My institution has supported all of the above (including the last, dealing with movie an tv production finance). Not popular at all, I guess everyone is looking for disruptive investment oppoortunities, in short time frames.

The problem with Canadian vc is it takes longer to build a great company than most people seem to be able to organize around. I think Roger Martin is really pointing our the fallacy of seeking short term gratification by random investments made within flawed vc business models. The solution lies in longer term investing, in lower volume, with much more concentrated bets.

The difficulties Canadian company founders face have been known for years, viz. too little capital doled out too slowly, and a lack of diligence expertise and nerve outside tried-and-true investment categories. One of several promising crossover situations I have been involved in was a chemo-informatics-based drug discovery company (back in those not-so-long-ago days when drug discovery was still hot)- Canadian tech VCs told me they ‘didn’t have a slot for virtual chemistry’ and biopharma VCs said they ‘didn’t do software’. There were experts in advanced computational chemistry out there, off-shore, that we could recommend, but the appetite for crossover just wasn’t there.

We did get it funded, in Montreal, but not by VCs (or angels).

Today I’m looking for advice about business models and funding for a start-up Internet service. It can’t be sold by viral marketing and it’s B2B not B2C, and, despite all the talk of taking Web 2.0 to B2B, I’m not surfacing professional venture investors who seem eager to get their minds into business models for new uses for the Internet.

Money provided by truly creative venture thinkers are what we need more of; whether and what kind of tax breaks needs to be focused on fostering creative risk taking in a world of increasing technological crossover. If labour backs that, fine with me if they keep favourable terms!

Angels will likely incubate the next Sandvine, therefore we should all be championing a tax system that affords them the ability to take on risk.

Let’s address the real problem, and let the free market figure out if LSVF work or not. If I can invest as an Angel with the same tax benefit as putting my money in a LSVF, I am making a decision as to my ability versus that of “professionally managed money”. Think discount brokerage versus mutual funds.

The more we can do to increase the supply of capital the better…

The real gap in the market, not addressed fully in either here, or in Mr Martin’s paper is in the early stage of company growth. In theory it should be where some big bets are made, and some big returns could be found. This market is basically non-existant in Canada apart from some gutsy individuals. (Sandvine got it’s start on the guts of serial entreprenuer Terry Matthews – the follow-on investment was a mezzanine round)

I’m not sure whether anything can be done about this in the short term apart from tax assistance for angel investors, and easing the ability of US VCs to invest in Canadian companies through an alignment of tax and corporate treatment of cross border transactions.

There is a school of thought out there that VCs do better when there is less funding (only the good deals get done.) But there is no data out there (globally) showing that fewer VCs (of any kind) make for a better climate of innovation. Theoretically MORE VCs are a better thing. Or is
Dr. Martin saying that the plethora of VC funding sources has hurt startups in Silicon Valley, Boston and San Diego?

Duncan

well… you guys doing nice work and i just want to say that keep rocking and keep it up !!!!

Regards
Sireena

You are so right on all fronts. Dr. Martin can’t believe that other traditional VC funds would have backed those same entrepreneurs and companies cited in the list. If he does, then he assumes a level of group-think in the VC industry that doesn’t exist in other entrepreneurial elements of the economy.

I could hazard a guess that several of those six examples, other than Sandvine, didn’t receive another term sheet

MRM