Simply increasing the volume of sub-par deals won’t solve the venture capital problem in Canada. The technology industry is a global business and has no borders. Put directly, Canadians need to build world-class companies, not just “Canada-class” businesses if they are to be competitive. To do this, Canadian entrepreneurs need to make a wholesale shift in their attitude about markets, competition, ownership and opportunity.
I continue to hear from entrepreneurs that they want to expand throughout Canada before exploring opportunities in the United States. This is a fatal mistake. Canadian technology entrepreneurs need to adopt the view that Israeli entrepreneurs accepted long ago. There is no domestic market for their product or service. The sooner they recognize there is only a global market, the better off they will be.
As for competition in this global market, Canadian entrepreneurs need to operate under the assumption their competitors are better capitalized, networked and staffed than they are. As former Intel CEO Andy Grove said, only the paranoid survive. Our high standard of living in Canada sometimes shields us from the reality that somewhere out there is an entrepreneur who has nothing to lose by taking chances, making bold moves and just plain working harder than everyone else. We need more of that attitude in Canada.
Since I probably spend more time with American entrepreneurs than most other Canadian VCs, I can tell you Canadian entrepreneurs seem overly focused on owning the largest slice of what will turn out to be a very small pie. At the risk of generalizing, most American entrepreneurs would rather have a small slice of a really big pie. When it comes to financing a company with venture capital, entrepreneurs need to keep this concept in mind. It is a self-fulfilling prophecy that comes true more often than not.
Finally, too many entrepreneurs in Canada are creating “lifestyle businesses” that only aim to achieve a certain level of income or give them a “job” on their own terms. While there is nothing wrong with this, VCs are not in the business of funding these opportunities. To create the next RIM, VCs need to focus on entrepreneurs with game changing ideas who are building “companies” with large markets and high-growth potential.
