Why is there no Canadian Google or Facebook? It’s a question that has stalked Toronto’s tech and startup scene for years now. Yet, for just as long as the question has lingered at the edges of the startup world like an unwelcome ghost, there has also been a debate swirling at the core of the issue: is the problem a lack of venture capital for innovative new companies? Or is the cause a lack of ideas and innovation?
At Startup Weekend in Toronto, a panel of venture capitalists attempted to provide something like an answer to the question. Chaired by Sunil Sharma, the discussion featured some of Canada’s most important VCs, including Extreme Venture’s Farhan Thawar, BDC’s Senia Rapisarda and OMERS Peter Carrescia.
OMERS in particular was an interesting addition, as the enormous Ontario pension plan recently made the unusually risky move of starting a venture capital fund dedicated to investing in new business. Rather than focusing on early seed funding, in which companies are given comparatively small amounts of cash to develop an idea, Carrescia was clear that OMERS isn’t looking to continue Toronto’s emphasis on small-to medium-sized startups*.
“We’re looking for the next billion dollar idea,” said Carrescia, in contrast to companies like Extreme Venture, which tends to focus on smaller deals. “We’re talking about the next RIM or ATI, a company that will employ thousands and appeal to a big market.”
At the same time, however, Carrescia stated that though OMERS’s recently-launched fund has looked at 500 pitches since its inception, it has funded precisely one of those ideas. Naturally, this abysmal ratio raised that looming specter of a question: is there something wrong with Canadian innovation?
Canada certainly seems to have its share of both troubles and opportunities for reform, as was outlined in a provocative article in the Globe this weekend. But speaking to the Standard after the panel discussion, BDC’s Senia Rapisarda suggested that though problems persist, when it comes to the issue of funding versus innovation, things aren’t quite as grim as some have suggested.
“We have some early-phase funding and incubators,” says Rapisarda, “but we also have a moment where we don’t have a commercialization of a product, where there isn’t much capital. Naturally, some venture firms have moved upstream. But, yes, Series A is still a problem.”
Asked about the viability of OMERS and Peter Carrescia’s desire for the next billion dollar idea, Rapisarda took a more long-term, cumulative view.
“I agree with Peter, but I think having medium sized companies is important, because they are the ones who buy other companies,” Rapisarda says. “If you have medium-sized companies, you can do more acquisitions of companies that stay in Canada rather than be sold to the United States. Two medium sized companies can actually create a larger one.”
But is Canada, as many have argued, risk-averse and conservative? Rapisarda takes a more institutional view. “When it comes to culture, it’s important in terms of thinking big, but also in the value we give to certain positions in a company,” she argues. “In the US or the UK, the VP of sales can sometimes earn more money than the CEO. It’s a position that is very important, but not necessarily [in Canada]. When we need to find a head of sales, it’s difficult to find someone good.”
It’s that emphasis on promotion and what Rapisarda called “owning the podium of success” that might be lacking in Canadian business. The best and brightest often end up as CEOs, CFOs or CTOs, leaving the all-important question of sales and marketing to what the BDC exec diplomatically calls “not always the best and the brightest”.
The upside according to Rapisarda, however, is diversity, not simply in terms of a mix of talent, but global connections too. “Canada has a great opportunity because of immigration and the melting pot we had here today (at Startup Weekend),” she says. “To be able to go into so many different markets and use this talent is great.” Our position as outsiders won’t hurt us either: “Not being American also helps because it helps perception.”
Among the answers to Canada’s innovation problems, then, may be something as “straight forward”—and difficult to execute—as finding a uniquely Canadian solution that looks at business building in the long-term, and seeks to capitalize on the global reach of the country’s globalized population.
*Correction: OMERS contacted the Standard to clarify that, though OMERS is certainly focused on larger exits, its aim is to get there by investing in small- and mid-sized startups, such as its recent $500k investment in the 8-person team of Wave Accounting. The Standard regrets the error.
Navneet Alang is the Toronto Standard’s Tech Critic
