By Chris Arsenault, Managing Partner, iNovia Capital

Written up for the CVCA Private Capital Magazine and curated by VCrants.com Blog

The C100 is an exciting new initiative that has recently launched to turbo-charge the development of Canadian technology startups.  Comprised of a passionate group of primarily Silicon Valley based Canadians, the C100 aims to foster relationships that will lay the groundwork for future Canadian success stories at the highest echelons of the technology industry. On May 25, 2010 the newly formed, non-for profit association hit the road in Ottawa for a networking reception at the offices of the Foreign Affairs and International Trade Canada to announce its Canadian launch. Given the tremendous traction that the group has already gained, none of the 125 privileged guests could believe that the C100 was only a few months old.

So why so much hype around the C100?

For starters, this young organization has demonstrated quantifiable results and has awakened hundreds of Canadian technology entrepreneurs to a new dimension – one where Canadians are helping fellow Canadians to succeed. In order to achieve such success, a C100er doesn’t just lend his or her name to setup a meeting in the Valley or provide funding to a talented entrepreneur; rather, he or she provides a “Path to Success”. The package provided by C100ers to young, dynamic and talented Canadian entrepreneurs includes access to role models, coaching & mentoring sessions, networking events, financial capital and a healthy dose of inspiration. “There is a bigger story here than just providing introductions or capital”, said Anthony Lee, a General Partner at Altos Ventures who co-founded the C100 alongside Chris Albinson (Managing Partner at Panorama Capital). “This is a non-for profit, we have no permanent staff, no one is being paid to do this, everybody is a volunteer and cares about giving back to Canada”.

With over 300,000 Canadians now working in Northern California (almost 1% of the Canadian population), the C100 aims to attract those Canadians at a stage of their lives where they want to give back to their homeland in a truly unique way. “C100 Charter Members include top executives from technology giants such as Apple, Cisco, Electronic Arts, eBay, Facebook, Google, Microsoft and Oracle, plus a terrific group of start-up CEOs, and some of the most active venture capital investors in both Canada and the US”, said  Anthony. Now over 500 members strong, including 70 Charter Members, the organization expects to further broaden its influence by reaching out to the non IT sectors, such as Life sciences and Cleantech. Plans are also in the works for the group to expand its membership footprint in the East Coast, taking advantage of another large community of successful expatriates who share in the C100 vision.

Here is what most C100 Charter Member looks like today:

• Canadian and Silicon Valley based;
• Senior Executive (VP or C-Level) within a successful tech company, Founder or CEO role at a start-up or as a Partner with a VC Fund;
• Has the ability and resources to provide coaching, mentoring and introductions to aspiring Canadian entrepreneurs;
• Fully committed to participating;
• Passionate about Canada;
• Wants to give back!

Since its inception, the C100 Organizing Committee has already helped kick-start a new era in Canadian entrepreneurship. Beyond delivering on membership goals, the organization has hosted over dozen networking events in major cities across North America (including Los Angeles, San Francisco, Menlo Park, Vancouver and Ottawa). The inaugural 48Hrs in the Valley mentoring event was also a tremendous success, hosting 20 top Canadian tech start-up entrepreneurs for a two day session in the midst of the world’s technology headquarters.  To build on the momentum of these events, the group also holds quarterly mentoring sessions via Cisco Telepresece to provide additional support to eager entrepreneurs.

Cross border deals by C100ers already account for over $40M in funding: Calgary based Tynt, Toronto based Kontagent, Montreal based Beyond the Rack, Edmonton based Immunet, Toronto based Dayforce, Montreal based Vantrix, to name but a few. Also worth noting, Toronto based Bumptop acquisition by Google was also co-funded by two C100ers.

The growth of Canadian start-ups in the US is still heavily dependent on their ability to effectively access the Silicon Valley market. The Tynt example provides a perfect case study of what C100 intends to do for Canadian entrepreneurs. “Chris Albinson helped Tynt’s team make contact with executives at Google, Facebook, Twitter and other important partners — all of which were very interested in the new technology. We started seeing short term business development results which would have been much more difficult to accomplish without the C100 ”, said Derek Ball, President & CEO of Tynt.

“I feel a strong sense of patriotism towards Canada – growing up there gave me an amazing start in life – and I’m happy to be at a stage in life where I can give back by supporting Canadian technology entrepreneurs. It is not all altruism though. There are some very talented technology entrepreneurs in Canada and I not only want to see them succeed, they are an additional source of potential deal flow for my work as a venture capitalist in the Silicon Valley” said Katherine Barr, Partner at Mohr Davidow Ventures.

The passion and drive behind the C100 marks an important change for Canada and the Canadian Tech Community. Not only is it time we realize we are already leaders within the global economy, but by regrouping and providing a forum to learn from each other, we are poised to play our most important role yet in the ever changing landscape of Communications, Digital Media, Enterprise Software and the real-time Internet.

The C100  sponsor members: Alberta Enterprise, BDC Ventures, iNovia Capital, Founders Fuel, Extreme Venture Partners, bootup Labs, Communitech, MaRS, FMC, OCRI, Growthworks and the Canadian Consulate General.

If you haven’t yet had a one-on-one conversation with a C100 Member, don’t miss the opportunity to meet up at the Quebec city conference on October 25-26th or through one of the many mentoring, coaching and networking events. You’ll find all the details at http://www.theC100.org

Don’t forget to checkout the Fall edition of the CVCA Private Capital Magazine at the CVCA web site.

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repost by Chris Arsenault, Managing Partner at iNovia Capital

Earlier this month I was invited by Rob Hyndman to post some of my views on the topic of: The Future of Venture Capital in Canada, as part of a series of posts at The Mark – Canada’s daily online forum for news, commentary, and debate. I ended up posting a short view of the “VC Ecosystem”, outlining only but a few key elements critical to having a stronger and most importantly a viable tech industry supported by venture capital in order to compete on a world wide basis. David Crow, added some valuable comments relating to “Creating a Venture Culture” so as did ex-VC and entrepreneur Rick Segal, tech CFO Mark MacLeod and others, participated in the discussion and shared their views on the topic. If you haven’t read the posts, I strongly suggest you give it a read.

I fundamentally believe in the early stage venture capital model that supports promising high growth tech startup entrepreneurs. And through my efforts and those of my colleagues and partners at iNovia Capital, MSBi Valorization, the CVCA, the C100 and numerous other initiatives, we are trying to make the model work by approaching venture capital the same way you one would build any other tech business: with the right people/team at the right time (entrepreneurs vs. operators); by building a strong network of knowledgeable partners with complementary skills sets and long term relationships; and by understanding what startups and entrepreneurs need from their early stage VC’s and deliver results/returns to our Limited Partners while properly managing expectations. Building an Ecosystem takes time, commitment and passion.

Building an Entrepreneurial Ecosystem requires the right culture and mindset! For the last 12 years I’ve dedicated my entrepreneurial life towards helping to build successful tech business via my role as an active early stage investor. Over this same period of time I’ve witness important changes across the Canadian VC landscape which continues to evolve and now seems to be driven by a more entrepreneurial culture, one that includes Venture Capital savvy Entrepreneurs that understands the role of VC funding more than ever before. Hopefully the pieces will continue to fall in place and we will see the next generation of successful Canadian tech entrepreneurs that will change the way we work and live be funded by Canadian VC’s.

Earlier in March I was given the opportunity/challenge to discuss Entrepreneurial Venture Capital by giving a, “fast, 15 seconds per slide, 5 minute 20 slide presentation” at Ignite Montreal. My presentation was specifically on the topic of trying to communicate how to “Make Venture Capital Work”.  I really like the Ignite presentation model, but it’s indeed a challenging concept, too bad I ended up doing the basic mistake of trying to say too much in too little time… thus not saying as much as I could if I would of said less!

So, many entrepreneurs these days are talking about “How the Venture Capital Model is Broken”, which is the wrong way to address the lack of capital Canadian entrepreneurs face! The VC Model isn’t broken because it never really worked in the first place, period!

With the exception of the 1980’ and the few last years of the Internet bubble, the model has never been successful for the masses, but has been only for a handful. And, when it comes down to Canadian numbers, we have to account for an additional level of difficulty: the fact that Canada doesn’t have the “weight” of numbers in its favor. Not only does Canada have a less mature IT and Biotech industry when compared to the US, it also has a small and nascent private equity and venture capital industry, and still only has a handful of privately managed venture capital funds today.

The stories about the highly successful technology entrepreneurs as well as those about the rockstar venture capitalists (note: over 80% of all venture capital returns are generated by less than 25% of the venture capital funds out there) created the impression that the only thing needed to build a high valued successful startups was an entrepreneur with an idea and an investor with cash! This meant that venture capitalists could blame poor returns on unsuccessful entrepreneurs while those entrepreneurs could blame their failures on the lack of capital or restrictions tied to the capital they did raise.

The math is the same for a Canadian venture capital fund as it is for a US venture capital fund. Investors in venture capital funds usually expect a high IRR (internal rate of return) – Top tier venture capital expected returns in the +30% IRR, a rate that is far above banking rates due to the high level of risk involved. A Venture Capital fund will usually has a ten year life and will require a certain level of management fees over that period. Therefore, in order to understand the type of capital that needs to be returned to the investors of the Fund (the Limited Partners) one needs to plan on generating three times (3x) return of capital to be successful and part of the Top tier firms that are able to continuously raise additional capital and funds.

In a nutshell, that means that a $100M size fund must return approximately $300M in order to generate the expected level of returns of a Top tier fund! So, knowing that for an early stage venture capital fund, one can expect it owning on average 20% of any given company in a portfolio of around 15 companies (for a $100M size fund), this would translates into $1.5 billion of aggregate portfolio enterprise value at exit, or $150M in cumulative EBITDA based on a 10x EBITDA exit valuation, needed to generate those type of returns. That’s pretty demanding! Managing expectations also sets the bar as regards the type of actions that will be put forward to achieve those expectations. Maybe it’s time we set an aggressive but achievable bar that would benefit the whole industry, no?
Reality is that entrepreneurs operate in a living “Ecosystem” that feeds itself by growing and building new connection. No party can do it alone! The community feeds itself off its own growth. High growth technology companies need venture capital to succeed and the venture capitalists need to back successful entrepreneurs to generate strong returns. Not only do we need to have better return expectations for venture capital funds, we also need better collaboration within the community to build networks strong enough to support promising technology companies and deliver high shareholder value.

The more successful entrepreneurs are, the more successful venture capital funds will be, leading in turn to more funding for entrepreneurs.
We have to learn how to expect more and know how to get more. Yes, funds and large institutional investors like pension funds and insurance companies should expect better returns from their venture capital investments. The last 10 years of Canadian venture capital returns represent -0.2%, yet expectations were in the unrealistic + 30% range, while solid manageable returns should be more in the 15% level. Large institutional investors can help themselves achieve such realistic returns by selecting fund managers with entrepreneurial backgrounds and experience with building successful companies. Managers who think and act like the entrepreneurs they back are better suited to select the ones who understand how build a successful start-up and have the most chances of succeeding.

Likewise, entrepreneurs should expect more from themselves, their teams and their investors. Entrepreneurs need to understand what is expected from the capital they raise and they can do this by selecting the right potential investors and doing due-diligence on them, by understanding the ecosystem they are operating in and making sure they surround themselves with people who are stronger than themselves, and generate stronger returns by setting themselves up for success.

High but achievable expectations create and define leaders!

Entrepreneurs are natural leaders, because they are able to execute on ideas, they transform opportunities into tangibles such as jobs, products and profits. So by having more entrepreneurs funding other entrepreneurs, we have more chances of building a sustainable ecosystem. It takes time to build a viable company, and by understanding the type of returns that are expected from the different source of funding, entrepreneurs and fund managers alike will be able to create a model that works.

The venture capital model is broken only to those who don’t understand it
those who aren’t willing or interested in investing the energy to adapt it to their reality. Like other industries, the venture capital industry will continue to evolve over time.

I’m looking forward to seeing the level of returns over the next five to 10 years as the Canadian venture capital industry begins this evolution – where entrepreneurs are funding entrepreneurs

Now, some questions for you:
- What do limited partners think of the emerging number of entrepreneurial driven Venture capital Funds?
- What do entrepreneurs think of the new breed of entrepreneurial VC’s?
- Is the Canadian market mature enough to trigger the level of collaboration required to build a strong ecosystem around Canadian technology companies?
- What is expected by the entrepreneur of the early stage VC’s (other than the obvious $)?
- How will you be part of the “make it Happen” generation?

For those interested in participating, take a look at the following few links to recent articles and you’ll get a feel for the energy and around the subject:
The Mark: The Future of Venture Capital in Canada
La Presse: Jacques Bernier, de Tralys: le goût du risque
Tech vibes: Venture Capital Funding Outlook In Canada
Financial Post: Venture capital finally gets a break
TechCrunch: Strength In Numbers: Canadian Entrepreneurs Flock To The C100
CVCA: Canadian Venture Capital Investments in 2009 – Lowest recorded in 13 Years
StartupNorth: What is being a startup really about?
Bootup Labs: Startup Visa Canada

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Re-Post by David Crow for StartupNorth

Mantella Venture Partners launched today.It’s a $20MM early stage technology fund based in Toronto.

“Unlike most venture funds that are supported by institutional investors, this one is backed by Mantella Corporation, a family owned commercial and residential real estate developer who has been entrenched in the GTA market since 1946. The fund is also focused on the concept of ‘hands-on capital’, ensuring that early-stage entrepreneurs get the hands-on support they need at every stage of a company’s creation and growth to help facilitate”

The main investment partners are Robin Axon and Duncan Hill. Robin is ex-Ventures West and Ducan was an EiR at Ventures West and previously had founded Think Dynamics (acquired by IBM back in 2003). They also run Basecamp Partners/Labs where they have been incubating PushLife, Chango and a couple of other startups.

It’s interesting to see an emerging breed of Canadian incubators and small funds like Mantella VP, Extreme VP/Xtreme Labs, Bootup Labs, Flow Ventures, Montreal Startup, Wesley Clover, and others. All of these have very different models and motivations. But they exhibit the need many startups have in both getting to Product/Market Fit and then the business development and go-to-market efforts. Both of these efforts require capital, and it’s great to see VCs that traditionally don’t get their hands dirty with operational details down in the weeds.

Full press release below.

TORONTO—March 2, 2010—Mantella Venture Partners announced today the formation and launch of a $20M investment fund to support early stage technology ventures in Ontario. Mantella Venture Partners is a collaboration between Basecamp Labs, a private early stage technology accelerator, and Mantella Corporation, an established family-owned commercial and residential real estate developer in the Greater Toronto Area.

Mantella Venture Partners will invest in entrepreneurs who are building early stage mobile and Internet software companies, helping them to get their ideas from conception to market. Through the Basecamp Labs accelerator, Mantella Venture Partners will provide hands-on support at every stage of a company’s creation and growth – from business development and marketing to financing and team development – to help facilitate early market traction.

Mantella Venture Partners is managed by Robin Axon and Duncan Hill, the founding partners of Basecamp Labs, experienced venture investors and company creators who have been involved in multiple successful venture exits to companies like IBM, Intel, Microsoft and Siemens.

“For the past few years, we’ve seen a steady decline in Canadian venture capital deal flow, the number of VC-backed firms, and the average investment size,” says Axon.  “In fact, according to a recent CVCA report on the industry, investment levels in 2009 were the lowest they’ve been in 13 years.”

“But innovation is still thriving,” says Hill. “With the venture market in such a state of flux, the timing could not be better for the launch of a new fund that is focused on both early-stage investing and providing the hands-on support entrepreneurs need to ensure market success.”

The existing Basecamp Labs portfolio includes two companies: Chango, an ad buying platform for direct response advertisers; and Pushlife, a mobile entertainment platform for mobile operators.

“The value of combining capital with guidance and support from a team with extensive experience building companies, can be seen in the progress of our first portfolio companies,” says Robert Mantella, president and CEO of Mantella Corporation. “Robin and Duncan are experienced investors and entrepreneurs who are passionate about technology and know what it takes for a start-up to succeed. Together we can breathe new life into a changing venture industry.”

Duncan Hill was the Founder and Chief Technology Officer of Think Dynamics, a developer of data centre automation software that was acquired by IBM in May 2003. He spent two years at IBM driving strategy for early enterprise cloud computing. Most recently, Hill served as Entrepreneur in Residence at Ventures West; was an independent director for RapidMind (acq. by Intel August ’09); and was executive advisor to Opalis (acq. by Microsoft December ’09). He currently serves on the Chango board of directors and on executive advisory boards at Pushlife, ServiceMesh, Cirba, Embotics, and the Velocity program at the University of Waterloo.

Prior to founding Basecamp Labs with Duncan Hill, Robin Axon was a partner at Ventures West on the IT and communications team. Before that, Axon was at MD Robotics (formerly Spar Aerospace) and the Canadian Space Agency, where he helped to prepare the Canadarm2 for installation onto the International Space Station. Axon has served on the boards of a number of technology companies including: QuickPlay Media, RapidMind (acq. by Intel August ’09), AudienceView, Fortiva (acq. by Proofpoint ‘08), Chantry Networks (acq. by Seimens ‘03), Belair Networks and Instrumar.

About Mantella Venture Partners
Mantella Venture Partners is a $20M early stage investment fund with a hands-on approach to building technology companies in high growth markets.  The fund invests in founders focused on creating market-altering mobile and Internet software businesses, and surrounds them with an ecosystem of passionate, experienced operators that drive early market engagement into sustainable business success. Mantella Venture Partners will invest up to $500k at inception with the ability to support subsequent rounds as required. It is managed by Robin Axon and Duncan Hill, experienced venture investors and company creators who’ve been involved in multiple successful venture exits to companies like IBM, Intel, Microsoft and Siemens. Additional information is available at http://mantellavp.com/.

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Re-posted from Suzanne Dingwall Williams blog at Venture Law Lines

Just before Christmas I was out to dinner with a group that included Q1 Capital’s Mike Middleton, some US VCs and Vancouver’s Paul Lee. Paul was originally part of Distinctive Software, a Canadian game developer purchased by Electronic Arts. He stayed with EA for more than 10 years post-acquisition, rising to President of EA Studios before leaving to form Vanedge which, he explained to me, was going to be a new investment vehicle that he and his friends put together to invest in early stage digital media plays.

As it turns out, Paul has quite a few friends. PE Hub reports today that Vanedge is about to close the first $100 million in commitments from partners that reportedly include EA, BDC and EDC. I am wishing I’d put my wine on his tab. Interactive folks – this is the team to get to know.

More later.

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