Are Canadian Startups Missing the Party?

South of the border, the party is raging. You can almost hear Prince’s “1999″ playing the background as startups find themselves being courted by investors and snapped up for eye-popping amounts.

The case in point is Facebook’s $1-billion purchase of Instagram, which is staggering any way you want to slice it.

To me, it feels frothy and eerily similar to the dot-com boom of 1999/2000. Meanwhile, Jason Freedman, founder of 42Floors, wrote a post yesterday about how investors at a Y Combinator demo day were “frenzied almost, excited to invest in entrepreneurs”.

While there seems to be reasons for concern about a market becoming increasingly over-heated, you also have wonder whether it matters. If the party is happening and everyone is having a great time, does it make sense to be a party-pooper? Maybe it is just better to jump into the fray and enjoy the ride.

It is a strange world. While the startup scene in the U.S. is flourishing, the Canadian startup ecosystem is far from robust. There still isn’t enough capital, many institutional investors are still not participating, and many startups find getting financing difficult, if not impossible, to attract.

This is despite the fact the startup ecosystem is as vibrant and strong as it’s ever been, and that dozens of start-ups were acquired acquired last year. In other words, there is a lot to be excited about but Canada is hosting a small tea party, there’s a wild rave taking place in the U.S.

When you compare the two “parties”, the key question is whether Canadian startups are missing the boat? Is our conservatism and aversion to risk damaging the development of the startup sector and hurting Canada’s ability to drive innovation and economic growth?

When the federal government has to commit $50o-million to support venture capital activities, it is an admission something is not right.

One of the key questions is whether Canada’s startup scene is not robust enough, or whether it is getting out of control in the U.S. Are we right, and they’re wrong, or are we missing a good party?

What do you think?

More: Anyone interested in the Canadian startup landscape should read Jevon MacDonald’s post on StartupNorth.

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  • Jevon

    I do not think that the $500m commitment is because “something is not right” — I think it is because there is an outsized opportunity for Canada right now and it is more about opportunity than it is about surgery.

    • Mark Evans

      Jevon: Agree with you that there is huge investment potential in Canada. The question is why the federal government has to step into the fray in addition to the R&D credit system and various other investment programs and incentives.

  • William Mougayar

    The boat is the world. The US market is a springboard to the world. Canada is just a base.

    The challenge in Canada is the long distances between Toronto, Montreal and Vancouver, who are the 3 key centers. All put together, they are smaller than the NYC ecosystem. We need to continue breaking down the barriers of working together. That will happen when you can fly from Toronto to Vancouver for $139, just like you can fly from NY-SF for that price.

    (Hey Mark- why don’t you consider switching to a more modern Commenting system like Disqus?)

  • Stuart MacDonald

    I think the Party in SFO is not tied to anything approaching reality (to wit: my quotes in the NYT, Bloomberg and on BNN) but I think Canada has come a long way. I’d love to see more businesses growing and creating futures here and not doing the fast exit, but regardless I’m not going to fault that. Canada is a great place to run a tech business. Maybe the best.