U.S Investors Digging the Canadian Startup Scene

If you’re looking for validation about the good things happening within the Canadian startup landscape, it might be the growing number of U.S. investors coming north of the border.

The latest “evidence” is the $15-million raised by Ottawa-based Shopify from Bessemer Venture Partners, FirstMark Capital, Felicis Ventures and Georgian Partners. It is a major financing for a company that has become one of the fast-growing e-commerce players, even though it might not have a huge profile outside of its hometown.

The financing for Shopify, which offers an ecommerce software platform financing came on the heels of Wave Accounting raising $5-million from a group that included Charles River Ventures; WattPad raising $3.5-million in a deal led by Union Square Ventures, and Achievers.com pulling in $24.5-million from Sequoia.

The growing involvement of U.S. investors can only be seen as a good thing because there is still a lack of startup capital in Canada. This is particularly necessary for startups looking for raise anything more than $5-million given there are few Canadian VCs able or willing to make this large of an investment.

The other reason more U.S. investors will be looking for deals north of the border is lower valuations. The U.S. startup market is frothy (bubble-like?) so Canadian start-ups may be more affordable and, at the same time, provide solid investment opportunities.

The only cloud I can see on the horizon is the health of the global economy, which doesn’t seem to be having an impact on startups raising money.

For more, StartupNorth has a round-up of the U.S. deals.

Subscribe to "This Week in Canadian Startups"

A weekly newsletter featuring news about the Canadian startup scene, as well as great startup content. We'll also send you an e-book featuring more than 100 of the leading digital marketing services.

http://www.eqentia.com William Mougayar

This is a great for Canadian startups, and it shows that the US VC’s are still the king makers. Too bad that the Canadian VC’s couldn’t capitalize on these opportunities to the full extent they could have.
http://inoviacapital.com Karamdeep Nijjar

It has less to do with lower valuations, and more to do with some exceptionally talented teams going after big markets in a disruptive manner (the valuation gap exists more at the seed and later stage). These were not bargain basement deals – they were a fair reflection of the hard work, vision, and tenacity of Canadian entrepreneurs. BTW, there are Canadian VCs (Georgian, OMERS, Golden, and JLA) in each one of those deals. We’re going to see more US VCs in Canada because more Canadians are building great companies – exciting times.
http://startupcfo.ca Mark MacLeod

I have been saying for some time now that the borders are coming down. US investors are coming up here more and more because:

i.) We have great talent;

ii.) Valuations are not as rich as in the US, particularly in the Valley; and

iii.) There are no longer any tax issues when US investors sell Canadian shares
http://www.rho.com Roger Chabra

The broader view question is whether the current US VC funding flurry is cyclical as it was last time. We saw a strong influx of capital during the 1999-2003 timeframe (with a lapse like everywhere else in there when the Internet bubble burst) from US VCs into Canadian deals, especially in the telecom sector and in Ottawa. But once the bubble effects really hit hard (and the telecom bubble itself burst), US VCs ran back to tend to portfolio companies closer to home and to doing selected deals closer to home (because valuations became more normalized there as well).

I think we have seen some structural changes, that point to the current influx not being only cyclical-driven activity (e.g. Section 116 going away), but these changes alone aren’t enough to ensure the best companies in Canada get funded in both up and down cycles. When the current bubble inevitably bursts, and we all know it will at some point, we will see US VCs retrench again. We need domestic seed, Series A and later stage funds that can invest and help local companies during good times and bad. It’s not a patriotic or ego-driven issue of proving we can do this ourselves – it’s just the reality of what is needed to somewhat smooth out the ebb and flow of capital into the best ventures and entrepreneurs in Canada.
http://inoviacapital.com Karamdeep Nijjar

It has less to do with lower valuations, and more to do with some exceptionally talented teams going after big markets in a disruptive manner (the valuation gap exists more at the seed and later stage). These were not bargain basement deals – they were a fair reflection of the hard work, vision, and tenacity of Canadian entrepreneurs. BTW, there are Canadian VCs (Georgian, OMERS, Golden, and JLA) in each one of those deals. We’re going to see more US VCs in Canada because more Canadians are building great companies – exciting times.
- http://www.markevanstech.com Mark Evans
  
  Karamdeep,
  
  I agree that the quality of entrepreneur and the startup opportunities have improved in a major way, which explains the deal flow and involvement of U.S. investors. I’m curious to see if U.S. investors are going to be take a bigger profile or whether this is a cyclical kind of thing. Thanks for the comment. Mark
Pingback: Canadian Venture Investment Grows 51%

inbox

U.S Investors Digging the Canadian Startup Scene