The JumpStart program from the BlackBerry Partners Fund can provide up to $250,000 to help launch a smartphone application development startup.

The money is provided as a convertible debenture—debt that can be converted into shares if the startup gets to a point where it raises a round of funding.

First step is to fill out an online application form that asks:

• What is your business concept?
• Who would use your product or technology? Why?
• Describe yourself and your qualifications.
• Why is your idea unique and better than existing products or technologies in the marketplace?
• How do you plan to monetize your business model?

More details at the JumpStart page.

Toronto lawyer Suzanne Dingwall Williams wrote a piece for the CVCA blog this week lamenting how often the startups she works with choose to seek investment from American VCs over their Canadian counterparts.

If that's the case, it sounds like another significant difference between the Toronto and Waterloo startup communities. In these parts, if you go much farther than Toronto to look for early stage capital you risk being accused of being exotic. It happens, but not often. Of the six seven-figure seed/early-stage deals we saw last year, I think only one involved a foreign investor. That seems to be consistent with the national statistics, which saw most foreign investment being put into later stage deals.

In the same post, Dingwall Williams also writes about the reputation of Canadian VCs being tarred by American brushes, but from a Waterloo perspective, I'd be shocked if one startup founder in ten here knows anything about Blackstone and Stephen Schwarzmann, to use the example she cites. Actually, my guess is that's true in Toronto as well. Some may be aware that VCs have been very well paid and that—with some exceptions—they haven't come close to delivering results consistent with that compensation. But that's made-in-Canada tar. The CVCA and others have published rates of return for Canadian VCs and the numbers don't paint a flattering portrait of the industry. There may have been an emperor-has-no-clothes epiphany on the part of LPs and entrepreneurs toward Canadian VCs but, from what I've seen, this has had more of an effect on LPs than on startup founders.

From any perspective, I don't agree with her view that startups should feel a "moral imperative" to get funding from Canadian VCs. That's straight out of "buy Canadian" campaigns that encourage you to buy products that you would otherwise avoid just because it might help keep people employed and extend the amount of time they spend making second-rate products. If that's the best pitch we can make for Canadian VCs we might as well just shut the whole industry down now. [Actually, with Canadian VCs collectively showing almost zero rates of return, from a strictly economic perspective it would have been better if we had let American VCs make those investments and put our money to more productive use. I wouldn't recommend that either. :-)]

Startup entrepreneurs should go where they can get the best deal for their companies. Fortunately, that will often be with a Canadian VC. What we do seem to be seeing, though, is that a greater percentage of startups today are companies where bootstapping or sub-VC funding are all that's needed to get a product to market, and often to get companies to a point where they are acquired (usually by American firms ... at that point you don't hear many complaints about foreign ownership). Of those six deals from 2007 I referred to, only one of them involved a VC, and even that also included angels.

For that reason, there has been the disconnect between startups and VCs that Dingwall Williams refers to. But that's okay. Not all promising startups need VC funding. That was really an artifact of the boom years. As long as companies get the funding they need, I'm not going to lament that a shrinking percentage of startups are paired with a VC.

Unfortunately for the Canadian VC industry, many of its current problems are linked to matters of history that can't be rewritten with better mission statements and promotional campaigns (although, on the subject of marketing, I think Rick Segal has done an amazing job of both getting himself over and improving the reputation of the entire Canadian VC industry). But the message from startup entrepreneurs I'm hearing in Waterloo is more that they often don't see the need to work with VCs, not that they are avoiding Canadian VCs in favour of American investors.

The National Angel Organization's free online book, Age Of The Angel: Best Practices For Angel Groups is a worthwhile read for entrepreneurs who expect to be dealing with angel groups, or even (although to a lesser degree) with individual angels. The appendicies with a sample term sheet and a sample shareholder's agreement are worth reading by themselves (and we hope to add other samples to the WatStart site soon).

At the same time, it's also a reminder of many of the things I can't stand about angel groups. There's more than a whiff of self-importance in the tone of the writing and the book promotes as "best practices" actions that would only strain the relationships between angels and entrepreneurs.

It encourages angels to take preferred shares, rather than common (something that even Waterloo-based VC firm Tech Capital Partners prefers not to do) and promotes the inclusion of liquidation preferences and ratchets in the term sheet.

For hubris, it's hard to beat this passage from page 69:

The other issue that Angels often run into is the false notion by founders that they, as the sellers, set the price. In reality, it's the "Golden Rule" that comes into play. He who has the gold makes the rules.

In the Waterloo area, we've been fortunate to have a very active angel community, and a core group of angels that really want to see companies succeed and entreneurs be successful. Not all of our angels are easy to work with, but I think we score pretty well compared to other centres. Thankfully, we rarely see demands for prefs and ratchets here (I never have with the angel deals I've seen, but I imagine it's happened) and it would be unfortunate if some of the less entrepreneur-friendly terms being promoted by the NAO were to find their way here.

I think it's in our favour that we don't have an angel group here. There briefly was one, in theory at least, but it quickly died. Angel activity has only increased since then. 

Mark Evans finds it notable that a Toronto company closed an angel round of funding. That's interesting because, in the Waterloo area, we've seen a wave of angel deals over the last couple of years. Most of them have involved local business people, although it looks like another one might be closing soon with Toronto's Maple Leaf Angels.

It could be another example of the differences between the Waterloo and Toronto tech environments, although I wouldn't be surprised to learn that there's a lot more angel activity going on in Toronto than what we hear about. Certainly, most angel deals here never get announced.