Posts Tagged ‘ venture capital

Change in tax law sends a strong signal to international investors that Canada is “open for business”

Following March 4th Canadian federal Budget, Deloite released a comprehensive summary (Link to full release) of the impact of the changes to the Taxable Canadian Property better knowned as Section 116, which is outlined below.

The CVCA Applauds Budget Decision to Remove Foreign Investment Barrier (CVCA release Link).

cvca-icon“The CVCA has long requested the elimination of Section 116 as it pertains to the venture capital and private equity industry and we wish to congratulate the federal government for taking action,” said Gregory Smith, President of the CVCA. “Many CVCA members, as well as a large number of individuals and organizations, have been actively encouraging the federal government to eliminate this section of the Income Tax Act which has had a dampening effect on cross-border venture capital and private equity transactions. Its removal provides an important signal to foreign investors that Canada welcomes their contributions to growing companies and employment.”

Note that there were also a number of highlight’s from the Canadian government’s Throne Speech and Budget that may have a direct impact on the technology landscape of Canada. TechVibes did a good job of summarizing the main Tech elements (Link to blog here)

Deloitte. SUMMARY

“The CVCA has long requested the elimination of Section 116 as it pertains to the venture
capital and private equity industry and we wish to congratulate the federal government for
taking action,” said Gregory Smith, President of the CVCA. “Many CVCA members, as well as
a large number of individuals and organizations, have been actively encouraging the federal
government to eliminate this section of the Income Tax Act which has had a dampening effect
on cross-border venture capital and private equity transactions. Its removal provides an
important signal to foreign investors that Canada welcomes their contributions to growing
companies and employment.”

Government removes tax barriers and stimulates flow of capital across Canadian border

Canadian companies across the country are likely applauding today’s federal budget, which contains tax law changes that give them the advantage they need to compete on the global stage.

By amending the definition of “taxable Canadian property” to exclude shares of Canadian private companies (where not more than 50% of their value is derived from real property in Canada, Canadian resource property or timber resource property), the government has significantly reduced administrative and, in some cases, economic barriers to foreign investment in Canadian-based innovation and technology. This change puts Canada at the top of the list of places to invest globally.

“The changes in tax legislation announced in today’s budget are among the most significant changes to capital gains taxation since the introduction of taxation of capital gains in 1972,” explains John Ruffolo, Global Tax Technology, Media & Telecommunications Leader, Deloitte. “The Canadian government has listened to the financing community, understood the severity of the problem and removed the major tax barriers that have prevented critically needed international investment capital from crossing our borders.”

“At a minimal cost to the government, this amendment will have an immediate, positive and direct impact on Canada’s ability to grow a robust Canadian technology industry,” explains Terry Matthews, Chairman, Wesley Clover. “By sending a clear message to international investors that Canada is “open for business”, the government will make Canadian companies more attractive to foreign investors overnight. This will help Canadian companies raise the capital they need to achieve global leadership status.”

The change means a much more welcoming environment for foreign investors. In the vast majority of cases, non-residents who were not taxable on the disposition of their investments in such shares due to Canada’s broad international tax treaty network, are now exempt from tax under Canadian domestic law without having to apply for treaty relief.  As a result, they are no longer required to comply with the Section 116 tax clearance certificate procedure or file a Canadian income tax return. The changes also remove what were perceived to be insurmountable barriers for many venture capitalists who considered the previous administrative requirements and economic delays for each investor to be strong deterrents to investing in Canada.

“The removal of the Section 116 tax barrier is a tax master stroke by the Canadian government enabling Canada’s emerging technology companies to access deep pools of international capital and the vast global customer markets to which those pools are connected,” notes Stephen Hurwitz, Partner, Choate Hall & Stewart LLP in Boston. “I predict that over time this farsighted tax legislation will help propel Canada’s extraordinary technology into global industry leadership in numerous markets, and will likely be viewed in the future as a defining moment for the Harper government in Canadian innovation.”

BACKGROUND INFORMATION ON THE SECTION 116 TAX BARRIERS

The following describes the tax barriers that were removed in today’s budget and that are no longer preventing international investment in Canada:

  • Withholding and Section 116 certificate process — The overwhelming majority of foreign VCs are not subject to Canadian tax when they sell an investment, but face a delay of many months to work through the Section 116 tax clearance process until funds can freely flow to them. Many foreign VCs are structured such that each of the investors in the VC — sometimes hundreds or even thousands — is subject to this clearance process as if they held the investment directly. This delay results in lower returns and frequently causes direct financial loss to investors. Canadians who invest in the United States, the United Kingdom and other major global markets do not face such taxes or delays from red tape.
  • Requirement to file Canadian tax returns by foreigners who don’t owe taxes creates hundreds of pages of unnecessary paperwork — Canada imposed tax filing requirements in circumstances where no taxes were payable by these investors. When a foreign VC sells an investment, each investor of the foreign VC has to file a Canadian tax return even if they don’t owe any taxes. This results in literally hundreds of pages of documents that are required for signature and processing for a single sale. This tax return filing issue also applies to certain Canadian public companies.

Why Canada was perceived by VCs as having an unfavourable tax environment

A 2007 survey by Deloitte and Canada’s Venture Capital & Private Equity Association (CVCA) of 528 VCs from around the world found that 40% of U.S. respondents and 28% of global respondents cited Canada’s unfavourable tax environment as a key reason for not investing in Canadian companies. This level of concern is five times higher than for any other country in the survey and reflects the current investment crisis within Canada’s venture capital industry. The survey also found that Canada is attracting the attention of just 11% of U.S. VCs as a primary country for expansion — behind China (34%) and India (24%).

Please find the full release by Deloitte Here. EAVB_THMQKZAOUO

Feds to tackle Section 116 in Budget

Re-post by Mark McQueen for the Wellington Financial Blog Canada USA flag

March 3rd, 2010

Today’s Throne Speech contained a passage that will excite our friends John Ruffolo, of Deloitte, Stephen Hurwitz, of law firm Choate in Boston and Yaletown’s Steve Hnatiuk (Chair of the CVCA Tax Policy Committee). For several years, these three, along with the help of countless others in the venture capital industry, have tried to help the Federal Government understand that Section 116 of the Tax Act served as an unnecessary barrier to foreign investment.

In a nutshell, Section 116 required the limited partners of U.S.-based venture capital funds to make individual tax filings with Canadian tax authorities when a Canadian VC investment was sold, even though there would be no tax to pay as a result of bilateral tax treaties. To some, this was such a hassle that certain VC firms wouldn’t look to invest in Canada as a result.

The CVCA has long lobbied to have this dealt with, as one facet in our broad Commercializtion Support Program.

In yesterday’s Throne Speech, this reference caught everyone’s attention:

Our Government will open Canada’s doors further to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need.

Continued on the Wellington blog (Link here)

Mantella Venture Partners Launches $20M early stage fund

Mantella VP & Basecamp LabsRe-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 PushLifeChango and a couple of other startups.

It’s interesting to see an emerging breed of Canadian incubators and small funds like Mantella VPExtreme VP/Xtreme LabsBootup LabsFlow VenturesMontreal StartupWesley 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/.

StartupNorth

Start-Up Brain Drain: The Next Threat To Canadian Venture Capital?

Re-post by Suzanne Dingwall William of Venture Law

When US VCs grow introspective, it’s almost never good for Canada. Which is why we should all be concerned about the self-reflection now taking place south of the border.

In recent months, US VCs have cottoned on to the importance of immigrant entrepreneurs to an innovation economy. This used to be Canada’s exclusive domain; thanks to historical inclination and demographics, we’ve long known we need foreign innovators in order to grow our economy.

Now, US venture capital is catching up. Their zeal is fueled by a recently released study by the NVCA, which notes that (a) immigrants have started more than 25% of U.S. public companies that were formerly venture backed, and (b) more than 50% of the employment generated by U.S. public venture-backed companies has come from immigrant-founded companies like Intel, eBay, Yahoo!, and Sun.

The New York Times has also taken note, citing Harvard Law professor Vivek Wadhwa’s claim that 52.4% of today’s Silicon Valley startups have at least one foreign founder. US VCs are figuring that, to expand domestic deal flow, they need to expand the immigrant entrepreneur base.

As a result, US VCs are now actively lobbying the Obama administration to increase the number of specialty worker visas (referred to longingly by Canadians with dreams of a Silicon Valley life as H1B Visa).

This is not the best of news for Canada, unless you are a young entrepreneur who believes his business would get more and better financial backing if only he could relocate to California. The limited number of H1B Visas in the US has driven high tech growth in Canada, in some respects; in several cases, American businesses who cannot attract or sponsor adequate numbers of high tech professionals have near shored that work to Canada.

In a larger sense, there is an active competition heating up for innovators from outside of North America, one which Canada can ill afford to lose. Canada has some immigration programs for entrepreneurs which are laudable, but not spectacularly effective. There is a need to think and plan for how to capture this desirable talent pool, before new market entrants steal our thunder.

The Changing Face of the Canadian VC industry – Tandem, Cycle, Teralys, Kirchner…

 

By Chris Arsenault Managing Partner & COO, iNovia Capital

http://twitter.com/chrisarsenault

New yet familiar faces are marching into the Canadian VC landscape with different approaches towards supporting tech entrepreneurs in their endeavour to change the world. At last’s year CVCA annual conference, the theme was utmost appropriate: The Face(s) of Change! Only one year has gone by, yet so much has already changed, new and familiar faces are showing leadership and paving the way for an industry revival.

Today’s BDC announcement of a $75M commitment towards the newly created Tandem Expansion Fund (link to press release), is yet another example of how the Canadian venture capital landscape is being reshaped from an entrepreneurial angle. The managers behind this $300M later stage fund are experienced operators, with investment backgrounds and core entrepreneurial values. Interesting enough are the powerhouses that will provide global networks behind this new fund: Charles Sirois (Telesystem Ltd) and Brent Belzberg (Torquest). I know Charles Sirois and the Telesystem Ltd group pretty well, having worked for Charles for a few years in the past and for having co-invested with his other VC funds (note: Telesystem is a small investor in iNovia Capital’s second fund). I have much respect for Charles, not only because he founded and managed companies, some he built from scratch and lead them to several hundreds of millions and even billions in value, but rather because Charles has been a fervent and active supporter of entrepreneurship, understanding what drives entrepreneurs and accepting that they have the right to try, to fail, adjust, and succeed.

What does Tandem means to me?

It means that many great Canadian companies and strong tech entrepreneurs having built their businesses up to the point where a substantial amount of capital is needed to either help them consolidate a market segment, or to simply support their growth, won’t be obliged to only look south for a strong financial partner. For iNovia Capital, it means that in some cases we will have a later stage co-investor able to lead those few $10-20M rounds required to further fuel the growth of our most successful companies.

The Tandem Expansion announcement comes on the tail of Quebec based Cycle Capital – who has recently launched its cleantech investment activities with the addition of new partner/recurring VC fund managerBernhardt Zeisig; Western Canada’s warming up to the recent formation of an interactive entertainment venture capital fund called Vanedge – the team are all gaming industry veterans from Electronic Arts and Dreamworks Interactive – Paul Lee, Glenn Entis, Owen G. Mahoney and Jason Chein; Celtic House’spreparation for their new fund IV fund raising activities with the addition of entrepreneur and VC experience Pierre-André Meunier; and Steven Hnatiuk and his team out in British Columbia at Yaletown Venture Partnerswho announced not too long ago the first closing of a second early stage cleantech & IT fund.

Interesting enough, many new VC faces are in fact venture capital knowledgeable operators and entrepreneurs. Others, like Bud Kirchner of Kirchner and Company are not only showing leadership, they are taking ownership! The Kirchner and Company team havebeen extremely active and involved on both sides of the equation: as a VC, by partnering up with existing fund managers to raise funds and actively oversee direct investments such as with Avrio Ventures where Bud joined as a Partner; then, by being one of the most active investment bankers doing M&A and divestitures in Canada, sometimes representing the buy-side and other times assisting the sell-side; and finally, as a key partner to secondary fund managers, acquiring and managing the exit process for a broad range of portfolio companies (rumour is that they recently came to an agreement with Coller Capital for the management of the old portfolio of Innovatech Montreal which was sold to to Coller in a secondary transaction a few years ago).

The following chart outlines what Kirchner & Company say makes them different. Funny thing is that it doesn’t sound any different, right? Wrong. Its different because Kirchner and Company, like many new entrants in the VC ecosystem, are building their business on new paradigms, where the people in the team are less alike, more complementary and more driven by entrepreneurial fuel. Just take a look at Kirchner’s recent additions to the team: Barry Gekiere (ex-Ventures West), Les Lyall (ex-Growthworks), Claude Vachet (ex-Multiple Capital), Andy Agrawal (entrepreneur), Chris Butlin (entrepreneur), Mike Cooke (entrepreneur)… and I can keep going. Doesn’t this start to sound way more like a next generation VC fund than the typical investment banking firm?   

It will be interesting to see how these new and returning faces in the venture capital landscape will affect the type of VC transactions we were once used to seeing.  

My recent post about our industry being at a turning point is more and more appropriate. With the recent announcement of Teralys Capital, a $700M + Fund of fund, managed by Jacques Bernier, an entrepreneur turned VC who then turned Fund of Funds Manager for the largest Quebec based labour sponsored fund (Fond de solidarité FTQ), and who now manages Canada’s largest Fund of funds, it seems like we are witnessing change within change.  

For Tandem Expansion as well as for Teralys Capital, our governments (both federal and provincial) are playing key roles of being “enablers”. By participating as pure investors, by expecting full return of capital in addition to reasonable returns, at the same rate and on the same terms as their private co-investors, our governments are setting a new tone: where they aren’t providing any bailout, any grants, any loans; they aren’t selecting or politically influencing the type of companies these funds should invest in; they aren’t trying to save any specific industry by giving tax credits for job creation; they are enabling sophisticated fund managers to attract important amount of capital into their funds (as we all know size does matter) as well as providing the level of commitment necessary to attract foreign co-investors into investing in promising Canadian tech companies. Anyway we look at it, having the means to invest and to support our entrepreneurs, directly creates high paying jobs, clusters of expertise and put Canada on the map (just think of what would of happened to these industries without venture capital: Quebec’s gaming and media production industries; British Columbia’s Biotech industries; Ontario’s semiconductor and telecom industries; Toronto’s software industries, Montreal’s aerospace industry, and I can go on and on). Our governments are doings the right things, now it’s up to our fund managers to do things right!

What is next?

Our governments and our large Canadian institutions alike, need to further value the impact that the venture capital and private equity industry has on the competitiveness of Canada on the world markets. One day, soon enough, I hope to see our Canadian government, as well as other provincial governments, follow in the footsteps of the Teralys Capital model and allocate substantial amounts of capital ($300-500M each) towards enabling private fund managers in their endeavour to attract local and foreign institutional capital, in order to better support our tech industry and our entrepreneurs, and by the same means, generate important returns on capital over the next ten to 15 years, while, as a result directly impacting the success level of Canadian innovation commercialization and job creation.  

As the Canadian Venture capital industry matures, we will witness higher returns, recurring entrepreneurs and an increase in local success stories. More high growth companies will not be obliged to be acquired by a foreign entity in order to provide exit opportunities to its stakeholders and with the recognition that this class of investment (venture capital), although considered high Risk, will prove to generate High Rewards. That should be enough to attract more Canadian pension funds, banks, insurance companies and private institutions,  with allocations of a fraction of their capital towards Canadian venture capital funds.

With this year’s CVCA annual conference, themed “Embrace our Energy”, being once again sold out, I take it that allot of the above will be subject of discussion in Calgary.  

Thoughts and comments welcomed.

P.S. for the latest and greatest industry headlines, follow the CVCA on Twitter at: http://twitter.com/CVCACanada

 

 

CVCA Welcomes New Quebec Fund of Funds

 

By Gregory Smith, President of the CVCA

CVCA – Canada’s Venture Capital and Private Equity Association welcomed the arrival of a significant new fund of funds that was put together by the Government of Québec, the Caisse de Dépôt and the Fonds de Solidarité. CVCA Press Release. Caisse de dépôt et placement du Québec full Press Release.

“This $700 million fund of funds first closing, called Teralys Capital, is a shining example of the positive impact that close public sector-private sector collaboration can bring about,“ said Gregory Smith, President of the CVCA. “The venture capital industry in Canada sorely needs more capital and more sources of capital supply in order to fund the industries of tomorrow upon which our future depends,” added Mr. Smith.

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%.

“This worrisome situation must be halted and reversed,” said Mr. Smith. “Objective research recently conducted by the CVCA with the financial participation of several provincial governments including Québec, Ontario, Alberta and British Columbia as well as the federal government shows the positive ‘snowball effects’ that venture capital has on economic development and job growth. Evidence reveals that venture capital investment has resulted in close to 150,000 direct and indirect jobs in Canada and added $14.5 billion to GDP.”

The CVCA also welcomed the nomination of Mr. Jacques Bernier as President of the new fund of funds.

“Mr. Bernier has a long, positive track record in the venture capital industry and we wish him every success,” commented Mr. Smith.

CVCA

The CVCA – Canada’s Venture Capital & Private Equity Association, was founded in 1974 and is the association that represents Canada’s venture capital and private equity industry. Its over 1600 members are firms and organizations which manage the majority of Canada’s pools of capital designated to be committed to venture capital and private equity investments. The CVCA fosters professional development, networking, communication, research and education within the venture capital and private equity sector and represents the industry in public policy matters.

To arrange an interview with Gregory Smith, President of the CVCA, contact Iris Roesler, 416 607-5166.

 

 

 

Calling All Connectors

Re-post from Tech Capital blog

By Jacqui Murphy

Lots of discussion/blogging/articles over the past few weeks about entrepreneurs and innovation in Canada. Here’s where we weighed in: Tim Jackson: Entrepreneurship and the upside to a downturn

The consensus appears to be that yes, we do have great entrepreneurs and great innovation in this country. I for one believe this is true and have worked with a good number of entrepreneurs who have built (with their teams of course) very successful companies.

Lately, I’ve been spending a ton of time thinking about what we as a venture capital community and the broader technology industry can do to support these entrepreneurs. When I look around at the venture capital ecosystem in Canada (and elsewhere) mostVCs are either out of cash or have very little cash left to invest (there are obviously exceptions and some VCs have raised funds in the last couple of years). I’m not sure that the majority of entrepreneurs have heard this message. When I look at the amount of time and effort that Canadian entrepreneurs invest in pitching their companies to VCs (here and elsewhere), it makes me want to scream. If we could harness this time and effort and direct it towards selling products and services to real customers, imagine how much revenue all of these companies could generate.

Looking at the funding process today, entrepreneurs pitch their companies to VCs who pitch to LPs. Wouldn’t it be great if entrepreneurs never had to pitch VCs? What if we turned the process on its head and built such great companies that entrepreneurs could choose whether or not to fund their companies with venture capital? And what if VCs had to demonstrate value beyond money for entrepreneurs to want them to invest in their companies…? And wouldn’t it be great if VCs never had to pitch LPs to raise new funds because of off the chart returns? :)

So how can we help entrepreneurs beyond providing capital?

* By helping them generate revenue more quickly *

Here’s what I’m proposing:

1. Entrepreneurs/companies:

  • Map out your industry ecosystem: a) Types of companies you sell to (e.g. carriers) b) Types of companies you would partner with in order to sell (e.g. network equipment vendors)
  • Identify the specific companies that fall into this ecosystem: a) Potential customers b) Potential partners
  • Identify the specific person/people at each of these companies that you need to get in front of in order to sell your products (great tools for this include LinkedInand Jigsaw). Figure out where these people are located. Group by geography. Plan trips to visit these regions.
  • Search on LinkedIn to identify “connectors” who can introduce you to these potential customers/partners so that you can set up initial calls and then face-to-face meetings with them.
  • Commit to building out your LinkedIn rolodex and sharing the connections you make with other entrepreneurs.

Now, these first few steps can be difficult and will take a significant amount of time. If anyone can come up with a cost effective way to help entrepreneurs work through this process, please weigh in below in the comments…

Communitech is one organization that has been supportive in finding creative ways to help entrepreneurs work through this process.

2. VCs and other supporters of entrepreneurs:

  • Spend some time building out our LinkedIn rolodexes (many of us know many more people than the ones we currently have listed in LinkedIn).
  • Highlight the market sectors where we have experience on our LinkedIn profiles.
  • Respond to entrepreneurs who reach out to us for introductions. Go for coffee to learn more about them and their businesses. Introduce them to potential customers/partners and others who can help them generate revenue more quickly.

I spoke with a group of entrepreneurs last week on this topic — “Leveraging Non-Existing Networks Into Guerrilla Revenue Generating Strategies”. Many were skeptical at the beginning of the discussion but by the end, there was a real energy in the room.

I understand why people might hesitate to open up their rolodexes and connect people.

My response:

1. I am not proposing that we destroy our reputations by spamming our rolodexes with Canadian content :)    I am proposing that we spend a bit of quality time, interacting with entrepreneurs in our sectors and connecting them with potential customers/partners when/where we feel comfortable doing so.

2. We would be connecting our contacts with entrepreneurs who have developed products and services that have real value propositions. Our contacts may well benefit from being introduced to these entrepreneurs.

3. What good are our relationships if we don’t leverage them? We become more powerful and influential by sharing and connecting.

“He who receives ideas from me, receives instruction himself without lessening mine; as he who lights his taper at mine receives light without darkening me” – Thomas Jefferson (tip of the hat to Michael Masnick)

Some ideas to get started:

1. I’ve been told that there are about 300,000 expat Canadians living in Silicon Valley (yes, 300,000). Have you reached out to a Canadian expat today?

2. There’s a small but mighty group called Canada Connects on LinkedIn. Same objective as this post. Please join to help get our Canadian entrepreneurs on steroids.

I’ll be the first to admit this plan is not perfect. Constructive criticism with suggestions for improvement are absolutely appreciated.

 

For more about this post please go to the Tech Capital blog

Comments already in when first posted by Jacqui:

  1. Derek Smyth Says: 

    Jacqui,

    All good ideas. You’ve inspired me to join Canada Connects.

    ds

  2. As someone who’s dedicated himself to helping Canadian startups, I’m all over this. Just joined the Linkedin group.

  3. Amen,

    Capital is only one piece of the puzzle. Starting to layout the pieces are key.

    * Mentorship
    * Networking/Connections
    * Attention
    * Training
    * Goals and Timelines

    I’ve started to think about what it takes to leverage resources locally (my thoughtshttp://www.startupnorth.ca/2009/04/13/incubators-accelerators-and-ignition/ ). And you are 100% correct that we need to help connect entrepreneurs and build successful companies. The connections are for business development, hiring, marketing, etc. We so often fall back on a consulting mentality, i.e., if you want access to my network you should pay me to have it. This is just wrong. A percentage of something worth zero is worth zero. We need to encourage and enable young entrepreneurs.

    But this requires that they have a developed product and they need help getting to somewhere bigger.

  4. Great post Jacqui, I couldn’t agree with your comments more.

    “I am proposing that we spend a bit of quality time, interacting with entrepreneurs in our sectors and connecting them with potential customers/partners when/where we feel comfortable doing so”

    As somene that’s been on the other side of the table – every time I’ve chatted with a VC/Angel it’s been specifically looking for that. Yes money is nice, but most of the time an entrepreneur will quickly realize they aren’t ready for cash yet, and just need some insight, validation of their ideas, and some introductions.

    Your comments about opening your networks apply to more than just the VC scene – most business owners (including the ones funded by VCs) would agree that by providing a lot of value to their target customer base, they improve their customers, their industry and their position in the industry. It’s a win-win-win.

    Finally – regarding your question about identifying targets, this definitely can be automated. Social Networks + Quick & Dirty Semantic Dictionary + NAICS/SIC Code Business Listing + Sales Force API = Automated Lead Gen Solution. Just need someone to find the time to put the code together.

     

OUR INDUSTRY IS ALIVE AND KICKIN’ – So lead, follow or get out of the way!

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

Réseau Capital sharing the study on the impact of Venture Capital on the Canadian Economy (en français et en anglais)

Text en français au bas

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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

‘Lost generation’ of technology threatens Canada: official

Source: The Canadian Press

Mar 31, 2009. updated April, 2009

By Julian Beltrame


OTTAWA  - The ability of Canada to develop the new technologies of the future is in jeopardy because entrepreneurs can’t get financing to see them through the recession, the Business Development Bank of Canada warns.

The Crown corporation which helps finance Canadian businesses says the disappearance of venture capital in the country will snuff out hundreds of innovative small companies in infancy and their technology with them.

“It breaks my heart because if we let go of these technology companies, once this recession is over you will have lost all this (new) technology, you will have lost a decade,” Edmee Metivier, the development bank’s executive vice president of financing, told a House of Commons subcommittee Tuesday.

Metivier said the BDC is a shareholder in about 150 technology firms, but in the future the corporation will only be able to help finance a much smaller portion of startups. 

But she says there are hundreds more such companies across the country that can’t find capital to fund research and get new products to the markets. And the BDC can only do so much because it needs partners to finance entrepreneurs.

“They are all at risk, there is no money for them on the marketplace at the moment,” she said.

In a later interview, Metivier said the focus of governments has been on the survival of mature companies, but in doing so they risk losing the companies that represent Canada’s technological future.

“Canada has to think through what it has to do with this sector,” she said.

Before the committee, Metivier and Benoit Daignault of Export Development Canada laid out the difficulties faced by Canada’s small and medium sized companies in obtaining sufficient credit to operate and grow during the recession.

While Canada enjoys a sound banking system, the collapse of many other non-bank lenders _ representing about 30 per cent of loans _ has created a tight market for credit in Canada.

As a result, many companies are being denied loans or are being charged exorbitant interest, they said.

”The difficulties facing Canadian businesses have increased in 2009, so it is difficult to find low-cost financing in these circumstances,” said Daignault.

The Business Development Bank has come under criticism from Liberal finance critic John McCallum in recent weeks for moving slowly in implementing several budget measures intended to free up credit for both businesses and consumers, particularly the auto leasing sector.

Metivier was not confronted by the charges in the subcommittee, but said she had been prepared to respond.

She said she expects the Crown corporation to double the rate of the annual increase in loans this year, and said $750 million had already gone out the door in the first three months.

Any delays on the $12 billion credit facility to increase credit in the auto leasing sector, and loan guarantees for companies were due to the fact the corporation, which operates on a commercial basis, had never engaged in either activity in the past and needed to do due diligence, she explained. 

The loan guarantee facility first announced in December will be in operation starting Wednesday, she said, whereas the measure on auto leasing will likely be up and running by the end of May.

“It would have been humanly impossible to kick start (either) any sooner,” she said. 

Copyright © 2009 The Canadian Press. All rights reserved.