There’s a good article in today’s Globe & Mail about Toronto’s vibrant high-tech community, and how there are so many people engaged in innovation, new ideas and new solutions.
The article puts the spotlight on what I consider to be the strength of Toronto’s high-tech sector – an abundance of optimism, enthusiasm, energy and the belief that change can be implemented if people pull together. As a member of the community, I’m always impressed to see so many people excited about technology and the impact of the Internet on how we work, live and play.
But – and here’s a big but – the reality is there’s a lot more talk than walk.
By that, I mean this energy and optimism isn’t being harnessed as much as it should. For all the great ideas and enthusiasm, the lack of start-up capital continues to be Toronto – and Canada’s – biggest weakness.
I realize the lack of start-up and venture capital is an old story but it stands in stark contrast to what’s happening within the high-tech community. You wonder how much of a difference it would make it there was even a modest number of investors able to provide $250,000 to $1-million of seed capital so some of the great ideas out there could be transformed into businesses.
I wonder, for example, what would happen if there was a Canadian version of Y Combinator where entrepreneurs could get start-up capital, support, mentoring and facilities to get going.
My sense is having this kind of capital would have a major impact on Toronto’s high-tech community. Not only would it provide capital to currently running start-ups but it would encourage other people to take the entrepreneurial leap. This, in turn, would jump-start the community and allow people to get more business experience, which can only be a good thing.
For how, however, Toronto’s high-tech community is going to have to sustain itself on enthusiasm, sweat capital, encouragement from friends and family, the vibrant camp community (DemoCamp, ChangeCamp, CaseCamp, etc.) and online conferences such as mesh and StartupEmpire.
The silver lining is there’s no lack of energy and enthusiasm out there.
9 Comments
“Toronto’s high-tech community”
I hear what you are saying – but I am sure you are not referring to all of the community.
The part you refer to (if I can be so bold as to guess) would be the younger, entrepreneurial, bright, dynamic inventor types.
Which is cool. But that is a very, very small portion. No?
If we look at what the City of Toronto classified in their ICT Toronto cluster – roughly 3500 companies and 200,000 ++ folks – most of whom work in IT or communications or technology for a company – probably really large – like a Telco, bank or someone like Hydro One or HP or IBM, we get a bigger picture.
In years of working in this industry (I wrote the Marcom strategy for the City’s ICT Toronto among other things – and to the folks think i am boasting I am not – I am setting a referrent point for my position. Oh and for those folks who think I am boasting – “referent point means: a reference is a relation between objects in which one object designates by linking to another object.)
sorry je digress …
There have been a ton of reports on this cluster going back to the mid 90s (the one you are mentioning, the design community – the animation and multimedia communities etc etc) cause it is rather sexy – great meetings, fab get togethers some outrageously brilliant folks and some really amazing break throughs (Yay Albert and Bubbleshare!) – but like all things in the world – about 1 in a thousand of these great technological inventions – just like new products – see the light of day.
Also the group I think of when you mention the “camps” do not have clients, jobs nor any visible means of support. (Luckily they removed the Vagrancy E charge out of the Criminal Code yars ago! )
But they are vital. Just don’t anyone expect to make any money at it.
The IT and high tech sector here in TO is amazingly huge – hell the three feet of research I have sitting in a file box is daunting in in itself.
There always have to be the lil guys and the inventors and the tinkerers. Just want to make sure – for any folks from Souther Pump Handle Tenn who are reddin this – “That’s all we got in TO.” scenario … well it ain’t so.
Hell on Front Street we got more Geeks per Square Inch just at the RBC than all of NASA! (I am jokin but I think we would be close.)
I do have a Question, Mark… (Sorry couldn’t resist.)
As a former (and current I would guess) very hip journalist – What would you say your feelings are towards the Toronto City Hall and the politicos that look after this sector? Like the EDT?
We have always been
Good blog. The reality is that you can’t get $1 million of seed capital in the middle of a financial crisis, nor do you need it. One solution is to “think micro” and lower our initial expectations. IMHO, many great business ideas can be started with as little as $5,000 in seed money. If the business works, then it can self-finance through growing revenues and profits. If not, then it’s a lesson learned and investors lose very little.
Why not use the power of social networks to create some type of micro-VC fund for the Toronto community? It could operate as a non-profit private equity fund with direct micro-funding from the community’s members (that’s us), while structured as an investment club to bypass accredited investor rules.
Ray: You’re right – even small amounts of seed capital would be a good thing and provide some entrepreneurs with just enough capital to gain traction.
One of the reasons that Silicon Valley has capital for technology companies is that it has a long history of people who have made good money in technology and are willing to invest their time and money in technology ventures. In Canada we have few such people (e.g. RIMionnaires — I just made that up). This isn’t specific to Canada: there have been various attempts around the world to create local equivalents of Silicon Valley, and there’s been some success but nothing anything like the Valley. I think it pointless to look to the Valley and its outfits like YCombinator — it’s just not going to happen.
Fortunately, much less money is needed now than in the past, as Ray Acayan says in the comments. I’ve been to many DemoCamps in Toronto and have seen lots of good business concepts — some of which have been developed, in most cases without much funding. And one of the things provided by the “camp” community and the mesh conference is that vital connection between startups and the few funders we do have available. Impressive results may take a while, though — the camps and mesh have only existed for a few years and this new community of innovation needs some time to transform from a sapling to a solidly rooted tree. The continued momentum makes me optimistic.
Rohan,
I agree that less money is needed these days but, at the end of the day, many start-ups need some money to get them over the hump. It could be as little as $50K so they can hire a salesman/woman. The reality is, however, I think many promising start-ups wither on the vine simply because they are unable to raise even a little bit of capital.
Agreed, Mark. “Much less money needed” does not mean “no money needed”. One hope I have is that the reduced barrier to entry for being an angel investor, combined with lower (often negative) returns in the stock market, will bring some new people into the funding game.
Mark — yes, seed capital. These days, for “digital media” type ventures, the number is somewhere around $250K or less — a first round in this space is $500K – $2M+.
Wish there was something like a Y Combinator? There are two of them. One is the Montreal Startup Fund, which invests in the neighbourhood of $250K per startup.
The other is us, Bootup Labs, in Vancouver. We do more of the incubation thing, and invest in the neighbourhood of $100K.
There is no reason there couldn’t be one such entity in each major center in Canada, and Toronto is the obvious place for the next one.
Oh, and we’re accepting applications for a May 1st intake in a couple of weeks.
We can’t ignore the fact that a lack of business models has probably hampered VC financing. Canada was guilty of following the no-biz model of Silicon Valley, which makes it a lot harder to attract funds.
We need to get Canadians focused on delivering real Web 2.0 solutions for biz that is prepared to pay for it.
Simple as that.
The Greek
Great post Mark, and I agree with everything that you’re saying, and I loved reading the comments as well. I’ve never read a blog with so many detailed comments, so it’s amazing how can you spark such a passionate discussion.
It would be nice to have a TechStars, or a YCombinator here in TO. I heard the founder of TechStars speak last year here in Toronto at StartupEmpire and was thinking the whole time that it would great to have one in Toronto. I wonder if TechStars will just focus on Boulder or branch out across North America?
I was in a great government sponsored entrepreneurship program where I GOT PAID to learn what it takes to be a business owner, and ended up with a decent business plan as a result. There should be more programs like this to really help to encourage and spark innovation in the creative younger generation coming up. I consider the experience invaluable to my early business career.
My company will be looking to raise at least a couple hundred thousand as Spring approaches and I don’t know where to start? Toronto angels is what I’m thinking right now, but more importantly than the money is the support of investors who have had successful exits in the past.
The first problem is to find investors to invest the financial capital I’m looking for, next is to find the people who invest in Web 2.0 companies. That may be hard because traditionally Web 2.0 = something fun and cool for users, but no business model to sustain a company.
It’s nice to see the tech scene coming together in Toronto and in Canada, but I doubt we will see a Silicon Valley North emerge any time soon.
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