Does Venture Capital or Internet exist in Canada?

I’d say for the last couple of months i’ve had a average of 1 VC or Investment banker contact me per week.   Since I have started my site I’ve never once got any inquiries from VC’s or bankers in Canada.    Until a few months ago I didn’t even think Canada had any, but I happened to come across a few blogs mentioning them.

When I look at alexa, although it really under estimates my traffic it shows Plentyoffish as #23 in Canada and the 4th largest Canadian owned site after 1. The government, 2 MLS online (Realtors),  3  Canada.com (owned by news papers).    If you go down the rest of the list you would be hard pressed to find other sites that were owned by people in Canada.  There a few other sites  but many of them are for companies with offline stores like bestbuy or futureshop.

Most of the time when Canadian reporters call me,  they say they heard of the site from some American site,   or some American source.   I find they aren’t very in tune with technology.  Given that millions of Canadians use my site and you’d be hard pressed to find people that haven’t used it or heard about it.

Is Canada really the internet backwater that alexa’s rankings make it out to be?  Is there any innovation here?  Do all the companies that achieve any measure of success here in Canada sell out and move to the states?

27 Responses to “Does Venture Capital or Internet exist in Canada?”

  1. Darcy Says:

    I really enjoy your reading your blog, and as I fellow Vancouverite and CND entrepreneur who deals mainly with US clients, I agree. Maybe the reason there is a lack of Venture Capital in this country is because not as many CND’s think big.

    Just out of curosity, it appears you shoot all the VC’s down anyway. Why would you need a VC? Your marketing is viral, your costs are well below your income, it seems to me you can keep growing easily, or you could sell the entire thing. What’s their pitch?

  2. Markus Says:

    well I don’t need VC’s, but the complete lack of Canadian VC’s speak volumes. They expect everyone to come to them and they never seek out opportunities.

  3. Chris Says:

    As a fellow Montrealer living in California now, I have to say that Canada is definitely an important part of what the internet spreads out. I used to come from the porn business where a LOT of my servers were parked in downtown Montreal. Ever since 1999, I’ve seen lots of companies come up north for their server needs and in turn, this gives us some good market share on the internet.

    Now as far as having Canada on the “map”, it’s exactly that one reason why I am in the States – There’s too many politics in Canada for people to do business. If there’s one thing that I love about the US, is that people really just wanna do business however pssible. If you have a PULSE and you’re dealing with the States, you’ll be making money…which is pretty much what you’re doing in a nutshell, Markus. You’re on the right track. I, for one, would love to see Canada take off just like the US and Europe. It’s getting there, but WAY too slowly. When I was running my business in Montreal, I could LITTERALLY count the amount of my clients that I had on one hand. There’s too much bureaucracy in Canada and albeit that we’re a liberal country, we haven’t really ‘opened’ up to the internet as much as other places. It will happen though…we have some really smart people up there Im proud to say.

  4. patrick Says:

    I am a vancouverite and I work for one of the large banks in Canada. I think a large part of the Canadian problem is partly that a greater amount of Canadian businesses rely on banks for financing. As such there are currently very strict requirements on Canadian chartered banks as to how much foriegn investment they can hold in proportion to domestic. This is why only one of the big 5 banks in Canada can remain competitive globally with the worlds other banks and obviously the US market which isn’t as regulated. Secondly, I am guessing but I believe that Canadian venture capital is probably focused more on the natural resource sectors, natural gas, oil, lumber and so on since exports of this kind drive our GDP more… like I say thats just a guess so dont quote me on that…

  5. engtech Says:

    We have VCs out in Ottawa.

  6. Rush Says:

    Canada is only good for hiding during the draft…. duh.

  7. samuel Says:

    Montreal il one of the most innovatives city in multimedia, in North America.🙂

  8. Nudecybot Says:

    In Montreal, there are a fair number of angel, or small private VCs but otherwise it is mainly about the banks such as Desjardins. Having been privvy to a few of these deals it is true they don’t invest in an entrepreneurial fashion rather they invest like a bank (conservatively but never creatively) and politics do matter. The main downside of the banks as VCs is their inability to bring any interesting synergy to a relationship. It is all about the money, while things which can be even more important than the money (experience on how to grow a business, contacts, business development) seem to be absent. I think that is where a lot of American VCs excel.

  9. /pd Says:

    “Is Canada really the internet backwater that alexa’s rankings make it out to be? Is there any innovation here? ”

    What about RIM ?? They are highly innovative and secussfull in technogloies.

  10. Markus Says:

    RIM isn’t a website, its a hardware maker.

  11. Gomer Says:

    Markus, I met you at Mesh conference in Toronto earlier this year.

    At Mesh, there were a few VC sessions during that conference that featured people like Rick Segal and also hovering around the conference was Ventures West. I am sure there were more VC’s there.

    They are out here in Canada, sometimes around you. You just don’t need their services so you may not be noticing them.

  12. Dave Starr Says:

    @ Chris, interesting that you find the business atmosphere biased toward the US. I’m a US-based small businessman who has sold nothing but Canadian product for years. If I could find anyone in the US with comparable product and prices I’d jump at the chance (US Customs is a bitch), but in my little world view US companies deliver PowerPoint slide shows and Canadian companies deliver products that work … up to and including some important systems Dubya uses on Air Force One.

    A good friend, CEO of one of my supplier companies there in CA is a South African citizen. He started his business in SA and them emigrated to the US intending to move the business (and jobs) here. The US Federal and California authorities gave him such a hassle in starting the business and US immigration apparently holds the sins of apartheid against guys who weren’t even born then that he crossed the border to Toronto and became a Canadian citizen. Certainly the business climate in Canada is good for some folks.

  13. Andre Says:

    I co-incidently read this post straight after I read Darren’s post at ProBlogger where he mentions that B5Media has received funding from two Canadian VC firms. Read his post here http://www.problogger.net/archives/2006/10/05/b5media-takes-funding/

  14. Andrew Says:

    Exactly, JL Albright just funded B5Media and Mark Evans is reportedly joining the company:
    http://www.b5media.com/welcome-to-mark-evans-vp-operations/

    I met John Albright last week, along with the other team members of a Toronto-based startup I’m working with. He definitely “gets it.” There may not be 500 others here who are as plugged in as that, but that’s because Sand Hill Road is “down there.”

    I tend to agree with you about some of the other issues though. Although my company’s in Toronto, 80% of our clients are US-based. I always told people that’s because “that’s who calls me,” and “that’s who says yes the fastest.” I talk to other entrepreneurs with the same experience. It’s cultural as much as it is institutional: you’re supposed to go to work for a big company someone has heard of. But that is shifting.

  15. samuel Says:

    @ Nudecybot

    you’re 100% right, and I think its the major problem here now, we need a lot more VCs.

  16. GMan Says:

    I run a SAS company in Calgary. Here there aren’t VCs as much as there are investment bankers, guys in suits that will facilitate the financing in the $10-100M range for oil&gas projects. I must say that for $1-10M internet companies such as mine, Calgary is a pretty lonely place.

    I’m seriously considering relocating to Vancouver as there seems to be much more more going on in the internet world. Is there much of a community in Vancouver for internet entrepreneurs? Is there anything like a monthly/quarterly gathering/meeting/conference for like-minded to socialize/network?

  17. Suzie Dingwall Williams Says:

    Don’t you feel like you’re kicking a puppy when you rail on VCs? Haven’t they been through enough?

    I totally agree with you, the guys who play in that part of private equity just don’t have any appetite for internet/2.0 plays (which is wild when you consider how much was eventually made from backing Lavalife). But would you want to be the first investment they make in the space? I’ve never seen anyone profit by being someone else’s learning exercise.

    I know your beef is not so much about the VCs, but more about the lack of local support for scaling what sounds like a great business you’ve built so far. It’s there, honest – but you need to decide for yourself whose help you need and then go bother them until they get it.

  18. raincoaster Says:

    I did an article about this very topic a few months ago, and the hard numbers I found may surprise you.

    Canadians are three times as likely to become entrepreneurs as Americans, and once they do they are twice as likely as American entrepreneurs to succeed.

    HOWEVER

    When entrepreneurs decide to get shareholders in, unless they themselves are very well-connected, they end up going to the States. There are a plethora of angel investors here, but they only invest in people they personally know; they don’t use VCs as intermediaries. I know a woman who wrote a book; a friend of hers funded a publishing company just to publish what she turns out. That’s how it happens, often as not.

    If you want to make your money by doing business, you can do that in Canada. If you want to make your money by selling shares, you’re better off doing that in the States.

  19. Lindsay Lent Says:

    Lack of VCs isn’t the problem. Many of the new startups and existing businesses (ie POF), especially in the 2.0 world, really don’t need a large investment to move forward – they need expertise and angel funding.

    In Canada, VCs fill the void between angels and banks. They mitigate their risk by investing in businesses that have already made an impression (get that marketing program going) expecting to win big on a few of their ‘high risk’ holdings. They usually hold substantial amounts of capital and need to show a solid ROI to stay in business – hence they need to invest larger sums which the new 2.0’s really don’t need (except if they are #2 into the space and need to compete globally – marketing again). Long story short – VCs here (like banks) will come to the party too late. In the US, VCs will take that upfront risk – but also a big bite.

    Business philosophy in Canada stems from our ‘company town’ mentality…after all, we were founded by the Hudson’s Bay Company. We want security – job, pensions, high wages….mostly for creating rules and moving paper (23% of the pop are employed directly or indirectly by the government)…yet when the west was opened it was done so by immigrants who risked everything to come here – many of whom went on to create the businesses we find in Canada today. Small businesses still employ the most people.

    It’s tough to do business here – especially startup. It’s much easier in the US. It hasn’t changed in 20 years and probably won’t but, what we do have is innovation and perspective. If we continue to innovate, build our companies and show others what can be done at home, perhaps we will help those who will undoubtedly follow us with ventures of their own. If you reach the stars, remember where you came from and help those on their way up.

  20. raincoaster Says:

    I must disagree with you; if it were that difficult to start a small business in Canada, we would not have the several-times the US rate of entrepreneurship that we do.

    Again I say: if you want to make money doing business, do it in Canada and you’re more likely to succeed. If you want to make money selling shares, go to the States, where the money flows like rivers.

  21. Errol Mars Says:

    Yes, it is very easy to start a business in Canada but is difficult is to grown that business and to find mentors. To grow your business you need capital and getting capital in this country is not easy unless you know somebody.

    However I think with the use of things like this blog and others, is will make it much easier for entrepreneur’s to connect and create a community from the ground up. Pretty soon the same people who meet on these blogs or forums and find success will be the one’s who will be willing to take a chance on new start-ups at a much earlier stage. So I think we are on the right track.

    Markus your success will create other successes because you are documenting your experiences and it’s causing other like minded people to take notice and as long as there are places for CND entrepreneurs to learn form others, you can bet there will be many more success stories.

  22. Lindsay Lent Says:

    Thanks guys…your both right. Starting a business in Canada isn’t a problem (putting aside taxation and government regs etc) – growing that business into a ‘success’ can be a problem.

    We don’t have the risk capital base and/or attitude as a nation to hold the entreprenuer as a beacon of hope for the future. Instead Canadians (in general) like to criticize and think of reasons why whatever you are doing can’t work. It isn’t until you prove yourself (achieve some level of success or make an impression) in the US that Canadians really come around and jump on the bandwagon. And the attitude extends into media and financial investors – it’s Canadian nature. In the US, they simply have a different attitude – it’s all about fulfilling American dream (with enough moxie anyone can do it!!)

    So, as Canadian entrepreneurs aka risk takers, it’s up to us to persevere and make it happen against whatever odds. And as Erroll implies, we can make it better for the next gen. Back to the blog topic…VC money exists but early stage risk taking is very hard to find.

  23. Simon Says:

    Canada is not as “capitalist” as the US. Canadians have a lot of creativity vision but they lack motivation or persistance. For those that break free from the norm, it is much easier to be successful in business here than in the states due to less competition. However, the chance of instant success is not present because Canada doesnt have as big of a population as the US.

  24. Mark Skapinker Says:

    Marcus,
    We met briefly at the Mesh conference earlier in the year. I am a managing partner at a seed/early stage Canadian VC firm called Brightspark. You indicated at that conference that you were not interested in VC investments. You told us that you were not interested. So don’t blame us for not contacting you – word spreads…. Since then, we invested in a few other Canadian Internet and software companies such as NowPublic and B5Media.
    There is lots of innovation in Canada and lots of deals and dealflow.
    At the same time, I agree that the industry has not reached close to its potential. There are much fewer early stage VCs now than there were and the prospetcs are not positive. I try and encourage change to the prospects – see my “raves” on our Blog site http://brightsparkventures.typepad.com/
    There are ongoing efforts to build a healthy Canadian software and Internet industry. And the good news is that success leads to more entrepeneurs and more success. So, good luck – I hope you get to top 10 at alex and motivate the creation of a 100 new Canadian Internet companies.
    Keep us in mind for this next 100…

  25. Markus Says:

    Mark i’m not looking for VC money, but i see a endless string of small companies that are looking. But before mesh I had never heard of any VC’s and my site was already the largest online only business in canada.

    My main point is that there are a lot of startups wanting to do stuff and not enough money going around. Granted a lot of the stuff i’ve seen is just plain stupid.

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