VC Industry Lessons

I have recently returned from a 10 day trip to Israel with my partners at Brightspark. We were busy the entire trip with meetings every day including some touring as well. It was a wonderful opportunity to see the Israeli VC industry “in action”. We met with a number of VCs, especially early stage VCs, software companies – early and later stage, angel investors, operating companies, incubators, and investment bankers. We were treated very well, and we learned a lot – now to get rid of the jet lag...
Instead of composing a long blog post, I am composing a few smaller entries with some thoughts and ideas after our travels.

Trying to compare the Canadian and Israeli VC software markets – not much to compare

I have been fortunate to participate in the Israeli and Canadian software industries over the last twenty five years. My first programming jobs were on Data General computers in Israel in the early 80’s when hardware was so expensive that we battled to squeeze business software on to underpowered hardware. Soon thereafter, I came into contact with the software publishing industry when Ontario, Canada led the market (with Atari and Commodore software). By the early 90’s, we had some major software companies in Canada when Delrina, Corel and other led their marketplaces.

Ten years ago, the Canadian and Israeli VC marketplaces were poised to take off from a leveled starting point. The Internet was emerging; both markets had some of the best computer science universities in the world; governments were trying to figure out how to help. When I founded a software company called Balisoft in 1997, we created a software company that had early leading VCs from both countries - Sofinov (CDP) and J.L. Albright from Canada, and Gemini from Israel with government assistance via CIIRDF.

Fast-forward 10 years to 2006. Canada has a VC based software industry that I would describe as quite unhealthy, and the Israeli industry has created huge momentum that seems to be driving an entire economy. The contrasts are amazing. During our trip to Israel, we spent four days traveling from hi-tech area to hi-tech area. We kept saying to each other that we could easily have been in Silicon Valley. And we never even got close to visiting any meaningful proportion of the industry – we mainly visited just the North Tel Aviv Area. We found an industry with more than 60 private VC firms, with exits taking place regularly on a weekly basis, established government programs in place that are driving innovation, and a new presence from the major US VC firms.

Contrast that with the Canadian industry. We seem to have fewer VC’s in existence each year. At the seed and early stage, outside of Quebec we have very, very few funds. It seems to me that the Quebec government is doing something right because they are attracting outside VCs and new activity. But outside of that one glimmer, we seem to have an industry where the best talent moves quickly to the USA, we have very few repeat entrepreneurs, very little momentum in creating success stories; and while we keep hearing about new potential new government programs, there seems to be almost no visible success from these programs.

Sadly for the Canadian software industry, we find that if Israel and Canada were at the same place in the VC industry 10 years ago, we now find Canada very far behind.

We can find excuses and explanations, and there are no simple solutions, but it is interesting to look at what I think are some of the reasons for the difference and what can be done about it. This will be the topic of other blogs posts, but I believe that well focused government programs have been a huge contributing factor to the success of the Israeli industry, and that Canada should learn from this success.

Fortunately, it’s not too late to fix...

Comments

[Dave Forde]

Mark - very interesting insight into the current Canadian VC's. Who's job it is to fix the problem?