Submission by: Nick Yang, HBA 2010
It was a warm and windy night in mid-November, as I stepped out of the Toronto Union Station, fully dressed in suit, a feeling of relief finally came to mind, realizing that I was on time for the 3×5 Venture Capital Dinner, organized by the Ivey Pierre L. Morrissette Institute of Entrepreneurship. The dinner took place at the renowned National Club of Toronto, Canada, where 5 students chosen from Ivey were given the opportunity to have dinner with 3 successful venture capitalists – Ron Patterson from MMV Financial Inc, Michael Goffin from Quorum Funding Corp, and Derek Smyth from Venture Fund at EdgeStone Capital.
As I stepped into the private dining room of the National Club, I was greeted by the 3 hosts, along with fellow participants, who all arrived at an earlier time. Not feeling so good now about my just-on-time arrival, I sat down at the table, and got myself ready to participate in this rare learning experience.
What did I learn?
1. A background on Canada’s VC industry.
Back in the 1990s, during the dot-com boom, Silicon Valley was the place to be for entrepreneurs who wished to make it big. There seemed to be a perception that Venture Capitalists in the valley always have deep insights into the next big idea or the next breakthrough technology. Startups elsewhere seem to be at a disadvantage over startups in the Valley. So many Canadian VCs and entrepreneurs packed up their belongings and headed down to south of the border. What they didn’t realize was the abundance of opportunities, resources and incentives existed here in Canada. Our government puts up billions of dollars annually into incentive programs for businesses, from interest free loans to grants and tax credits.
Toronto, being one of the largest cities of Canada, has a strong network of VC/Angel investors, well-build technology infrastructures, plenty of startup focused events, and a highly talented labor force. All it lacks is a good technology incubator program such as the Ycombinator or TechStars. In the end, being in the Valley doesn’t give you that big of an advantage. Canadian entrepreneurs and VCs are just as smart as our counterparts in the Valley, don’t you think?
2. How an entrepreneur should approach a Venture Capitalist.
What do VCs generally look for? Put simply, top notch, smart/talented founders, with at least a B+ idea in an industry that they are interested in investing. Why a B+ idea? Don’t VCs scout for the best possible idea when reading through the stack of business plans on their desk? Not Really. During this dinner session, Ron, Michael and Derek shared the view point that having the best founders in a startup is more important than the actual idea itself.
A startup is very much like a consulting firm, with little tangible assets before getting funded, the company as a whole will only be as smart as its people. When a VC firm decides to fund a startup, they are putting a huge bet on the visions and talents of its founders. This is even more so during early stage seed finding, when there are absolutely no proven revenue streams. So next time when you are pitching to a VC or angel investor, make sure to talk about all the talents within your company and prove to them that you and your co-founders have what it takes to take your startup to the next level.
3. Next top industry?
During our discussion, an interesting topic came up – what will be the next booming industry? Could it be alternative energy? BioTech? Ron bought up an interesting one: precious metals. If you think about it, it makes some sense. The basis of our economy was built upon currencies.
Back to the time when the main form of transportation was a horse or a donkey, when the currencies of human civilization were gold and precious metals, inflation was nowhere near where it is today. As we switched toward paper currencies, the value of our bank account is at the mercy of the economy. Today, there are more wealthy people than ever, and they are increasingly looking for ways to hedge their assets against economical risks. So precious metals could very much play an important role in the foreseeable future.
4. Right industry for an Entrepreneur?
People often say getting into the right industry at the right time will significantly increase your chances of success, due to the potential opportunities within the industry. I would say that being at the right place at the right time is just as important. Where is the right place right now? China & India. Soon after our discussion about the next top industry, the conversation quickly turned into the rising stars out east. As long as you haven’t been living under a rock, I don’t think there is a need to convince you the potential power and opportunities these two countries offer.
With tremendous amount of lower-income families in China & India increasingly turning into middle- and upper-class, the consumer spending potential is enormous. However, the challenges of doing business in Asia are just as great as the benefits. Google.cn, Google’s China operation is currently looking towards pulling out of China completely due to government censorship regulations. Ebay, with its Chinese operation eachnet.com failed to take into account the local consumer preferences, eventually lost out to its competitor – TaoBao.
What does this all mean? If you are looking to start a business in a foreign country, pack your bags, and move to that country immediately. Immerse yourself within the culture, learn the language, and start making connections with the locals. That’s exactly what Ivey HBA Grad Ash Sign did back in 2004. He was recently awarded as Asia’s Best Young Entrepreneur and has been featured on the Ivey Alumni InTouch Magazine.
Overall, it was a tremendous learning experience.
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Thanks for the submission Nick!
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