Skapinker gives his homeland the Bronx Cheer part 2

I must be honest. It takes all of my energy to summon a reply to what might be referred to as a “clarifying” blog post of Mark Skapinker from this past weekend; and by clarifying I mean he is making some elements of his interview more clear, and at other times advising that he was misquoted by the journalist involved. That’s the luxury of having a blog: if you ever get misquoted by the Fourth Estate, you can just rattle off a post to fix their errors.

As you may recall, Mr. Skapinker provided an interview to The Wall Street Journal last Friday in which he is alleged to have said various derisive things about Canada’s Innovation Economy. He called my brief post “obnoxious”, and yet I had thought I went out of my way not to take pot shots at what appeared to be uncharitable comments about our Motherland.

Compared to the comment by “Jeremy B5” on the WSJ site, I gave Mr. Skapinker a warm hug. This was “Jeremy B5’s” take on the interview:

“The reason Mark didn’t raise another fund has nothing to do with the strength of the entrepreneurial pool in Canada. They tell everyone that to cover up the fact that they have had NO returns of note over 5 years, except for a company they built themselves. So, their LP’s didn’t want to fund them again. I am very tired of hearing VCs complain about lack of deal flow when they get bad returns…maybe, they are just bad investors.”

In an effort to get all sides of the story out there, here is the cut-and-thrust of the situation as it has developed. The lines that caught the most attention back home included:

From the WSJ:

One VC firm has grown so dismayed while looking for entrepreneurs to back – and finding that the cream of the crop has departed for Boston or Silicon Valley – that it has started up, funded and launched three of its own Web companies.

“There are no significant repeat entrepreneurs here,” [Skapinker] said.

From Skapinker’s post-interview blog:

Here, I was simply misquoted.

Yes, I said that we don’t have enough “career repeat VC CEO’s” like there are in the US – this means that many of our startup CEOs are first time CEOs. My real quote was “there is great expertise, but not enough experience”. VCs like to invest in serial, repeat entrepreneurs who have been CEOs before. This is because it is far less risky than investing in a new, unproven CEO.

Somehow, the WSJ journalist took “there are not enough career repeat VC CEO’s”, plus “there is great expertise, but not enough experience”, and turned that into “One VC firm has grown so dismayed while looking for entrepreneurs to back – and finding that the cream of the crop has departed for Boston or Silicon Valley,” and “There are no significant repeat entrepreneurs here.”

If that’s not what Mr. Skapinker said, and the journalist twisted he real quotes all to hell, then a Letter to the Editor of The Wall Street Journal is warranted; or at least a comment in the Online Story correcting the record. That’s just shoddy journalism and Mr. Skapinker shouldn’t have suffered from the brickbats he received on Friday about Canada not having any significant repeat entrepreneurs. Clean-up the record forthwith, Mark! There’s no shame in calling out a journo on his/her errors.

One can certainly parse a difference between “there are not enough career repeat VC CEO’s” and “there are no significant repeat entrepreneurs here”.

Although, by telling the WSJ that he was running all of his new start-up investments himself, I suppose you can see why the journalist might have been confused about the availability of top-tier management talent. But that’s no justification for getting the quotes so horribly wrong.

From the WSJ:

We can’t rely on anyone else, so why don’t we just delve into that marketplace ourselves?

“And there used to be an infrastructure of VC firms here. We used to get referrals, and that’s not happening now. We need co-investors, and there are very few players.”

According to Skapinker, just two years ago there were as many as 15 active venture firms in Canada, and that now the number can be easily counted on one hand. Two of Canada’s biggest firms, VenturesWest and Celtic House, have been stalled in their fund-raising, and slowed down their activity considerably.

From Mr. Skapinker’s post-interview blog:

First, the Canadian VC industry is broken (it is not dead). I am referring to the software and Internet VC industry. Some of it is a syndrome of the VC industry everywhere: No IPOs, mergers or exits mean lower returns. LPs everywhere are having major issues – remember, many of the LPs are banks and pension funds struggling with the market downturn.

Some problems are VC issues that are unique to Canada: Meltdown for some major late stage VCs, not enough infrastructure and critical mass, Canadian LP issues, and an Ontario industry that has been ignored by government for too long. The industry is struggling – there are almost no established seed VCs in Ontario anymore. Read the CVCA reports – there is little optimism.

This does not mean that it won’t recover or is dead. This also does not mean that there are not some great VCs with hugely talented VCs in Canada or Ontario – there are. Funds like RBC Venture Partners, JLA Ventures, Edgestone, Rho, The Blackberry Partners Fund, and Tech Capital are solid, innovative players.

In his own blog post, Mr. Skapinker names the “handful” of five firms he had in mind during his WSJ interview: RBC, JLA, EdgeStone, Rho and Tech Capital. Now, off the top of my head, I can quickly name at least 37 active domestic venture capital funds (and rattled off 20 on Friday night on Twitter, which seems to meet the test of “really mean and nasty” in Mr. Skapinker’s books). NO offense to the recently active institutional VC firms I’ve left out:

Avrio, BDC Venture Capital, BlackBerry Partners Fund, Capimont, Celtic House, Chrysalix, Covington, Discovery, EDC Capital, Emerald, EdgeStone, FondAction, FTQ, Garage, Genesys, Genuity, GrowthWorks, iNovia, InNOVAcorp, JLA, Lumira, Multiple, Novacap, Rho, SummerHill, Tech Capital Partners, Telus, Trellis, VenGrowth, VentureLink, Ventures West, Victoria Park, Walsingham, Wesley Clover, XPV, Yaletown, etc.

Not all of these funds may play in the information technology and internet deals that Mr. Skapinker referred to as his bread and butter, but there are far more than five left standing. And it annoys many of us to no end that the WSJ’s huge readership will be left with an erroneous impression of the state of the Canadian venture capital system.

On the syndicate partner front, it is worth noting that most of BrightSpark’s Fund II deals had syndicates made up of Canadian VCs: B5 Media (06), Exludus (05), Mobivox (05, 07), NowPublic (07), Radian (07), Tira (05, 06, 07). Rather undercuts the claim “we need co-investors, and there are very few players”; although the industry needs more capital.

That’s not to say the industry isn’t in crisis. People like Ian Graham and I have been making those points since at least 2007 (see prior representative posts “Brutal venture capital stats for H1 2007” August 1-07 and “Deloitte’s study on Canadian VC Crisis is well-timed” December 6-07). The CVCA issued a watershed press release that Fall in an effort to bring this to the attention of the Ontario electorate and their political servants (see prior post “Ontario politicians asked to address deteriorating VC climate part 2” October 26-07). As you know, things may have finally started to happen on that front (see prior post “Edgestone VC team wins big backing from OVCF” April 2-09).

And it hasn’t all been moaning and groaning, either. Dozens of VCs and other players in the Innovation Economy ecosystem have put in countless hours to try to fix some of the things that Mr. Skapinker spoke of in his interview (see prior representative posts “Solving the Start-up & VC malaise” January 18-08 and “CVCA injects some fresh ideas into the federal elecion campaign” October 6-08 and “CVCA letters to Messers Flaherty, Clement and Ignatief” December 26-08).

As far as credentials go, working on this very topic on Boxing Day is about as sincere as I can profer. I’d be delighted if Mr. Skapinker joined the rest of the industry in trying to bring change about; some of us are meeting practically every week on the topic of how to bring the start-up and VC industry out of its crisis.

He and I even agree on some things, such MARS, and the notion that “Government programs need to stimulate an industry, not become the industry.” We need fesh ideas, though, not just opinions.

If he thinks the Canadian VC industry’s reaction to his WSJ interview was akin to him “getting kicked in the ass” for “telling it like it is”, he shouldn’t surprised about why that happened. And, if his quotes were even close to accurate, we’ll have to agree to disagree on the central themes of his remarks.

Mr. Skapinker, there are more than “five” active VC funds in Canada, and we have plenty of “significant repeat entrepreneurs”. Don’t confuse being frank with being right.

I admire him for having the courage and talent to run a start-up tech company. I would fail at that task, without a doubt. But I try to succeed at being fair and precise and well-researched when it comes to blogging (not to mention the day job). Moreover, any friend of Superstar VC Rick Segal is a friend of mine!

If the WSJ got the story wrong, we’d all appreciate a correction. No Canadian VC and venture debt fund wants that article to show up in a Google search the next time a prospective international Limited Partner considers a first-time commitment.

Lord knows we need them.

MRM