I recently wrote about Wattpad co-founder Allen Lau’s call for Canadian investors to be more cutthroat. That newsletter installment looked at the dismal numbers Canada’s VCs put up against our neighbours to the south in terms of deal count and dollars. This week, we’re diving deeper into the conversation.
Ryan Henry, partner at Sand Hill North, invests primarily at the pre-seed and seed stages. Last year, he switched from primarily investing in Canadian startups to writing 80 to 90 percent of his cheques in the US. Why?
One of Henry’s primary complaints is that Canadian companies “spend too much time” building a product, going to market at the seed stage. “Many of the best companies that grow very quickly down in the States are in stealth mode for a couple of months and then launch very quickly, go to market very quickly, and get hundreds of thousands of ARR within the first couple of months,” he said. “That would be abnormal in Canada.”
On the flip side, Topicflow CEO Amin Palizban told Alex Riehl that he had a difficult time with Canadian investors for his company’s $2.5-million seed round. The former 7Geese CEO, who ended up raising solely from US investors, said Canadian VCs continually told Palizban he was too early for funding, and asked for complicated deal terms. The difference raising in the US was “night and day.”
On LinkedIn, some founders cautioned painting Palizban’s experience as uniform, while others said founders privately tell each other to not bother trying to raise in Canada (BetaKit has heard the same in our DMs).
It’s not just raising from the US: some founders are uprooting their companies entirely. CMD Capital’s Matt Roberts said seven founders have personally messaged him to say they’re leaving Canada.
“Everybody will talk about capital gains, that’s part of it, but I’m hearing people say they’re leaving because of general things like the high cost of living,” Roberts said. “Experienced founders in our ecosystem are choosing not to do it again.”
Are they fleeing a ‘go-for-bronze’ culture? Panache Ventures’ Chris Neumann doesn’t think Canadian founders lack ambition. He does believe that the Canadian ecosystem is missing key ingredients, leading founders to decide “the best path to fulfill their ambitions involves leaving Canada.”
It’s a tough pill to swallow heading into Canada Day. But as Neumann notes in his blog post, Canadian tech (on all sides) could benefit from hearing some constructive criticism.
Thanks for reading on and ’til next week,
Bianca Bharti
Newsletter Editor
Burn season
On June 25, more than 100 tech sector leaders and finance professionals attended the BetaKit Talks: In the Black, hosted by Float. The candid conversation featured Rob Khazzam, CEO and Co-Founder of Float, Christian Weedbrook, CEO and Founder of Xanadu, and Hanna Zaidi, VP, Payments Strategy and CCO of Wealthsimple. Read their insights from our limited event series, which convenes and engages Canadian tech on top-of-mind issues and challenges.
Float is Canada’s only business finance platform for managing all non-payroll spending in one place. Sign up for Float and get early access to Bill Pay and Reimbursements.
TOP STORIES OF THE WEEK
BetaKit wins General Excellence, Small Publication at SABEW Canada Best in Business Awards
BetaKit took home two awards at SABEW Canada’s 10th Annual Best in Business Awards Monday night.
BetaKit received the 2023 award for General Excellence, Small Publication, while reporter Josh Scott received the Jeff Sanford Best Young Journalist Award.
“Holy shit, we won,” posted BetaKit editor-in-chief Douglas Soltys to social media.
Pay gap between men and women in tech tripled over five years
The pay gap between men and women working in tech nearly tripled between 2016 and 2021, underlining the growing inequality in the sector, according to a new report.
Public policy organization The Dais, based out of Toronto Metropolitan University, released a report Thursday titled “Canada’s Got Tech Talent,” which found that men made $20,000 more on average than women in 2021. The gap has widened since 2016, when men made $7,200 more than their female counterparts. In 2021, men earned $91,000 on average, while women earned $71,400.
Susan Hawkins to lead Payments Canada as president and CEO
On Aug. 12, Hawkins will officially assume the role, which has been held by interim co-CEOs Kristina Logue and Jude Pinto since Tracey Black stepped down from the position in April after choosing not to renew her term. Once Hawkins starts, Logue will resume her role as the agency’s chief financial officer, while Pinto will resume as chief delivery officer.
Hawkins joins Payments Canada from TD Bank Group, where she worked for over five years, serving as global head of enterprise payments and executive vice-president of US payments.
Why SaaS shouldn’t sleep on customer success in a down market
For Matt Roberts, the days of encouraging explosive growth have given way to urgent directions to stave off death.
As the co-founder and general partner at CMD Capital bluntly put it: “Cash today is hard to find, and so expensive to get.”
SaaS businesses tend to fare much better in down markets, said Roberts, thanks in part to the predictability of recurring revenue. But they are now increasingly at risk, as enterprise customers cut costs and streamline existing contracts.
From God’s Pocket to YVR, how a BC program is giving startups a major testbed for scale
In 2020, cleantech startup Moment Energy was a team of four working out of a garage in Port Coquitlam, BC.
The company had created an innovative energy storage solution using repurposed retired electric vehicle batteries. Their early customers were a handful of remote, off-grid sites including a cold water dive resort called God’s Pocket, off the northern tip of Vancouver Island.
Today, the company is working with an international airport that sees millions of passengers each year.
Don’t miss out on two great Canadian tech events
Tickets are still available on the Startup Train from the Greater Toronto Area to Startupfest!
Travel in style with chartered business class cars alongside investors, startups, and mentors headed to Montréal, July 9-12. Register now to access BetaKit’s 15% discount.
And the Super Early Bird offer ends today for Elevate’s world-class Tech + Innovation Festival, Oct. 1-3, at Meridian Hall in Toronto. Get your #ElevateFest2024 tickets for up to 50% off here.
Funding, Acquisitions, and Layoffs
TOR – Haloo – $4.7M CAD
TOR – e-Zinc – $42M CAD
TOR – Healwell invests $2.7M CAD in xAI
TOR – IGM Technology receives strategic investment by Lead Edge Capital
TOR – INOVAIT invests $10.7M across seven projects
KWL – CoGuard receives OpenAI grant
OTT – Raven Connected – $10M
OTT – FedDev invests $20M across nine companies
OTT – Feds invest $2.4M in two Ontario accelerators
QBC – Gaia – $18M CAD
MIA – Hut 8 – $150M
HFX – Innerlogic – $1.3M CAD
The BetaKit Podcast
This deep tech PE firm was drawn to Canada by the data
“In Canada today … if you look at the inventory of 20,000 great technology companies, 60 percent of those have never met an investor. Because they’re really busy at meeting customers.”
Jolt Capital managing partner Jean Schmitt joins to discuss why he made Montréal his deep tech private equity firm’s North American HQ, and the opportunities for investment he sees across Canada.
Teladoc Health Canada releases study that shows over 78% of Canadians find accessing mental health support in the health care system a challenge
Teladoc Health Canada, a leading provider of virtual healthcare services, recently partnered with Modus Research to survey over 1,600 Canadians to shed light on the mental health needs of Canadians and the persistent challenges they face in accessing support.
Key highlights:
• 71% would be more likely stay with an employer who fully supported their mental health needs
• More than 78% who accessed mental health support report that navigating the health care system to find this support was “somewhat difficult” or “very difficult”
• 53% found it challenging to locate a professional who can effectively help them. Of those who received care, only 28% had high levels of confidence in their diagnosis
For more information, please visit https://www.teladochealth.ca/expert-care/mental-health/
Feature image courtesy Unsplash. Photo by Igor Kyryliuk.