Ed Levinson recently did some calculations about the active angels in Vancouver, as well as the active annual crop of fundable companies in Vancouver.
From his tweet, his numbers look like this:
- Number of available seed deals: 24/yr
- Average deal size: $500K
Total funding needs: $12M/yr
- Number of local angels: 30
- Average investment: $100K/yr
Total angel funds being invested: $3M/yr
The conclusion is that yes, Vancouver startups are underfunded by almost $9M annually.
Some clarification on the above:
Number of available seed deals: by this, we mean there are 24 companies annually that show enough traction that they should raise a "first cheque" round.
Number of local angels: this is our estimate of how many people in Vancouver actively write a number of angel investment cheques annually. We know that there are US-based investors that participate locally, but we don't think they make up the shortfall.
Some thoughts from a Vancouver newcomer
Hugues Lalancette recently moved to Vancouver from Montreal, and shared some thoughts on the local market:
I also think that a key competitive disadvantage that Vancouver has vs. other Canadian tech ecosystems (eg. Toronto and Montreal) is that there are no "market makers" that consistently invest in riskier early stage deals. Such liquidity is provided in Montreal by Real Ventures for instance. Obviously, this analysis neglects the opportunities in US and abroad, which represent another funding alternative for YVR startups looking to raise capital, but I think that by addressing the early stage liquidity shortage in Van, we could reduce the talent/project migration towards other Canadian cities, while also preventing some migration to the US.
To go further, the CVCA published an interesting report regarding the Canadian VC landscape. Note that in Quebec, the tech industry is heavily subsidised, as illustrated by the high number of deals made there (see Real Ventures, FTQ - government pension fund, and others).
Similarly, Ontario also has funds focusing heavily on their respective territory. While there is an argument that funds with geographically-defined mandates lose on average, I believe that such market making activities generate positive externalities to other agent in the same geographic space. Note also that BC had more $ investment than Quebec in 2014 (Quebec had more deals), however those results are probably skewed by investments made in Hootsuite and Slack.
I was involved in 4 Seed deals in Montreal (leading 1 as provender.com's CFO) and was amazed by the ample liquidity there - investors literally threw money once minimal traction was demonstrated.
To be honest, I was surprise to hear the unanimous feedback regarding the liquidity shortage experienced in Western Canada for tech startups - given the talent pool and track-record, I don't see why we shouldn't be able to reverse the stream!
These topics are ones that Open Angel Canada hopes to help solve. But without more angel investment or other capital structures, it may be unsolvable.
And we definitely need better data.
Have thoughts on the matter? We'd love to hear from you on Twitter @OpenAngelCanada.