The Party’s Rocking But Let’s Keep Our Heads

It is difficult not to get stoked about Canada’s startup landscape by looking at what’s been happening recently:

- Halifax-based GoInstant is acquired by for a reported $70-million

- The $30-million Hyperdrive accelerator program in Waterloo officially launched with a co-hort of seven companies, while Jolt unveils its cohort.

- The International Startup Festival is Montreal has kicked off. Heck, there were even a group of startup entrepreneurs who organized to get there by train.

These are definitely exciting times for the startup ecosystem. There is  a lot of activity, a growing number of experienced and enthusiastic entrepreneurs, and an encouraging number of startups becoming viable businesses. This is why I’m bullishness about the Canadian high-tech sector despite bad news such as RIM’s struggles to stay relevant.

That said, it is important to remember that while the party is raging, there is still lots of room for improvement. As much as the startup ecosystem is flourishing, there is still not enough financing to support entrepreneurs looking for seed capital and, as important, fast-growing companies looking for series A money to accelerate their development.

To me, this is the Achilles’ heel of the Canadian high-tech sector.

There is tremendous potential but if there isn’t enough support, it will be difficult to capitalize on the opportunities in front of us. What could happen is three two things:

1. The high-tech sector will do well but it won’t thrive and become a vibrant marketplace that drives high-paying jobs and strong economic development.

2. The high-tech market will sag or lose its momentum because people will get discouraged and entrepreneurs won’t take as many chances, or

3. U.S. investors looking for good opportunities at attractive valuations will snap up the best deals, taking the returns and entrepreneurs south of the border.

As an optimist, I’m hoping deals such as GoInstant have caught the attention of VCs who are still too cautious for their own good, as well as institutional investors, who have been sitting on the sidelines for far too long. This is not to suggest one deal changes everything but GoInstant is another signal good things happening.

What do you think? Is startup financing the elephant in the room? 

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