Taking Risks,
Building Fast:
Industry experts look
at Ontario’s thriving
Venture Capital space.
October 2013
2

Participants
Moderator:

Mark Evans
ME Consulting — Owner

Panelists:
Ian Carew
Director
Northleaf Capital Partners

Mi...
3

Introduction
Invest in Ontario brought together 5 top venture capital specialists for a
roundtable discussion about Ont...
4

How is the current Ontario Venture Capital
landscape conducive to a new business start-up?
• In 2008, the Ontario Ventu...
5

In what ways has the Ontario landscape changed
that would benefit my business?
• Our whole ecosystem is better at the e...
6

What unique opportunities does Toronto offer a
start-up?
• Ontario is known for enterprise software and has had big out...
7

How many funds are available in Canada?
• In Canada you don’t need 50 or 100 funds, only 10 or 20 that are
really focus...
8

How do the federal and provincial government
programs support Ontario start-ups?
• The OVCF has a third party manager t...
9

As an entrepreneur, what funding does Ontario
offer me?
• Funds such as the Investment Accelerator Fund from Ontario
pr...
10

What amounts of funds are available?
• Accelerator programs for extreme start-ups provide mentorship and
from $50,000 ...
11

What type of financial incentives are available in
Ontario?
• Access to funds through the BDC (Business Development Ba...
12

How does Ontario VC funding compete with USA?
• Very favourably. The OVCF program has 8 funds; each of them
have deep ...
13

Is the growth capital handled domestically or
syndicated with US Venture Capitalists?
• It depends on the amount of fu...
14

What other advantages does Ontario offer start-ups
versus the USA?
• Talent! “Toronto is a better place than the Valle...
15

What other advantages does Ontario offer start-ups
versus the USA?
• The support network and the ecosystem, (both prov...
16

Why Ontario?
• Because your dollars go a lot further -- at that very critical early
stage when you’re not generating a...
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Taking Risks, Building Fast: Ontario's Venture Capital Space October 2013

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Invest in Ontario brought together 5 top venture capital specialists for a roundtable discussion about Ontario’s capital fund climate for new start-up companies. A key component of the discussion was how the Ontario Venture Capital Fund (OVCF) and the Ontario Emerging Technologies Fund catalyzed the industry and is helping innovators to attract investment.

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Taking Risks, Building Fast: Ontario's Venture Capital Space October 2013

  1. 1. Taking Risks, Building Fast: Industry experts look at Ontario’s thriving Venture Capital space. October 2013
  2. 2. 2 Participants Moderator: Mark Evans ME Consulting — Owner Panelists: Ian Carew Director Northleaf Capital Partners Michelle McBane Investment Director Investment Accelerator Fund Simon Chong Managing Director Georgian Partners Suresh Bhat Venture Capital Associate Extreme Venture Partners David Unsworth Partner RBC Venture Capital
  3. 3. 3 Introduction Invest in Ontario brought together 5 top venture capital specialists for a roundtable discussion about Ontario’s capital fund climate for new startup companies. A key component of the discussion was how the Ontario Venture Capital Fund (OVCF) and the Ontario Emerging Technologies Fund catalyzed the industry and is helping innovators to attract investment. The following Q & A provides the perspective from the VC panelists and what they believe is working to support more successful starts-ups in Ontario.
  4. 4. 4 How is the current Ontario Venture Capital landscape conducive to a new business start-up? • In 2008, the Ontario Venture Capital Fund (OVCF) was established to provide capital funds to start-ups – making the availability of capital much easier. • The $250 million Ontario Emerging Technologies Fund invests in 3 key sectors; • • • Cleantech Life Sciences and Advanced Health Technologies Digital Media and Information/Communication Technologies • Today, seed capital and angel investors are available, along with larger fund amounts for expansion capital • Now there is a range of funding available across all financial stages for a company -- from seed capital through to growth and expansion.
  5. 5. 5 In what ways has the Ontario landscape changed that would benefit my business? • Our whole ecosystem is better at the early and seed-stage investing • Ontario has become a lot better at getting very young, very aggressive and very talented entrepreneurs coming out of our engineering programs and getting their companies through that first initial stage of financing.
  6. 6. 6 What unique opportunities does Toronto offer a start-up? • Ontario is known for enterprise software and has had big outcomes with companies such as Algorithmics • Toronto specifically has every single financial service, so you know how to deal with enterprise software in terms of engineering support, sales, retail, oil and gas, manufacturing, everything. “You are selling to BIG companies.” • Access to the best and brightest talent pool with over 40 top universities and over 30,000 graduates in computer science engineering each year. • For example, BumpTop’s founder created a desktop user application that was spun out of his Masters thesis at University of Toronto. When he graduated he got commercial funding and eventually was acquired by Google.
  7. 7. 7 How many funds are available in Canada? • In Canada you don’t need 50 or 100 funds, only 10 or 20 that are really focused on the best investment opportunities. • There’s a pool of $205 million ($90 million from Ontario and $115 million from other institutional capitals) of leveraged capital. • These funds span across seed funds, early stage investors, late stage funds – a nice mix to generate returns.
  8. 8. 8 How do the federal and provincial government programs support Ontario start-ups? • The OVCF has a third party manager that can make decisions to allocate the money to the best funds based on returns potential. • Through longer term support. It is going to take five to eight years to generate returns. • However, the funds need to invest their capital, they need to generate returns, as that's what's going to drive other investors into the asset class. This longer-term support is critical to giving the industry a chance to mature and grow.
  9. 9. 9 As an entrepreneur, what funding does Ontario offer me? • Funds such as the Investment Accelerator Fund from Ontario provides active seed funds (over 65 deals in the last 4 years). • Follow-on funds can be up to 5 times the amount for a seed-stage fund for high quality companies. • Many of the successful angels and entrepreneurs coming out of the ecosystem come back, create new companies and reinvest – thus the ecosystem loop effectively churns out more successful companies, wiser entrepreneurs, and second, third, and fourth type entrepreneurs. • Ontario programs offer opportunities to work closely with other entrepreneurs and bring other eyes, mentors and high quality advice to the companies – increasing their chance of success.
  10. 10. 10 What amounts of funds are available? • Accelerator programs for extreme start-ups provide mentorship and from $50,000 - $200,000 right away without a lot of due diligence if the start-up has a good team, are working on something that’s really interesting, and there's a big market opportunity – they get a chance right away. • For every dollar reinvested, there’s been almost $30 in follow-on.
  11. 11. 11 What type of financial incentives are available in Ontario? • Access to funds through the BDC (Business Development Bank of Canada) -- one of the most aggressive and most active venture capitalists in Canada – and a Crown Corporation. • Access to funds from OVCF, which has been key in all deals raising funds of critical mass in Ontario in the last 5 years. • Very generous tax credit programs. • The R&D tax credit offers for every dollar spent on an accredited activity in technology development, the company gets up to $.35 back. • No interest payment loans. The FedDEV Investing in Business Innovation (a $175 million fund) offers companies a loan, with no interest payment terms over 60 months.
  12. 12. 12 How does Ontario VC funding compete with USA? • Very favourably. The OVCF program has 8 funds; each of them have deep domain expertise, deep operating expertise and are competitive on a North American basis. • These investments are made because these are the best companies, not because they have to focus on local markets. • An example from the Ontario portfolio is Fixmo. This started as 2 people working on mobile security. It was seeded here in Ontario initially and when they reached a point where they could scale, they got really good interest from the Valley and Kleiner Perkins invested. • Fixmo started off small here in Canada, and then investors helped scale it with an investment of $40 million. • Fixmo is an example of how something can be built here, but can then access investors outside of Canada, to go to the next level.
  13. 13. 13 Is the growth capital handled domestically or syndicated with US Venture Capitalists? • It depends on the amount of funds required • If you need $15-$25 Million, then the fund has to be more than $300 million. • For example, RBC Venture Partners has 2 funds focused on enterprise software that could provide all the funds, but it’s in the best interest in many cases to bring in a US syndicate partner to lead that growth equity and to get diversification because they bring expertise to help the company expand into the US.
  14. 14. 14 What other advantages does Ontario offer start-ups versus the USA? • Talent! “Toronto is a better place than the Valley for initial start-ups because in his mind (Canadian data entrepreneur) we had better and cheaper technical talent.” • The University of Toronto and University of Waterloo have a mentality of building companies. The university doesn't take a portion of the company and the invention. Whatever comes out is taken by the entrepreneur, with the intent that they will give back to the university. • As well, U of T has very strong tech transfer and software engineering programs and are building really great pools of people. (Continued)
  15. 15. 15 What other advantages does Ontario offer start-ups versus the USA? • The support network and the ecosystem, (both provincial and privately funded programs) educate the next generation of entrepreneurs and take them to that next level -- to expand what's going on in universities to a practical level. • Availability of accelerators (i.e. Extreme, JOLT, and HYPERDRIVE) to provide a really good opportunity to learn how to build a company. • Loyalty/Retention of talent: • It's rare that people leave a company after three or four months -versus the jumping around that you often hear about in the Valley. • People are here for the long haul and they're very loyal to the company that they're building.
  16. 16. 16 Why Ontario? • Because your dollars go a lot further -- at that very critical early stage when you’re not generating any revenue and you don’t have cash flow to keep going. • Ontario helps companies take risks, build fast, and to get to that validation stage where they can bring key investors to the table. • If you would like to talk to a representative immediately about expansion opportunities in Ontario, please call 1-800-819-8701 in North America or 1-416-313-3469 internationally. (Available: 8:30 - 16:30 EST) • You can also email us at info@investinontario.com. A representative will contact you within two business days.

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