury, usually more than 25% of the gross sales proceeds are withheld when in the form of shares to compensate for any potential  downturn in the stock price while withheld.

These same US venture investors may also have to deliver copies of their prior US tax returns and must obtain Canadian taxpayer ID numbers and file Canadian income tax returns – even though in virtually every case no Canadian tax is ultimately due as most foreign parties are exempt under the treaty. Worse still, the charters of many US venture firms prohibit them from investing in countries where foreign or past private tax returns must be filed by their investors. Because of these administrative burdens and economic risks of delay, many US venture investor’s just say no to investing in Canada. Those that do invest must engage in complex, expensive and time-consuming legal acrobatics to escape the administrative hurdles, such as forming a Luxembourg or Barbados subsidiary (but only after an assessment of its legality under Canada’s anti-avoidance tax laws), or doing a convoluted reorganization of the Canadian investee company into a wholly-owned Canadian subsidiary of a newly-formed Delaware holding corporation. If these reorganizations are not done with the greatest of care, serious  consequences can ensue, including the Canadian subsidiaries losing huge amounts in Canadian tax benefits (scientific research and experimental development refundable tax credits) and existing Canadian

shareholders losing significant personal tax benefits, as well as labor sponsored and other government subsidized Canadian venture capital firms becoming ineligible investors in these subsidiaries. Further, the legal costs of such a reorganization are high, sometimes exceeding $400,000, which amount could go a long way to assist in completing a new technology product or a new clinical trial or funding a much needed marketing campaign for a promising Canadian company.

Because most US venture investors choose the Delaware corporation alternative as the lesser of the two evils, a growing number of Canadian technology companies are becoming Delaware corporations. It is ironic that existing Canadian public policy is forcing many of Canada’s most promising venture-backed technology and life sciences companies to become Delaware corporations.

The tax clearance process generates virtually no tax revenue for Canada, because almost all US venture firms and their investors are exempt under applicable treaties with Canada from paying Canadian tax. This process intended to assure treaty compliance instead frustrates an important goal the treaty should achieve: furthering cross-border investment. It should be remembered that these worrisome Canadian cross-border rules apply not only to US VCs investing in Canadian emerging companies, but also to other US private equity groups, as well as to US institutional investors when investing in Canadian venture capital and other private equity firms. Thus, these Canadian cross-border rules starve the entire Canadian venture capital ecosystem of much needed funding.

In short, Canada’s cross-border laws needlessly thwart hundreds of millions of dollars in much needed and sought after foreign venture capital from entering Canada. The cost to Canada is the potential loss of untold jobs and millions of dollars in tax revenues that successful investments can create. Canada’s predicament will only worsen as other countries – from emerging giant players such as China and India to smaller, competitive jurisdictions such as Ireland and Israel – take increasingly vigorous stands to attract foreign capital.

The federal Canadian government has removed restrictions on investments by a Canadian pension plan in “foreign property” outside of Canada that exceeds 30 percent of all its property. To an outside observer, it seems extremely odd that, despite such a move, major tax impediments to the flow of a much larger pool of US institutional and private equity capital into Canada remain unaddressed. So there is an anomaly – while there are neither Canadian nor US restrictions on millions of dollars of scarce Canadian institutional and venture money leaving Canada (potentially in vastly growing amounts) and being invested into the US, Canada makes it extremely difficult for much needed US capital to be invested into Canada. In short, Canada has a “post-NAFTA” position as to the unrestricted cross-border flow out of Canada of capital vitally needed by its own venture capital industry, while maintaining a “pre-NAFTA” position severely restricting the cross-border flow into Canada of capital for its venture capital industry. Unlike Canada, neither the US nor the UK discourages cross-border investments into their respective countries through any similar tax clearance certificate process. There is, however, a silver lining in this problem – it can be easily fixed. The following solution was presented to the Canadian government for consideration in its 2009 Budget by John Ruffolo, Chair of the Tax Policy Committee of the Canadian Venture Capital & Private Equity Association. I believe his proposal has full support of the venture capital industries in both Canada and the US and would solve the Section 116 problem once and for all:

Canada currently defines taxable Canadian property (TCP) to include shares of a private corporation resident in Canada. At the same time, Canada’s tax treaties cede taxes jurisdiction to the country where the non-resident vendor is resident, provided the shares do not derive their value principally from real property (including resource property and timber property). Based on the large number of tax treaties Canada has concluded, it appears that Canada is prepared to exempt from taxation all gains realized by non-residents, other than gains from the disposition of real property. In light of this treaty policy, we believe that Canada should adopt a broader exemption in its domestic law to exempt gains realized by non-residents other than those arising from the disposition of real property.

We see little benefit in providing the exemption only on a bilateral basis. The benefit of a broader exemption is that it would make Canada a more attractive destination for equity investment by non-residents, and in particular, venture capital and private equity funds. A broader exemption would also reduce a significant compliance burden that acts as an impediment to foreign direct investment in Canada. Recently enacted changes regarding the Section 116 clearance certificate process did not address the issue and are unlikely to reduce the number of situations involving arm’s length transactions in which clearance certificate are obtained.

We would propose to amend the definition of TCP in subsection 248(1) to exclude the shares of private corporations, except for shares of private corporations whose value is specifically derived from real property, resource property, or timber property situated in Canada.

This proposal would be consistent with how Canada currently taxes most gains realized by non-residents. As stated in 2008 Federal Budget Commentary, “most tax treaties allow Canada to tax capital gains only on Canadian real and resource properties and on shares of companies that derive most of their value from such properties.” Under this proposal, non-residents of Canada would not be subject to withholding under Section 116, nor be required to file Canadian tax returns in respect to dispositions of Canadian private corporations, except to the extent the value of the shares was principally derived from Canadian real and resource properties. This alternative would significantly streamline the administrative process for non-resident vendors and lessen the tax barriers to foreign investment in Canada.

This proposal is the only one presented from any source to date that, if adopted, would truly solve the Section 116 problem and over time result in a significant increase in much needed US (and other foreign) capital for Canadian innovation without adverse fiscal effect on Canada. Mr. Ruffolo’s proposal was ignored in the federal Canadian 2009 Budget. The benefits of a healthy venture capital industry for a nation’s economy and society that reforming Section 116 would advance are best illustrated by an example. In a recent year, venture capital investment in the US equaled 2/10 of 1% of US GDP, while in the same year revenues from venture capital-backed US companies equaled almost 18% of US GDP. That is a multiple of almost 90.

A recent prominent study further highlights the continuing harm to Canada from failing to reform Section 116. In 2007, the accounting firm of Deloitte did a major international venture study revealing that 40% of US venture capital respondents and 28% of global venture capital respondents cited Canada’s unfavourable tax environment as a key reason for not investing in Canadian companies. This concern as to investing in Canada was at a level five times higher than for any other country in the survey. This Deloitte report is in the hands of major venture capital firms all over the world, and this adverse finding is likely to further worsen Canada’s venture financing predicament.

If Canada’s venture capital and emerging company industries remain chronically underfunded, much of Canada’s billions of dollars of investment in R&D could be lost and its intellectual capital squandered and future growth imperilled. Investment money has no nationality and should be borderless. Canada should change its cross border laws to enable its venture firms and emerging companies to freely access much needed international capital.

Stephen A. Hurwitz is a partner at Choate Hall & Stewart LLP, Boston. He is a member of the Tax Policy Committee of the Canadian Venture Capital & Private Equity Association. His study published by C.D. Howe Institute and co-authored with Louis J. Marett, Financing Canadian Innovation: Why Canada Should End Roadblocks to Foreign Private Equity, is available at www.cdhowe.org. Mr. Hurwitz speaks at many of Canada’s major technology, life sciences and venture capital conferences. He is also cofounder and chair of the North American Venture Capital Summit held each year in Quebec City.

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By Chris Arsenault, Managing Partner & COO at iNovia Capital

Within 3 days I probably saw more Tweets and Blogs about the Canadian Venture Capital Ecosystem and Canadian Entrepreneurship than I’ve seen in any given month! Rants, Raves, Criticism and Support, some comments were without any dept while others provided insight. Over the last few weeks, we started hearing about the different provincial government initiatives to support, as investors, the venture capital industry, thus addressing in part the lack of equity financing for existing and new promising technology companies across Canada. Following the CVCA publication earlier this year of a Comprehensive Study on The Impact of Venture Capital in Canada on Economy, Jobs and Innovation (link), many provincial governments jumped on the bag wagon and were announcing fund commitments, new fund creations and/or new budget allocations to VC in order to show their support and help in addressing this crying need for more venture capital funding for Canadian businesses.

Even though we still haven’t resolved the fundamental issue of having private capital flow to entrepreneurs with high growth businesses via more LP commitments towards privately managed venture capital funds, I was pleased to read about the initiatives, the interest and comments from the various players of our ecosystem. The level of comments I received (online and directly via email) from my recent post about the indirect benefits of the recent Quebec government commitments towards venture capital (first posted on Montreal Tech Watch) $5 billion to end up in the hands of Canadian entrepreneurs, nothing less! told me one thing: Yes, people care, people want change, people are showing leadership, support and interest. I’m not saying that everybody agreed with what they understood was going on and how the challenges are being addressed, many had their own views on the Canadian funding issues and had very different opinions, and that’s a good thing, I respect that, as long as those who are voicing their opinions can show leadership by causing action and are participating in the debate by building our industry, not purposely demolishing it.

I suggest you checkout the following blogs for more views and angles, some are more positive than others, yet they all offer additional insight, such as Suzanne Dingwall: Ont. Gov’t As A VC: In with a Whimper, Not a Bang; Mark McQueen’s OVCF dips toe in Ontario waters with “commitment” to Georgian Partners; and entrepreneur start-up CFO Mark MacLeod’S Unfair Advantage only to name a few.

The article from The Canadian Press, and interview with Edmee Metivier, the Business Development Bank  executive vice president of financing, gave a glimpsed of the importance of the continued support needed for our Canadian technology ecosystem and the role some government agencies (such as the BDC) play ‘Lost generation’ of technology threatens Canada: official; The techvibe Canada’s Venture Capital industry is bad? blog posted comments and perspective from Brian Sharwood. Which in itself was interesting because it was a pure entrepreneurs’ view on the VC industry and start-up related government economic development agencies, questioning the way the system works from his angle.

But then… then… came the infamous WSJ article with as interviewee:  Mark Skapinker. Ouch! That one hurt. Why? Because the message that came across was wrong, the burning Canadian flag was an insult, and it created a false generalized impression that we, as Canadian Entrepreneurs and VCs had failed. No the Canadian Venture Capital Community is not dead nor broken, it’s evolving and that’s a good thing! The Canadian Venture Capital Community, like in any other country, needs to adapt to its own national realities while at the same time face global competition. And secondly, we do have great new and recurring entrepreneurs, that have proven time after time that we can built great companies (even though we end up selling most of them to foreigner). Can Canada afford to have more proven and successful Canadian Tech CEO’s and Entrepreneurs? Of course, 10 times more, easy! Do Canadian Venture Capital Fund have enough financial resources to fund all the great deals out there? No, and we need to convince more institutions to allocate funds to VC & PE and we need toshow then hard results and strong IRRS!   

For those of you who missed some of the action, here are  the few must read links related to the infamous article:

1.     The Wall Street Journal article itself: O Canada VC, We Stand On Guard For Thee

2.     The reaction, among others of Mark McQueen: Skapinker gives his homeland the Bronx Cheer

3.     The clarification blog by Mark Skapinker: Say it like you see it – and get kicked in the ass

4.     The Rick Segal reaction: Owww! I hate getting hit from behind

5.     The clarifying-clarification of Mark McQueen: Skapinker gives his homeland the Bronx Cheer part 2

I personally think that we can wish and want, complain and comment as much as we want. But the only way to build a successful business, a successful fund, to build a strong ecosystem, to innovate in an ever-changing environment, is by showing leadership. No one person, nor firm nor government will make any true difference “alone”. We can’t expect everybody to agree on “how” our ecosystem should be built or how our industry should thrive. But we can agree to respect the leadership of others, to work towards building a strong ecosystem and support those who take initiative in paving the way towards solidifying our Entrepreneurship and Venture Capital base.   

Call to action! If someone doesn’t agree on how things are being done, then instead of complaining, show leadership and take action. Everybody, in its own capacity, can provide leadership, do his/her part, or at the least, support the leadership it believes is right.

I look forward to read more about what SHOULD be done, yet I sincerely expect to witness more of what WILL be done.

Chris

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Re-post from the Blackberry Partner Fund blog

by Pierre Donaldson, Partner at JLA Ventures & BlackBerry Partners Fund

(Warning: May contain traces of sports analogies applied to business)

For this, my first and long overdue post on the BBPF Blog, please allow me to momentarily and respectfully step aside from the excitement surrounding the launch of BlackBerry App World and the ever expanding smart phone eco-system, to briefly focus on one controversial aspect of our role as VCs.

Perhaps the most important aspect of our jobs is selecting the teams of individuals we want to back with our investments, and then working with them to build the best management team; a team that can take a fledgling tech start-up to the Promised Land of 10X returns and $100M+ exits.  In my career, I have built, backed, led, and been part of some of these teams, and of many more that never quite reached the Promised Land, despite showing great potential.  After a while, grey hair starts to appear and you also start to notice patterns in what works and what doesn’t.

So I would like to quickly share with you my Locker Room Theory. As mentioned, this can be seen as controversial. So many management teams today are dispersed. R&D team and the CFO in Montreal. CEO in Sillicon Valley. VP Sales in NYC (“oh yeah, all the big decision makers are there!”) with three sales people located in different cities in the US and working from their home office.

Of course, we live in a world where we are always connected and available.  That’s expected from us.  Always on. We all have love our BlackBerry, iPhone and the silly Bluetooth earpiece that makes sure we don’t even have to take them out of our pocket to take your call.  We’re always only one quick Skype, high definition, surround sound video-call away from one another, right?  We can e-mail, IM, SMS, blog, tweet… you name it.  It is exactly as if we are constantly sitting right next to each other, right? Plus, how many times have we heard the following statement:  “we don’t care where you live because you will travel  50%, no, 80% of the time”.  Or: “Oh, I’m based in San Diego but I travel to our Toronto HQ at least 2 times a month. That’s more than enough”.

I’m sorry, but I don’t buy that at all. As far as I am concerned, business is all about people. Building a winning tech company is mostly about people and having a strong team dedicated to a strategy and executing it together.  Being a hockey fan, I will use a hockey team as the analogy for a portfolio company. Being on the road is like being on the ice. That’s where you score goals. That’s where you win that big contract.  That’s where you build momentum; grow a sales pipeline, forge partnerships, hurt your opponent, drop the gloves if needed, etc. 

But, when players are not on the ice, they are in the locker room. The locker room is where it’s hot and where it stinks of hard work and empty cups of coffee. It’s where you regroup in between periods, look your teammates in the eyes, listen to your coach and team captain, get ice for that bloody bruise, adjust your strategy and tactics.  It’s also where you celebrate after a game. Open that case of cold beers every Friday at 4PM.  Get back to the whiteboard to figure out what went wrong on that goal against or sale lost to a competitor.

When not grinding away on the road, your executives need to be at Headquarters. You want them to live within driving distance of HQ.  Until the company has reached a critical mass and absolutely needs to branch out new locker rooms (new teams), the executives and the sales team should all be under one roof. You don’t build team spirit and a company culture through e-mails, video-calls and IM. It is all about people working together and making things happen. It’s about staying late when needed, or coming in on a week-end when the servers give up. It’s about the water cooler conversations and finding out that your sysadmin’s favourite uncle has a golf buddy who is CIO at that large corporation you’ve been trying partner with.  It’s about decisions made in the restroom. It’s about knowing all the details about key prospects in the pipeline because you ask your salespeople for an update 3 times a week while looking them in the eye.  It’s about buying all of them lunch to celebrate a big win. I could go on.

Of course there are exceptions of dispersed teams that did very well.  But, while this is not a religion at our firm (not yet!), by experience it is a principle I have grown very strongly attached to, and on which I will always vigorously challenge our CEOs or my partners when they think they can do without it. 

If you follow hockey at all, how many times have we seen a team that didn’t look like much on paper get to the playoffs and suddenly play like bulldozers and unshaved gods and go on to win the Stanley Cup? Ask them about the locker room.

Go to the Blackberry Partner Fund blog

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Text en français au bas

*** 

Letter sent out April 1t, 2009

To all members of Réseau Capital,

We are pleased to attach the study on the impact of Venture Capital on the Canadian Economy sponsored by the Canadian Venture Capital Association (CVCA) and BDC.  Aimed at a wide audience, it explains how venture capital works, reviews the major impact studies conducted in the United States and measures its impact on Canadian employment, growth, innovation and exports. Going beyond such quantitative impacts, it also illustrates by way of case studies the “snowball effect” of venture capital, whereby one success spurs the birth and growth of a new generation of technological enterprises. Finally, it highlights the risks to the entire ecosystem of the industry’s shrinking ability to attract more investment at this time.   Download .pdf link here.

Québec and Réseau Capital were active participants in this initiative, funded jointly by the Ministère du Développement économique, de l’Innovation et de l’Exportation, the other provinces and Industry Canada. Summit Capital provided additional funding that led to four success stories in Québec: Axcan Pharma, BioChem Pharma, Positron Fiber Systems and Taleo.  Annie Thabet, Charles Cazabon and Hubert Manseau were on the steering committee for the study, which was presented at the Réseau Capital convention in February and served as the basis of discussions between Réseau Capital and Raymond Bachand, Minister of Economic Development, Innovation and Export Trade, when the Québec budget was being prepared. It is a fine example of partnership between Réseau Capitaland the CVCA, which we intend to maintain. 

Janie C. Béïque             François Chaurette

Co-President                 Co-President

Réseau Capital              Réseau Capital

___________________________________________________________ 

À tous les membres de Réseau Capital,

Vous trouverez ci-joint l’étude sur la contribution du capital de risque à l’économie canadienne commanditée par l’ACCR et la BDC. Destinée à un large public, elle explique comment fonctionne le capital de risque, passe en revue les grandes études d’impact qui ont été conduites aux États-Unis, mesure l’impact sur l’emploi, la croissance, l’innovation et les exportations au Canada et, au-delà de ces effets quantitatifs, illustre par des histoires à succès « l’effet boule de neige » du capital de risque par lequel un succès alimente la naissance et la croissance d’une nouvelle génération d’entreprises technologique. Elle met également en lumière les risques que fait courir à l’ensemble de l’écosystème la contraction de la levée de fonds à laquelle fait actuellement face l’industrie. Suivez le lien suivant pour une copie de l’étude.

Le Québec et Réseau Capital ont pris une part active à cette entreprise. Le MDEIE l’a financée aux côtés des autres provinces et d’Industrie Canada. Sommet Capital a ajouté un financement supplémentaire qui a permis de porter à quatre le nombre d’histoires à succès du Québec : Axcan Pharma, Biochem Pharma, Positron Fiber Systems et Taleo.  Annie Thabet, Charles Cazabon et Hubert Manseau ont fait partie du Comité directeur de l’étude. Enfin, l’étude a été présentée au Congrès de Réseau Capital en février et elle a servi à supporter les discussions que Réseau Capital a pu avoir avec le Ministre Raymond Bachand lors de la préparation du budget. C’est là un bel exemple de partenariat entre Réseau Capital et l’ACCR que nous entendons poursuivre.

Janie C. Béïque             François Chaurette

Coprésidente                Coprésident

Réseau Capital              Réseau Capital

Réseau capital http://www.reseaucapital.com

CVCA http://www.cvca.ca

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