Waterloo Investing Trends 5

One of the most objective tech folks in the Waterloo region, Gary Will, has weighed in on this topic. He sensed a start-up lull in the 2002-04 window, but believes there have been lots of late – which is very exciting news. As someone who tracks these things daily, Gary would know. I have been focused on remarkable drop post-2003 in VC-funding in this series of Waterloo Investing Trends posts, and had made the leap that a 2/3 drop in VC funding could only be due to a drop in great new tech companies.

He got me thinking. How does Waterloo’s $60 million in V.C. money for 10 different IT firms (investments announced between 1/2003 and 1/2007) compare to other regions according to public and industry sources?

Waterloo: 10 different IT firms raised ~$60 million. $42 million of that was in the form of follow-ons to existing companies, however.

Ottawa: 71 different IT firms received a total of $840 million of VC funding post January 2003; a figure that is articifically low as 19 of those firms didn’t disclose the dollar amount of their VC raise.

Montreal: 95 different IT firms raised a total of $388 million.

Vancouver: 54 different IT firms raised a total of $245 million (14 didn’t disclose raise size).

Kingston: 4 firms raised over $45 million of VC funding via 8 rounds, and three of those rounds didn’t disclose the size. These were medical device and biotech deals, given Queen’s research strengths.

Calgary: 13 different IT firms raised about $20 million in VC funding via 18 rounds, the size for 7 of those rounds were not disclosed unfortunately. Only $1 million was a follow-on.

If you back out Waterloo’s follow-on rounds for Sandvine, Sirific and Agile, ~$18 million in VC capital for IT firms was raised from Jan. 2003 to January 2007. Less than Calgary. That surprises me, even though our own venture debt firm has done more deals in Calgary (3) than in Waterloo (2).

Even Kingston, with a population of about 120,000 (and substantially fewer students, no resident VC, no organized Angel network, no extremely well-funded regional Tech association and no notable local public tech companies), drew almost the same amount of venture capital for its perceived domain expertise as did Waterloo.

I think it is fair to say that Gary recognizes that this topic is worthy of analysis, despite the Barney approach that some people are taking to it. Some of the flack I’ve received about this series reminds me a bit of how voters occassionally react when politicians or journalists point out things the masses didn’t want to hear: they shoot the messenger, of course.

Is the Waterloo community tickled with the flow of VC dollars over the past four or five years? Are these results reflective of the inherent opportunity in the region?

How did Vancouver attract the human and financial capital to raise four times the amount invested in Waterloo over the past 4 years? It’s a bigger city, but the tech base isn’t anywhere near 4x the size (MDA, Sierra Wireless, Intrinsyc, DDS, University of British Columbia, Simon Fraser University, BC Institute of Technology, etc.) of Waterloo’s (RIM, OTC, DSG, SVC, MKS, DSA, iAnywhere, University of Waterloo, Wilfrid Laurier University, etc.)

What would the late Ben Webster say about all of this? Would he be satisfied with these facts? Would the results be different if he were alive and in his prime today?

I’ve provided the data, and offered a concrete way to possibly stimulate increased venture capital investment in the area. It’s just the kernel of one idea, of course. And just as every entrepreneur knows, the first idea isn’t always the best. But pretending that new ideas don’t matter, or ignoring the elephant in the room, is a failsafe way to destroy any business/opportunity, successful or otherwise.

But if everyone in Waterloo & Wellington County and the 519 area code is pleased with the start-up and venture investing track record of the past four years, you certainly don’t need any input from a Toronto guy (with 5 generations of lineage in the region mind you), even if his firm has “Wellington” in its name and capital to deploy in great Waterloo companies.

MRM