Jumpstarting Venture Capital in Canada: Is It Possible?

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ome December, the federal government will receive recommendations from appointee Sam Duboc on how best to use the $400 million it has earmarked to jump start venture capital in Canada.

Some of those recommendations will inevitably be based on measures adopted by Israel, which has become the western darling for government-supported schemes.

As a former Israeli venture capitalist, let me add the following caveat: don’t expect venture capital-sized returns. Since 2000, I had a front-row seat to the Israeli start-up tech boom. For almost six years, I was General Counsel to Benchmark Capital’s two Israeli funds, the Silicon Valley giant’s branch operation which over the past 11 years has invested over $500 million in Israeli startups.

Like many foreign venture capital investors, Benchmark was drawn to Israel by the combination of government financial incentives and initiatives which had attracted significant tech talent to the region. The result, VCs thought, was a new Silicon Valley East, a start-up ecosystem ripe for growth capital. Time may prove this to be the case.

There is no dispute that Israel, a country of eight million, only 64 years old, is a success story worthy of emulation. Notwithstanding its unfriendly neighbours, its constant state of war since its establishment, and its lack of natural resources, it has produced more startup companies than large, peaceful, and stable nations like Japan, China, India, Korea, Canada and the UK.

Here are some of the lessons I learned, some of which may make it difficult to replicate the Israeli success story here in Canada:

1. Attracting highly-skilled, motivated and innovative immigrants is necessary, and the Russian wave of immigration in the early 1990s fit this bill perfectly, and undoubtedly played a key role in the rapid growth of Israeli technology sector. The Russian immigrants were desperate to escape the Russian motherland, and Israel was an attractive destination, as it was handing out generous financial benefits to new immigrants.

These immigrants often used Israel as an interim layover, taking advantage of many of these significant initial financial incentives and benefits, en route to their dream destinations of the United States and Canada. At the end of the day, the initial financial incentives were not enough to keep many of these immigrants in Israel, and policies that are not sustained over the long term can create a revolving door of immigrants rather than a sustainable ecosystem.

2. As many know, the Israeli military is extremely well-regarded, and the same is true of its elite “Mamram” unit, where Israel’s brightest receive high-level training which positions them well for stellar careers as innovative entrepreneurs post-army service. The “Mamram” programming school is considered to be one of the best sources of high-quality software professionals in the world.

Its members are trained to be innovators and have access to exceptional technology with a security focus which is unparalleled when compared to their counterparts around the world. Following their time at “Mamram”, its graduates remain the elite, and are aggressively pursued in the high-tech sector, often by former “Mamram” graduates, and successful entrepreneurs in Israel who are not “Mamram” graduates are few and far between.

3. Unlike Canadians, Israelis are by nature, constantly seeking to forge the way, are independent, visionary and creative leaders, but are also aggressive, blunt and stubborn risk-takers who learned in the army that they can do and be anything, refusing to accept anything less than the best.

There are many who believe it is impossible to recreate Silicon Valley elsewhere—hardly a new revelation. Government funding is more often a subsidy than a stimulus, and unless the right players are involved, and sufficiently skilled and aggressive encouragement in creating and maintaining the right atmosphere, it will be challenging to reinvent the wheel here and change the way the wind blows.