Tech Start-ups and the Canadian Venture Capital Paucity

by Jordan Richardson on May 27, 2011

Start-up companies looking to venture capital to get things off to a good start in Canada are in for a disappointing surprise. The world of venture capital is dismal in the Great White North, with only $819 million pulled from investors last year. To put that in perspective, that’s 20 percent less than what was available in 2009 and stands as a 16-year low.

When venture capital fund-raising runs into trouble, new companies can’t get the financing they need to start pushing products and services in Canada.

2011 doesn’t look much better, what with investors only ponying up $217 million in the first three months. That’s down 44 percent from the absolutely awful 2010 figures. When you compare these numbers to numbers in the United States, a sad picture emerges that represents what amounts to a complete lack of faith on behalf of investors in Canadian tech ingenuity.

In the U.S., the venture capital market is spicier than Salma Hayek because investors are doing backflips to get in on the next social networking miracle or the next Angry Birds. This belief in the innovative spirit has not been misplaced, as we all know how lucrative tech ventures are these days. The next great idea can easily transform its founder and a throng of investors into very wealthy men and women.

Is Canada’s tech and investment culture suffering from a case of the willies? Possibly. Canada’s population is, of course, smaller than that of the United States and that may factor into why there’s less cash flow in the venture capital sectors. But the bottom line still remains that many investors are downright chicken when it comes to posting money behind innovation in this country. Yeah, I said it. Chicken.

While venture capitalists in the United States are taking risks and chances on something fresh and new, Canadian investors are clutching and grabbing like a fighter too timid to take a punch. The opportunities are there, especially in the mobile entertainment and gaming industries, but nobody’s biting.

Aggression, according to Distinctive Software Inc. founder Don Mattrick, is the key difference between American investors and their Canadian counterparts. In an email interview with The Globe and Mail, Mattrick explains what’s needed to “spark momentum” and get things moving on the ground here. You can read the interview here.

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August 16, 2012 at 6:24 am
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