When Jordan Levy demanded that Toronto Startup Grinders explain why the track record of success for Toronto startups is so dismal he touched a nerve. There was a lot of passion but typical answers: too much regulation, too high taxes, ignorant investors, etc. Levy sees a different problem. He claims there is a soft skills gap. Is he right?
It’s hard not to like Levy even when he’s giving you a slap upside the head. Sure, he’s cocky and abrasive but he’s smart, experienced and is the first to poke fun at himself. He told this story. People were thinking up a name to brand Buffalo’s push to become a tech hub. Like Silicon Valley, only different. Levy, who is from Buffalo, proposed Silicon Snowbank.
My experience with startups goes back to the early 90s. I’ve been twice a principal and twice a spear carrier. In between there was a middle management role with a turnaround of a Toronto tech company, which included me advising startups that wanted to work with us. In that up-close-and-personal journey I’ve seen chronic structural challenges.
Canada is the biggest capital market for resource extraction but that scales poorly to the tech industry. The basics of mining don’t change much whether it’s a gold, rare earths, oil and gas, whatever. But that’s not true of tech. Look at computer graphics. In this small slice of ICT there are enormous opportunities in hardware and in software. Unlike mining, new tech changes the basics of each of these industries all the time – and the opportunities are where the changes are.
Valley investors aren’t smarter. High deal flow drives deeper insight.
Then there’s sales and distribution. It’s a particular challenge when your product or service is sold into enterprise-scale customers. The up-front investment makes it a big risk. It’s an especially big issue for Canadian startups. Our market is too small to achieve critical mass at home. From Day One we have to compete on the global stage. In hockey terms, our first match is game 7 of the Stanley Cup final and our side is a teenage AAA team.
But Levy claims there is a hidden, deeper problem. He compares Israel to the Golden Horseshoe and sees many similarities. Starting from a tiny base in the early 1990s Israel VCs last year invested 5 times as much in startups as Golden Horseshoe investors did. And Israel has grown a long list of companies to global scale.
Levy argues that Toronto’s problem is in soft skills.
Expectations. Levy says that growing up Jewish he knew he had to go to university and get a high-paying job. In business terms, US investors expect tech startups to grow to enterprise scale. And, that they need to invest alot to get there.
What is the Canadian expectation of early-stage companies? “Poor returns on investment, leading to a lack of investor confidence.” What Levy is saying is that people who think this way have it backwards. You get poor returns because you expect poor returns.
Promotion. Levy asked “Why doesn’t Stephen Harper regularly tour the Valley with Toronto tech companies and promote the GTA? Wynn won’t cut it. Nobody knows who she is.” I explained that Toronto voted Liberal and NDP in the last election, so the Prime Minister ignores Toronto. Levy looked shocked, started to talk, then stopped. For just that once, I stumped him. But what could he say, given the state of US politics?