The State of Venture Capital in Canada: An Entrepreneur’s Perspective

There’s been a lot of talk about the VC funding environment in Canada recently and several prominent investors have weighed in. I haven’t heard much on the topic from “the other side of the table,” so thought I’d provide my perspective, having recently raised our Series A from investors on both sides of the border.

There’s no question that raising money for your startup is more difficult in Canada than in Silicon Valley. The gap is most apparent at the early stage, where it’s almost impossible to get anyone to buy into your idea and take a bet on you without showing meaningful revenue traction in your business. The idea of “raising money with a PowerPoint deck” is almost laughable in Canada.

Here’s the reason why: until very recently, most of the early-stage money flowing into Canadian companies was not coming from entrepreneurs. It came from wealthy individuals who are more concerned with capital preservation than with building big companies.

This meant they didn’t take big risks on big ideas and when a company they did invest in had the potential to go big; they would instead push for an early exit. The entrepreneurs behind these companies didn’t get to experience true scale and massive success, and also didn’t make the kind of money on their exits which allowed them to aggressively angel invest in the next crop of startups.

That’s all changing. Accelerators like GrowLabs and Extreme Startups provide a proving ground for entrepreneurs and ideas. Proven entrepreneurs like Ryan Holmes and Dan Martell are supporting their local ecosystems with capital and mentorship. Silicon-Valley-style seed funds led by former entrepreneurs are starting to emerge, including Version One and Golden Ventures.

At the growth stage, Omers Ventures, iNovia Capital, and BDC are starting to make some big bets on IPO-potential companies, giving them the support and resources they need to get there. US firms are also starting to realize that the access to talent in Canada puts many Canadian companies at a competitive advantage for world domination and they’re starting to compete aggressively for the hottest deals. As they co-invest with our Canadian VCs, some of that “go big or go home” attitude will start to rub off. It will have to if the Canadian funds want to stay competitive in their home market.

Even though it may feel like Canadian companies are at a disadvantage to their US counterparts from a funding perspective, things are moving quickly in the right direction. There really has never been a better time to start a company in Canada.

Tomorrow I’ll share some strategies and tips for Canadian companies looking to raise VC.