Canadian VCs Need to Get Out of Canada
As a Canadian investor, I get to meet incredible founders from Victoria to St. John’s every single week. Some of the most ambitious people on the planet are building world-changing companies in the country I love and I’m privileged to have a front row seat. But as much as I enjoy crisscrossing this magnificent country (both virtually and – finally! – on airplanes again), for me to be an effective investor, it’s essential that I get out of Canada.
Already this year, I’ve been to San Francisco, Miami, Atlanta and LA. By the summer, I’ll have added Austin, Los Angeles, Tokyo and a second trip to San Francisco. Why do I do this? If my job is investing in Canadian startups, how can I possibly justify spending so much time gallivanting around the world?
Because it’s the only way for a VC based outside of Silicon Valley to be truly effective.
It shouldn’t come as a shock for me to point out that Silicon Valley is the only ecosystem in the world where investors see global deal flow. But think about the implications of that statement:
The best founders from all over the world travel to the Bay Area (physically or virtually) to raise capital. As a result, Silicon Valley investors can sit back confidently knowing that they’ll see the best that the world has to offer. When they make investment decisions, they do so with a global perspective.
For the rest of us, we need to put the work in.
That work comes in the form of travel. I love to travel and it makes me a better person in numerous ways. But it makes me a better investor in at least three:
Better Investment Decisions
If I only meet Canadian founders and only talk to Canadian investors, then my entire perspective on tech is based on what’s happening north of the 49th parallel. But my job is to invest in Canadian companies that can dominate on a global scale.
The Olympics have taught us that while we can own the podium in some sports, the best in Canada often don’t make the finals. The same is true with startups. That’s not a knock against Canadian founders. It’s the reality of competing in global markets. As an investor, I need to know what’s going on in the rest of the world in order to understand how good the “best in Canada” really is.
In both Olympics and startups, Americans often dominate the podium
Having a better understanding of the global tech landscape provides all sorts of advantages as an investor:
I can go all-in on an under-the-radar startup because I’m confident there’s nothing close anywhere in the world
I can pass with conviction on a “hot” local startup that other investors are tripping to get into because I know that there are three well-funded competitors in other countries that are still in stealth mode
By tapping my network to diligence startups in others countries, I can see opportunities to invest where others are scared away by “too much competition”
I can more accurately incorporate the likelihood of subsequent funding into my investment decisions, because I understand what downstream Silicon Valley investors believe will be hot/cold in the next 18 months
Better Founder Advice
For most founders, investors are a key source of mentorship and advice (I certainly believed that my investors knew everything back when I was a founder). One of the most crucial areas that investors have impact in is helping founders understand what milestones they need to achieve to raise the next round.
The problem is, if your goal is to raise your next round from Silicon Valley VCs (which is the case for the most ambitious founders the world over), then you need to know what Silicon Valley investors are looking for. Unfortunately, too many Canadian investors authoritatively tell founders that they need to achieve X, Y and Z to raise their next round, when the only downstream investors they’ve spoken with are down the street.
I can’t tell you how many Canadian founders I’ve met who dutifully marched towards the milestones their investors so confidently laid out, only to discover that they were nowhere close to what Silicon Valley VCs were actually looking for. Never mind the number of times I’ve heard a Canadian investor dismiss a large US-led round as being nothing more than FOMO or a company “raising a Series A on Seed metrics,” — as if the most sophisticated investors in the world were simply being duped.
The entire Silicon Valley ecosystem - startups and investors alike - evolves at a rate unlike anything else in the world. The best Canadian investors recognize this and are constantly In Silicon Valley. The lazy ones regurgitate media talking points instead of taking the time to understand the changing dynamics at play.
I was 4 rows behind Boris on this flight 👀
Better Investor Introductions
Job #1 for every VC is to help their portfolio companies raise their next round.
As important as mentorship and hands-on help is, the single biggest impact investors have after writing the check (cheque?) occurs during fundraising itself, helping companies prepare their pitch, making warm introductions to downstream VCs and championing portfolio companies through the process. In Silicon Valley, this is burned into the psyche of every investor, which is why they spend 1/3 of their time networking with other investors.
In Canada, not so much.
When I lived in Silicon Valley, I regularly met with Canadian founders who were trying to raise money in the US and was shocked by how many told me that their well-known, well-respected VCs provided zero warm introductions to Silicon Valley investors. Are you serious?!?
Today, there are nearly 2,000 active VC firms of various shapes and sizes between San Francisco and San Jose. The landscape is constantly changing, with new funds popping up literally every week. If I want to help startups raise their next rounds, then I have to meet as many of those investors as I possibly can, which means getting on a plane.
One of 4 dinners I had with investors on my last trip to SF
To be clear, my primary focus is — and will continue to be — meeting Canadian founders and investing in Canadian startups. This quarter alone, I’ll travel from my home in Vancouver to Victoria, Toronto, Montreal and St. John’s.
But for me to serve those founders best, it’s absolutely essential that I get out of Canada.