Who needs Silicon Valley money? Canada, that's who.

I love that the Canadian tech scene is getting so much mainstream media attention of late. Positive attention, too…it’s not just about the multi-year debacle at MaRS (see representative prior post “No surprise in MaRS scandal” May 30-14).

This extended focus is certainly good for the entrepreneurs who are trying to grow their businesses, and, being an election year, it’s definitely timely for the sector to be front-and-centre with politicians.

Depending on which recent Globe and Mail article you read, the Innovation ecosystem in Canada is either well served or it’s not. In his Tuesday piece, Globe and Mail tech editor Shane Dingman wrote under the headline: “Who needs Silicon Valley? Canadian startups scoring bigger deals“. By Thursday, the headline on a different article was “As Canadian startups grow, local venture capital funding dries up“.

It is entirely possible that both themes are accurate, but I think the first piece is the one worth challenging.

It is true that the Canadian companies cited in the infographic (D2L, VisionCritical, Hootsuite, Shopify….) have not pulled up stakes and moved to California. When it comes to source of funding, however, I must challenge the catchy “Who needs Silicon Valley” headline. It is a reality that pretty much every large VC tech financing over the past seven years has relied on U.S. capital: and most of it came from Silicon Valley. BuildDirect has Menlo-based Mohr Davidow; Shopify has Menlo-based Bessemer; Hootsuite has a swath of U.S. VCs; Halogen (HGN:TSX) has JMI from Baltimore; BTR has Boston’s Highland; KIK has Foundation, RRE, Spark and Union Square; Fixmo had Kleiner; Lightspeed has Cali’s Accel; GeoSign drew money from NY…. I could go on, but I suspect you get the point. For most of the past decade, about 40% of the venture capital raised in Canada came from U.S.-based VCs. (Although the CVCA didn’t break that figure out in its recent 2014 stats).

As much as our firm likes to fund every high quality Canadian-based growth story, and we’ve led deals are large as $25 million in the last six months, there just isn’t enough VC capital in Canada for any stage: Series A, B or C. That’s why Silicon Valley is so important.

MRM
(disclosure: I own HGN; WF owns warrants in VisionCritical)