I’m just going to come out and say it: companies in “the Valley”, and more specifically their CEO’s irritate me. It’s not all the entrepreneurs’ fault though, rather they’re just reacting to their environment. These entrepreneurs/CEOs are surrounded by massive VCs that don’t want to invest outside of driving distance of their offices. As a result you have a lot of capital concentrated in a very small geographic region, so the VC that steward that capital end up shoveling cash at entrepreneurs at ever higher valuations. Companies get valuations they don’t deserve and entrepreneurs don’t develop a respect for capital because they’ve never had to fight hard to raise it. If they need more cash to fund burn (and they all do), there is no shortage of VC willing to give it to them. The end result is companies bloated with inefficiency that make bonfires with their cash, culminating in sudden death as investors get tired of buying unprofitable growth.
CEOs in Canada however don’t enjoy the same luxury. There’s a serious lack of capital north of the border for cities like Vancouver, Calgary, and Ottawa and as a result CEOs there treat their precious capital with the respect it deserves. They run lean and make sure they can measure the ROI of their spend because when there aren’t VC handing out checks the way they are in SF, the goal doesn’t become taking market share at any cost, it becomes building a real, actual business that can sustain itself. We see similar trends in the Midwest and Southeast as cash starved companies have to keep an eye on comfortably getting to cash break even with their Series A/B rounds.
When we speak to businesses out of Canada, it’s not uncommon to find them to be break-even and growing 100% YOY with $1mm+ of revenue. Valuations are almost always reasonable and the currency issues the country is experiencing can make for even more opportunities to boost our return (if your revenue is in dollars and costs are in loonies, we should talk). While we haven’t had the opportunity to invest in a Canadian company just yet, we’re looking very hard and hopefully we’ll plant our flag in a province soon, before the VC in the Valley decide a plane ride isn’t such a bad thing.