I just got around to reading Paul Graham’s post on the VC industry’s reluctance to change its investment approach, despite evidence that its model might be broken. It’s hard to argue with the point that it costs less than it used to to create many kinds of technology-based businesses, and by extension that a valid approach is to make a larger number of smaller bets. I also like the idea that things are essentially binary. That is, web startups either work or they don’t, but it takes far less than the typical $3-$5 million A round to determine if you’ve got a zero or a one. Graham’s own YCombinator is of course leading the charge in proving this point.
In theory this climate should be good for Canadian startups. Historically we’ve had to do more with less, and some of our best home-grown success stories (Flickr, StumbleUpon, iStockPhoto, among others) have had great exits with little or no institutional funding. But what I’ve noticed in my own back yard (Vancouver), and what it pains me to admit I’ve been guilty of, is an expectation that a requirement for less capital makes a startup somehow less serious or demanding an endeavour.
Brendon Wilson has been shaking the trees over at our local tech blog, Techvibes, making the point that we’re outright kidding ourselves if we want to become a real Silicon Valley North. I agree with much of what he says, particularly the “work smarter” ethos, and the reality check about what it takes to push a start up over the edge.
What gets lost in translation between the Techcrunch posts on YCombinator glory and our own start-up community, though, is the do more part of do more with less. The amount of money you raise ought to be defined by how much you need to execute on your plan, but all over town I hear the refrain of “all I need is $x and I’ll quit my job and do this full time”. The implicit message is that the investment capital is to be used to fund the transformation of a hobby into a paid gig. In other words, the money is intended to relieve risk and pressure rather than create it.
As far as I can tell, US VCs rarely invest in Canadian companies, and certainly not early stage web businesses. And as much as we might bitch and moan about our local VCs, they, too, are simply not the right customers for the investment opportunities we’re all selling. The only options are to write the cheques yourself or tap into our vibrant angel community, or both. But none of this means shrinking our ambition to match the dollars. Instead getting funded in Canada is both extremely difficult and extremely simple: create a business that can scale in direct proportion to the effort and passion you invest, and wildly out of proportion to the amount of capital you can raise.
Post a Comment