Taking Risks, Building Fast: Ontario's Venture Capital Space October 2013
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Taking Risks, Building Fast:
Industry experts look at Ontarios thriving Venture Capital space.
Investment Accelerator Fund
Venture Capital Associate
Extreme Venture Partners
ME Consulting Owner
Northleaf Capital Partners
RBC Venture Capital
Invest in Ontario brought together 5 top venture capital specialists for a
roundtable discussion about Ontarios capital fund climate for new start-
up companies. A key component of the discussion was how the Ontario
Venture Capital Fund (OVCF) and the Ontario Emerging Technologies
Fund catalyzed the industry and is helping innovators to attract
The following Q & A provides the perspective from the VC panelists and
what they believe is working to support more successful starts-ups in
How is the current Ontario Venture Capital
landscape conducive to a new business start-up?
In 2008, the Ontario Venture Capital Fund (OVCF) was established
to provide capital funds to start-ups making the availability of
capital much easier.
The $250 million Ontario Emerging Technologies Fund invests in 3
Life Sciences and Advanced Health Technologies
Digital Media and Information/Communication Technologies
Today, seed capital and angel investors are available, along with
larger fund amounts for expansion capital
Now there is a range of funding available across all financial stages
for a company -- from seed capital through to growth and expansion.
In what ways has the Ontario landscape changed
that would benefit my business?
Our whole ecosystem is better at the early and seed-stage investing
Ontario has become a lot better at getting very young, very
aggressive and very talented entrepreneurs coming out of our
engineering programs and getting their companies through that first
initial stage of financing.
What unique opportunities does Toronto offer a
Ontario is known for enterprise software and has had big outcomes
with companies such as Algorithmics
Toronto specifically has every single financial service, so you know
how to deal with enterprise software in terms of engineering support,
sales, retail, oil and gas, manufacturing, everything. You are selling
to BIG companies.
Access to the best and brightest talent pool with over 40 top
universities and over 30,000 graduates in computer science
engineering each year.
For example, BumpTops founder created a desktop user application
that was spun out of his Masters thesis at University of Toronto.
When he graduated he got commercial funding and eventually was
acquired by Google.
How many funds are available in Canada?
In Canada you dont need 50 or 100 funds, only 10 or 20 that are
really focused on the best investment opportunities.
Theres a pool of $205 million ($90 million from Ontario and $115
million from other institutional capitals) of leveraged capital.
These funds span across seed funds, early stage investors, late
stage funds a nice mix to generate returns.
The OVCF has a third party manager that can make decisions to
allocate the money to the best funds based on returns potential.
Through longer term support. It is going to take five to eight years to
However, the funds need to invest their capital, they need to
generate returns, as that's what's going to drive other investors into
the asset class. This longer-term support is critical to giving the
industry a chance to mature and grow.
How do the federal and provincial government
programs support Ontario start-ups?
As an entrepreneur, what funding does Ontario
Funds such as the Investment Accelerator Fund from Ontario
provides active seed funds (over 65 deals in the last 4 years).
Follow-on funds can be up to 5 times the amount for a seed-stage
fund for high quality companies.
Many of the successful angels and entrepreneurs coming out of the
ecosystem come back, create new companies and reinvest thus
the ecosystem loop effectively churns out more successful
companies, wiser entrepreneurs, and second, third, and fourth type
Ontario programs offer opportunities to work closely with other
entrepreneurs and bring other eyes, mentors and high quality advice
to the companies increasing their chance of success.
What amounts of funds are available?
Accelerator programs for extreme start-ups provide mentorship and
from $50,000 - $200,000 right away without a lot of due diligence if
the start-up has a good team, are working on something thats really
interesting, and there's a big market opportunity they get a chance
For every dollar reinvested, theres been almost $30 in follow-on.
What type of financial incentives are available in
Access to funds through the BDC (Business Development Bank of
Canada) -- one of the most aggressive and most active venture
capitalists in Canada and a Crown Corporation.
Access to funds from OVCF, which has been key in all deals raising
funds of critical mass in Ontario in the last 5 years.
Very generous tax credit programs.
The R&D tax credit offers for every dollar spent on an accredited
activity in technology development, the company gets up to $.35
No interest payment loans. The FedDEV Investing in Business
Innovation (a $175 million fund) offers companies a loan, with no
interest payment terms over 60 months.
How does Ontario VC funding compete with USA?
Very favourably. The OVCF program has 8 funds; each of them
have deep domain expertise, deep operating expertise and are
competitive on a North American basis.
These investments are made because these are the best companies,
not because they have to focus on local markets.
An example from the Ontario portfolio is Fixmo. This started as 2
people working on mobile security. It was seeded here in Ontario
initially and when they reached a point where they could scale, they
got really good interest from the Valley and Kleiner Perkins invested.
Fixmo started off small here in Canada, and then
investors helped scale it with an investment of $40 million.
Fixmo is an example of how something can be built here, but
can then access investors outside of Canada, to go to the next
Is the growth capital handled domestically or
syndicated with US Venture Capitalists?
It depends on the amount of funds required
If you need $15-$25 Million, then the fund has to be more than $300
For example, RBC Venture Partners has 2 funds focused on
enterprise software that could provide all the funds, but its in the
best interest in many cases to bring in a US syndicate partner to lead
that growth equity and to get diversification because they bring
expertise to help the company expand into the US.
What other advantages does Ontario offer start-ups
versus the USA?
Talent! Toronto is a better place than the Valley for initial start-ups
because in his mind (Canadian data entrepreneur) we had better and
cheaper technical talent.
The University of Toronto and University of Waterloo have a
mentality of building companies. The university doesn't take a portion
of the company and the invention. Whatever comes out is taken by
the entrepreneur, with the intent that they will give back to the
As well, U of T has very strong tech transfer and software
engineering programs and are building really great pools of people.
What other advantages does Ontario offer start-ups
versus the USA?
The support network and the ecosystem, (both provincial and
privately funded programs) educate the next generation of
entrepreneurs and take them to that next level -- to expand what's
going on in universities to a practical level.
Availability of accelerators (i.e. Extreme, JOLT, and HYPERDRIVE)
to provide a really good opportunity to learn how to build a company.
Loyalty/Retention of talent:
It's rare that people leave a company after three or four months --
versus the jumping around that you often hear about in the Valley.
People are here for the long haul and they're very loyal to the
company that they're building.
Because your dollars go a lot further -- at that very critical early
stage when youre not generating any revenue and you dont have
cash flow to keep going.