Vanedge $100-million digital media fund a small step forward, insiders say

Vancouver-based Vanedge Capital may have gathered $100 million in committed capital for an interactive digital media fund, but industry insiders say there’s still a long way to go before investment in British Columbia can return to 2008 levels. On May 27, Vanedge announced it closed its Vanedge Capital I L.P. fund, intended to help finance Canadian and American digital startups. Paul Lee, the fund's managing director, told The Wire Report that several companies are now under consideration for financing, and those chosen will be disclosed later on in the process. “We'll look at anywhere digital: media companies that are building computers, or 'gamifying' the Internet,” Lee said. “This means companies that are connecting with consumers—either providing content or making traditional applications or traditional products more accessible.” Lee said a portion of the funds will target applications for mobile media, ranging from the high-profile iPad that hit the market in Canada in May to other smart phone applications for Google Android and other non-Apple systems. The fund appears to provide fresh hope for Vancouver's battered venture capital industry. After many months in a siege mentality, government funding and an uptick in Canadian investing are beginning to bring startups out of hiding. And on June 3, the British Columbia government approved an Interactive Digital Media Tax Credit to counteract ongoing gaming-industry job losses in the province since 2008. "The enactment of this program has already resulted in an increase in our investment in B.C. and will continue to raise B.C.'s profile as the international digital media centre," Brian Ward, senior vice-president of studios at video-games firm Activision, said in a release about the fund. In 2008 Activision laid off 100 employees in a decision to cut back the number of titles produced by the company. That year, the Vancouver region benefited by $260 million in investments, yet in 2009 the region showed almost half that amount, $141 million, according to numbers released by the Canadian Venture Capital Association (CVCA). But Vancouver wasn't the worst off. The city's venture capital funds represented 14 per cent of the national total for 2009, down three per cent from the previous year. In the small pond of Vancouver venture capital, Vanedge's $100 million fund could leave big ripples, local entrepreneur Danny Robinson said. “In the grand scheme of things, $100 million is not a lot of money compared to funds out of the valley, Silicon Valley, that is,” Robinson said. “But for Vancouver and Canada, $100 million is a big deal.” Robinson's fortunes have met with hard times themselves. The managing director of Bootup Labs enticed several local companies with his plan to offer a “startup accelerator” for technology firms. At a Bootup camp similar to that offered by Y Combinator in the United States, Robinson and his partners planned to give individual help to seven firms looking to get the next big break. Then disaster struck. One of the investors in the camp pulled out, and Robinson made the decision to cut the cohort of new firms to three. Among them was Phoenix-based Statusly, which had one of its co-founders move across the continent to take part in the camp. Penniless, the founders are now down to selling their last domains. Robinson's reputation took a beating, and he says Bootup Labs is just “surviving” right now. “When I went out to raise money for Bootup, I felt, ‘I can do this, I have confidence.’ But I tell you, this is the hardest money I've ever had to raise in my life,” he said. “It had to do with what I'm selling. It isn't shares in the next great startup—what I'm selling is a share in many next great startups . . . people in Vancouver, specifically the angels, they haven't made their fortunes on the web investing in Internet companies.” Vanedge declined comment on the state of venture capital in Vancouver, except to say it's no secret everyone in the industry has been hurting. The focus now, they said, is not only helping small companies get their products on the market, but also to build a more sustainable industry with ideas passing from entrepreneur to entrepreneur. “There's definitely been talk here about the phenomenon of the serial entrepreneur who has had their success, and is driven to do it and can bring the knowledge of previous successes and failures to mentor younger entrepreneurs,” Glenn Entis, general partner at Vanedge, said. “We're not seeing that enough. I would describe Vancouver as having really strong talent with strong companies and strong entrepreneurial activity. The great thing about Vancouver is there's plenty of upside. There's a lot of room for development and growth.” news@thewirereport.ca

Vanedge $100-million digital media fund a small step forward, insiders say

Broadcast | June 7, 2010

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