Monday, March 17, 2008

Battle of the Bloggers

Ouch! Canada’s entrepreneurial blogosphere heated up this weekend. It’s entrepreneur vs venture capitalist in a battle to the last post.

In this corner, Albert Lai, 29-year-old wonderkid of Toronto’s high-tech scene. He recently sold his third or fourth startup, photo-sharing site Bubbleshare, to Toronto e-commerce company Kaboose for some $3 million. (I presented him with a North York Business Award 12 years ago, when he was 17).

In that corner, Rick Segal, former high-tech executive (Microsoft, Chapters.ca, Microforum) and now a VC with JLA Ventures. He’s also a great friend of Canadian startup companies, and a frank and outspoken blogger at The Post Money Value.

Round 1: Albert Lai, who appeared on the cover of Canadian Business magazine a few months ago as poster boy for the new economy, resurfaced in the latest issue of CB (March 17) in a story called “Venture Gap.”

The reason: he’s starting his next business in Silicon Valley, not Canada. And it’s because he says venture capital is too hard to find in the Great White North. The money quote: Unless you can source capital from the U.S., he says, “as a purely business decision, you’d be an idiot to start a company in Canada.”

Enter Rick Segal (who is also quoted in the article, saying that Canada’s venture capital community isn't dead yet.) In his blog on Friday, March 14 he posted an unusually personal article called “Albert Lai and the Idiot Gap.”

While he admits the article is pretty much accurate, he says, "As a purely business decision, you'd be an idiot to listen to Albert Lai when it comes to where to start up a company."
First he takes issue with Lai’s claim to have been a founder of one of the companies he’s been associated with, MyDesktop. Then he rips into Lai’s complaint that "it's been very challenging to get the level of support from the [Canadian] venture community."
“Great stuff,” writes Segal, “except it isn't true. Albert had multiple offers for funding, including, surprise, from my firm. Actually, from me personally. In writing. In the FIRST meeting when I saw Bubbleshare.”
According to Segal, Lai turned down offers of Canadian VC money. “It turned out to be a smart move because had he taken the equity investment, he would have been giving up some of that U.S.$3 million to me. $3 million is a great exit when you pocket virtually all of it and a crappy exit when you give a hunk to a bunch of suits, I suppose.”
After congratulating Lai on his exit, Segal says “now STFU." [Note from Rick: it took me a minute to figure out what that meant. You can Google it if you wish.] Segal says "it is disingenuous (at best) to be complaining about your "deflating" funding problems when you had the opportunity to take VC money and turned it down…. Makes for good reading but is complete nonsense."
Segal then goes on to cite six reasons why the Canadian startup scene is not just for idiots. Among his arguments:
* The SRED claims and other federal and various provincial benefits are superior to those of the United States.
* In terms of government support of business, no country does more than Canada when it comes to export help, worldwide promotion, use of little things like Embassies for hosting business meetings, etc. The country is off the charts amazing when it comes to support her business community from the smallest one person start up to the multi-million dollar enterprises.
* Canada has a superior work force.
* Fact: There are dedicated programs in Canada specifically designed for start ups.
Segal's post is followed by comments from several readers – including Albert. Lai defends his status as one of three founders of mydesktop “as a company/commercial entity.” Then he explains that his comment, "you'd be an idiot to start a company in Canada," was “meant to convey the lack of sufficient risk capital in Canada to fully support all the opportunities and talented entrepreneurs in Canada… It was not meant to convey that VCs themselves aren't doing their job, but rather we need to have more support and capital.”
He goes on to say, “It’s unfortunate that some might have interpreted the article to think I was bashing the VC community or being anti-Canadian, when it was meant to be a rallying call to action to support young entrepreneurs (i.e. grass roots and student efforts) and innovators in Canada.”
Sounds laudable and very Canadian, right? But just when you think things are winding down, Segal fires back: “You were not, have not, and never will be consider[ed] a co-founder of MyDesktop. You word-spinning about roles takes your otherwise talented personality and lowers everyone's view of your results. Your embellishments of what you did aren't required.”
Ouch, indeed.
Naturally, I deplore seeing important discussions like this interrupted by personal attacks. Especially between two people who are both very important to the Canadian startup community. But maybe this is what it takes to get people to notice the serious problem of venture finding in this country. A few more exchanges like these, and perhaps Canada’s capital shortage will get sexy again.
Read Segal’s post (and the comments) here.
Check out the original Canadian Business article here.
See Albert Lai’s blog here.

3 comments:

Rick Segal said...

Rick,
I don't disagree with you that dropping into Naah Naaah takes away from the central issue(s).

As I've said to many who have written, I like Albert and my founder point was minor compared to the idiot notion. Albert got one across the finish line so in my mind he can be straight up with his work/accomplishments.

But, I'm the cranky American currently a guest here in Canada so I suspect toning it down a bit is probably a more long term approach.

rgds,

>R<

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sred said...

"The SRED claims and other federal and various provincial benefits are superior to those of the United States."

This is true. We have one of the most beneficial SR&ED programs in the world, and it's a shame that more Canadian companies aren't taking advantage of it. Companies can potentially get up to 41.5% of eligible R&D expenses refunded! (in cash)