Venture capital drought over, would-be entrepreneurs told

After a decade-long drought, venture capital has become plentiful again in Canada, attendees at the National Business and Technology Conference in Toronto were told on Saturday.

“We’ve gone from a decade of inactivity … to there being a surplus almost,” said Ray Sharma, founder and president of Toronto game developer XMG Studio Inc.  and co-founder of Extreme Venture Partners, an early-stage investor based in Toronto. “This is the best time to start up a company.”

Sharma said venture capital started flowing last year after “10 years in Canada where there was a death valley in venture capital.” Speaking as part of a panel on venture capital at the two-day conference, he told an audience made up largely of university students that it is easier now to find funding than it has been for a decade.

That doesn’t mean everyone with an idea will get funding, though, and fellow panelist Andy Yang offered some advice on what venture capitalists want to see.

Yang, managing director and chief innovation hunter for Extreme Startups and a former venture capitalist at BlackBerry Partners Fund, said he looks closely at the team pitching an idea – not just their skills but the rapport among the team members. He also prefers to see disruptive technology and strong intellectual property, rather than a team that is “just going to create an app and hope for the best.”

Toronto-based Extreme Startups puts startups through a 12-week accelerator program that includes $50,000 up front and up to $150,000 in additional investment.

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Yang also had some advice for entrepreneurs on what to look for in investors. Ideally, he said, the investor should have expertise in the market the entrepreneur is going after. He advised those looking at potential investments to talk to other companies  in which the venture capitalists have invested – and not just the successful ones, because it’s important to know how the firm will react if things go badly.

However, he added, “beggars can’t be choosers,” so startups won’t always find their ideal investors.

Still, said Sharma, more plentiful venture capital will mean entrepreneurs can be choosier than they might have been a few years ago. It may also alleviate the perpetual complaint that Canadian investors are more risk-averse than their American counterparts, he said. “This supply/demand dynamic will change the risk equation.”

Speaking of risk, Sharma told the mainly young audience not to be afraid of it themselves. “You’re at the point in your lives where you can afford to take substantial risks,” he said. “This is the time to take risks.”

Yang added a sobering reminder, though. “All you read in TechCrunch is the successes,” he said, and for each successful tech startup, 99 fail. Entrepreneurs need to realize that no matter how unique their idea seems to them, others are almost certainly working on the same thing.

Earlier in the day Jeff Dennis, entrepreneur in residence with the law firm Fasken Martineau DuMoulin LLP, had some advice for would-be entrepreneurs too, which he summed up in five key points. Create a vision and measure everything you do against it. Hire slow and fire fast – get beyond the interview mask, check references, hire better than yourself, and “if you made a mistake, fire them.” Take the same careful approach to partnerships  and get everything in writing. Raise more money than you need and spend less than you raise. And finally, balance work and personal life.

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Jim Love, Chief Content Officer, IT World Canada

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Grant Buckler
Grant Buckler
Freelance journalist specializing in information technology, telecommunications, energy & clean tech. Theatre-lover & trainee hobby farmer.

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