Thanks largely to the launch of four high-profile startup support programs in Canada over the past year, it's safe to say that the nation is in the midst of not only an entrepreneurship boom, but an accelerator boom, too.
Montreal-based FounderFuel started up in June 2011, followed two months later by Vancouver-based GrowLab. This past April, two more big accelerators were announced: Hyperdrive, created by Communitech, a Waterloo Ont.-based non-profit supporting technology companies; and JOLT, a project of the MaRS Discovery District, a Toronto-based centre dedicated to helping innovative companies grow.
"There's been an explosion of entrepreneurship in the Canadian market," says Sue McGill, executive director of JOLT. To accommodate this growth, get companies to market quickly and ensure financial viability, MaRS added JOLT to its already robust range of support for entrepreneurs.
The accelerator model of support for technology startups first seized wide attention in the mid-2000s, when Silicon Valley accelerator Y Combinator churned out hit after hit, including Reddit and Dropbox. Instead of lone startups pitching individual angel investors and venture-capital funds for cash, accelerators bring everything a startup needs under one roof. In exchange for a small equity stake in a firm—typically less than 10%—accelerators provides a group of business mentors, free office space and seed funding to cultivate a startup from good idea to marketable product.
Accelerator entrepreneurs get to validate their ideas, gain experience and benefit from the expertise and business networks of successful entrepreneurs and top executives. The exercise culminates in what's commonly known as Demo Day, on which new companies pitch their business to venture capitalists and angels in hopes of leaving the program with enough additional investment to establish themselves over their next six to nine months.
Part of what makes the Canadian scene so hot right now is a commitment from the Business Development Bank of Canada's venture capital arm to invest $15 million in the graduates of four top-tier accelerators over the next two years: Hyperdrive, GrowLab, FounderFuel and Toronto-based Extreme Startups (formerly ExtremeU). Companies deemed "revenue ready" upon graduation from the accelerators will receive a $150,000 loan from BDC Venture Capital that can be converted into equity.
Rock your pitch and capture the attention of top-shelf venture capitalists
For BDC, funding startups through accelerators is a big win, says Senia Rapisarda, vice president of strategic initiatives and investments at BDC Venture Capital. Each accelerator reviews hundreds of applications before narrowing the pool to five to 10 teams. If a team has the stamina to survive the months leading up to Demo Day, rocks its pitch and captures the attention of top-shelf venture capitalists such as OMERS Ventures, iNovia Capital and the Blackberry Partners Fund, BDC knows the team has the potential to make its business idea fly.
Another reason the accelerator model is growing is because it's cheaper than ever to get a web or mobile startup off the ground. And although the accelerator's financial contribution and potential venture-capital investment helps sweeten the pot, it's certainly not the only reason so many seek a place at the table. "We're giving each of these entrepreneurs a network that is pretty much impossible to build on their own in an entire career," says Ian Jeffrey, general manager of FounderFuel and a partner in Montreal based VC fund Real Ventures.
FounderFuel's pool of nearly 100 mentors was a major draw for Danial Jameel, founder of Oohlala, a mobile app that connects students with both events on campus and deals from local vendors. "You can have an idea and build a company, but that's not enough," explains Jameel. "To have an ecosystem in which you can grow a startup, you need capital, but you also need a good network."
Jameel has taken full advantage of those connections since his FounderFuel stay ended last November; he still calls his team's mentor, former Fido Mobile president René Bousquet, to run ideas up the flagpole. The money has come in handy, too: on top of the $30,000 in seed funding provided by FounderFuel, the accelerator led directly to more than $700,000 in funding.
Given benefits like those, competition for accelerator spots is intense. And because it takes less money to launch a tech startup than it used to, "there are a lot more people doing it," warns Jeffrey. In their last rounds, FounderFuel and GrowLab each fielded more than 300 applications. BDC's research shows that at least 500 unique teams vied for the 15 spots available between the pair. In total, space in Canada's top accelerators is limited to about 90 teams per year.
Mike Edwards, GrowLab's executive director, expects the number of prospective startups to rise for GrowLab's next cohort, for which GrowLab started accepting applications in the fi rst week of June. Says Edwards: "Now, you have to have a product that people want to use before you can get into a top-tier accelerator. You have to show a path toward scale or monetization."
The application itself is also crucial. Funding Portal, an online search engine and network of advisors helping Canadian companies access government and private funding and startup capital, reports that 80% of funding applications are denied without being read because they don't comply with the application criteria.
For those who need guidance, Funding Portal offers Scorecard, a way to have your accelerator application, funding proposal or Industrial Research Assistance Program application reviewed for 30 key criteria. The fee depends on the amount of funding sought, making it scalable for startups and new businesses.
But even if you don't get into an accelerator, you can still benefit from these hotbeds of innovation. Extreme Startups and JOLT both offer workshops open to non-accelerator participants. And Notman House, headquarters of FounderFuel and many of Montreal's most promising tech startups, sets up free networking sessions and holds an annual Google-sponsored hackathon.