Over the last few days I’ve had the pleasure of taking part in Metabridge 2013 in Kelowna, Canada. Metabridge is the brain child of Steve Wandler, a Kelowna native and successful entrepreneur, who wanted to connect the emerging technology talent that he found in Canada with the experience of industry experts and investors from Silicon Valley.
To call Metabridge a conference would be under-selling it – it’s essentially a high-end retreat – a carrot to bring the best from the Valley north of the border to spend time networking and nurturing young entrepreneurs who are trying to grow their businesses.
It was an absolute honor to be invited and to be considered a VIP amongst so many industry heavyweights. Our story at Xero is very different to your average Silicon Valley based startup. However it’s one that is very relevant to Canadian-based businesses trying to build a successful startup outside of the Bay Area bubble.
Even though Canada is not as far away from the Bay Area as New Zealand, a lot of the same issues and frustrations exist for startups in both countries. It’s very difficult to get funding outside of Silicon Valley – it tends to be left to previously successful ex-pat entrepreneurs who have money to invest or early stage investment government grant programs.
If you make the trip to Sand Hill Road then you’ll often be told that your business needs to move to Silicon Valley to get any funding. Money flowing out of Silicon Valley is almost nonexistent. And moving is not necessarily the answer – it’s expensive (especially with the high cost of immigration and the extremely high cost of resourcing) and the competitive landscape for funding is intense.
That’s why taking these people out of Silicon Valley and connecting them directly with these startups and entrepreneurs is such a powerful model and makes Metabridge such an important event for the Canadian tech scene.
One the interesting topics for discussion amongst the investors was the “Series A crunch”. Series A is usually the first round of pure venture capital funding that a startup receives after they’ve gone through either incubator or seed capital and have started to gain traction (product built, revenue growing). I think there has been a belief by entrepreneurs, one that was validated by VC’s throwing money around, that once you got seed capital, you would be assured a Series A round. This is not the case – there will always be drop off at every point along the capital raising spectrum. In many respects I don’t believe there’s a “crunch” – more of a correction.
While there were definitely some startups that were still in an incubator phase, there were also many that will be looking for Series A in the near future. The trick will be to convince the VC firms from Sand Hill that investing outside of the Bay Area is worth their while. In general I think that all the VIP’s were impressed with the talent in Canada. It will be a matter of whether they can convince their partners back in the Bay Area to take these investment opporunities seriously.
One way that Metabridge might be able to start that flow of investment would be to invite investors from other parts of the US (particularly New York or Boston), who already invest globally. Some healthy competition amongst the VC’s certainly can’t hurt.
From Xero’s perspective it was great to meet new startups. A lot of them are already using Xero – the rest hopefully soon! A lot of the advice that I could give is really around thinking global from day 1, and making sure that these startups have the right investment structure in place to execute a global strategy. A common problem with young entrepreneurs is that they hold on too tight to their equity share. Trying to convince them that if they want $5 million then they really want $10 million is hard – but it’s an important lesson to learn. They really only win if their business grows and their focus should always be on growth.
Xero’s story was also a fascinating one for many of the VIP’s – that we went public so early is just not something anyone from Silicon Valley is used to doing. It’s most certainly a conversation starter. The rules for early listing are different in every country – while it ultimately depends on your exit strategy, there are often alternative exchanges specifically setup for developing businesses that may be an option (for those wanting to learn more about our IPO, check out the IPO master class deck that Rod presented last year).
It’s hard not to have a good time at Metabridge. The event is run with immaculate precision – every excursion or dinner or party has been thoughtfully organized around encouraging conversations and networking.
Thanks to everyone at Metabridge for an amazing event – if I’m lucky enough to be invited next year then I’ll definitely be back.