Jim Orlando’s 2016 Venture Capital predictions scorecard

OMERS Ventures Jim Orlando

Twelve months have flown by and it is time to look back at my Ten Canadian startup and venture capital predictions for 2016. A lot has happened in our ecosystem since this time last year, so it is interesting for me to look back at what was on my mind a year ago and see how my predictions stacked up.

Prediction #1: Deal Volume Would Increase Disproportionately For Early-Stage Startups

A year ago I thought there would be fewer larger investments in later-stage ventures in 2016 versus the previous year, resulting in proportionately more investments in early-stage ventures. A guesstimate using data from the CVCA shows that funding to early-stage companies increased by 30%, while funding to later-stage companies decreased by 5% (the overall funding during the year increased by 15%). For what it’s worth, the four new investments in 2016 here at OMERS Ventures (AmpMe, Nudge, and two unannounced investments) were all early-stage and pre-revenue.
Outcome: TRUE
Score: 1/1

Prediction #2: U.S. Investor Interest in Canadian Startups Would Increase

I felt that in 2016 U.S. investors would be even more interested in Canadian startups than in previous years, with a particular emphasis in late-stage investments. A review of CVCA data shows that foreign investment in Canadian startups increased by 15% in 2016 over 2015.
Outcome: TRUE
Score: 2/2

Hootsuite lobby

Prediction #3: 2016 Would Not be the Year for Tech IPOs

I wasn’t bullish on the potential for tech IPOs for 2016 and I was right. Stay tuned for 2017
Outcome: TRUE
Score: 3/3

Prediction #4: More VC Firms Would Raise Larger Funds

With the Canadian VC industry continuing to mature, I predicted that some of the established VC firms would raise larger funds (> $150M) in 2016 versus 2015. Georgian ($485M) and iNovia ($175M) announced their funds in 2016. New funds from BDC Cleantech, VanEdge, and Yaletown were announced as well, but they were all just below the $150M threshold. The larger two compare against our one OMERS Ventures Fund 2 announcement ($260M) in 2015. Narrowly got this one!
Outcome: TRUE(ish)
Score: 3.5/4

Prediction #5: Equity Crowdfunding Would Take Hold in Canada

A year ago, I felt that the then-new equity crowdfunding rules would impact early-stage startups in 2016, similar to what has happened around the world. A mid-2016 report from the National Crowdfunding Association of Canada forecast a significant increase in crowdfunding capital for 2016. The numbers are still relatively small compared to the overall venture capital industry but the underlying trend is there.
Outcome: TRUE
Score: 4.5/5

Prediction #6: Enterprise Apps Would “Consumerize”

For some reason, I thought that more enterprise applications would move to mobile and into the cloud. Although I really stuck my neck out on that prediction , our investment in Nudge in early 2016 is one example of an investment in this sector. I also thought that email would remain dominant within the enterprise (vs. feed-based communications taking over). My quick poll of a few enterprise IT individuals confirms this but they also shared that 2017 is the time for broader rollouts.
Outcome: TRUE
Score: 5.5/6

bitcoin (1)

Prediction #7: Bitcoin and Blockchain Would Not Yet Have Mainstream Impact

Bitcoin was the best performing of all currencies in 2016, and there was a significant level of activity, good and bad, around other virtual currencies. I had felt that the wider-scale impact of all of this activity would be limited to industry insiders, and that appears to have been the case for 2016.
Outcome: TRUE
Score: 6.5/7

Prediction #8: Augmented and Virtual Reality Would Be Most Prominent in Games

A year ago I wrote that, although the ultimate impact of AR/VR would be enormous and that new startups would emerge to create content and applications, 2016 would be more about mobile and gaming. This appears to be on point with multiple product releases including Samsung’s and Google’s phone-based headsets, and higher-end products from Oculus, Sony, and HTC. According to IHS Research, Mobile VR accounted for over 85% units sold in 2016 and gaming was the main driver of VR content spending. On the AR front, Pokémon Go was downloaded by over 100 million users globally, which jumpstarted consumer interest in AR.

I remain bullish on the eventual impact of AR/VR (and looks like I am in good company). I am especially looking forward to the movie version of Ready Player One, although it looks like it has been delayed until 2018 (boo).
Outcome: TRUE
Score: 7.5/8

Prediction #9: Canadian Machine Learning Startups Would Emerge

I felt that 2016 would be a breakout year for Canadian Machine Learning startups. Activity around machine learning-related startups in the U.S. appears to be at an all-time high. In Canada, even though large companies like GM, Google, Microsoft, and RBC are taking advantage of the skills and knowledge of the Canadian ecosystem, and the CDL/Rotman ML conference has become the go-to conference in the sector, the data does not support my hypothesis that 2016 would be a breakout year. The 30+ Canadian ML companies that we follow raised less capital in 2016 than 2015.

There is clearly a lot momentum for Canadian ML, and I expect ML to be a critical part of many industries, with funding to increase in 2017 and beyond.
Outcome: FALSE
Score: 7.5/9

Pebble Time Round

Prediction #10: No Killer Wearable App

I felt that in 2016 we would see a number of wearable startups falter and no killer app would emerge. I am a regular user of InteraXon’s Muse headband for meditation and mindfulness, and I enjoyed playing with the Snap Spectacles that were released in 2016, but Fitbit stock is down for the year, Pebble was apparently a troubled company, and the Apple Watch has failed to hit the mainstream.
Outcome: TRUE
Score: 8.5/10

Prediction #11: Liberals Would Be Innovation Friendly

In late 2015 we were wondering what to expect from the newly elected Liberal government, and I felt that they would embrace the innovation economy. The federal government, led by Minister Bains (Innovation, Science, and Economic Development), Minister Freeland (International Trade) and Minister Morneau (Finance) all announced programs favourable to the ecosystem. All have reacted well to the Council of Canadian Innovators’ work in helping to shape the industry.

On the horizon, rumour has it that the feds might pull back on the VCAP program and instead reorient the capital directly into startups. We’ll see what 2017 brings, but for 2016, I saw nothing but positive support.
Outcome: TRUE
Score: 9.5/11

Prediction #12: A Consumer Brand from Asia Would Hit Mainstream North America

I felt that 2016 would bring apps or products from Asian companies such as Xiaomi, Tencent, or Alibaba to the North American mainstream market. There were many articles suggesting that WeChat is the most advanced messenger and that Facebook Messenger, Snap, Instagram, and WhatsApp are all adopting its features.

While Tencent, Alibaba, and Baidu have all opened U.S. offices, they appear to be more focused on investment and acquisition of other brands. China-based app Musical.ly certainly has a following in North America, and Japan’s Line is used by some Western consumers, but we haven’t seen a breakout branded Asian app hit it big in North America. I was close, but that only counts in bocce ball and curling.
Outcome: FALSE
Score: 9.5/12

Final tally: 9.5/12
Grade: B

All in all, almost all of the twelve predictions I made a year ago played out through the course of 2016. I won’t be joining the carnival as the traveling oracle anytime soon, but I do expect many of these trends to continue. Stay tuned for tomorrow’s post where I get out my crystal ball for 2017.

Jim Orlando

Jim Orlando

In his role as Managing Director of OMERS Ventures, Jim Orlando is responsible for leading investment activities in the North American market focusing on high-growth companies in the technology, media, and telecommunications sectors. With more than 14 years of experience in the venture capital and private equity sectors, Jim has a strong track record of finding deals, closing investments, and in working with strong founders, CEOs and management teams on the ongoing development and growth of their businesses. He is responsible for OMERS Ventures' investments in BuildDirect, Digital Currency Group, Jobber, Nudge, Ranovus, and Wattpad. Jim also led the investment into Shopify (NYSE: SHOP, TSX: SH).