By Paul Fitzgerald - Are fickle Canadian investors hurting the startup economy in Canada?
According to the latest Money Tree Report, startups in Southern California alone raised $761.12M in capital during Q2 this year and American startups accrued $13 billion nationwide. In contrast, MoPals.com Inc.'s (MoPals Stock Symbol: MOMO) CEO and founder Alex Haditaghi points out that “we haven’t seen this kind of investment in Canadian startups for the last 20 years combined.”
It’s a bitter reality despite the fact that Toronto, Vancouver and Waterloo are all part of the top 20 most active startup communities in the world. What’s worse is the neglect continues without any explanation.
“The truth is, Canadian VC’s and investors are not as gutsy or aggressive as their US counterparts,” says Haditaghi. As a Canadian businessman and entrepreneur, Haditaghi is no stranger to taking risks.
After growing his previous startup – an award winning mortgage company – generating billions of dollars in Canadian mortgages annually, he took a leap into the tech industry.
In 2013 – still a key advisor for his mortgage company – he successfully launched MoPals Inc., a community-driven crowdsourced social media loyalty rewards program, the first of its kind. Last year, MoPals Inc. was also a recipient of the prestigious COLLOQUY Loyalty Award alongside fortune 500 companies like Starbucks, Bloomingdales and Tesco.
While Haditaghi has a proven history of success as a Canadian entrepreneur, he understands that market capital is a major deterrent for Canadian investors. Haditaghi has found that investors receive low evaluations on the Canadian side of the border and instead focus much of their attention on The United States.
Additionally, Canadian startups generally receive less funding and are required to give up more ownership than their American equivalents. The consequence is a loss of gifted Canadian visionaries more inclined to find success in The States.
“In order to stand out, Canadian entrepreneurs need to be bold,” says Haditaghi, adding that he decided to take MoPals Inc. public last year, an unconventional move for an early stage startup.
By going public early on, Haditaghi was able to use his stock as currency to attract top talent, provide them with ownership and assemble a blue chip board of directors. Being publicly traded also provides transparency and credibility for all stakeholders, while offering the public a rare opportunity to purchase shares in a promising startup, at a reasonable rate.
There is a wealth of brilliant innovators in Canada – it’s time for VC’s and investors to start acknowledging them. If they are unwilling to take risks and provide sufficient funding for Canada’s budding startup community, entrepreneurs will have no other choice but to retreat. And maybe investors need to start using resources provided to them by the Canadian government, such as BDC, before all remaining talent trickles down south.