VC capital in Montreal

Daniel Drouet just posted another article in his series on VC capital in Montreal. I like where he’s going with this. There is good talent in Montreal, and VCs and Angels aren’t nearly as active as they could be. He finishes by asking “In a city with limited angel activity, how should entrepreneurs proceed? What should local VCs be doing?”

Here’s my take: invest amounts of $50-$250k, with answers for applicants given in 1 week after the first meeting. I know a few people that could build a good product and be ready for an A round or buy-out with $250,000 - and could get a prototype for $50k. Well, less if he wants to hire students that will eat ramen for 3 months.

He refers to a Union Square Ventures post claiming they’re not staffed to do as many small deals as Charles River Ventures. That sounds like nonsense to me. CRV needs fewer partners to OK a seed investment; they didn’t double their staffing to double the deal flow; they’re putting less work into vetting each opportunity. This is normal, since the risk is inherently spread.

One thing I would change about CRV’s standard QuickStart terms is a clause in the case of a sale. The VC should have an upside if the company gets bought out by Google after an angel investment, so incentives are aligned.

To pull this strategy off, a VC would have to be able to assess the technical chops of hackers as well as the market potential of their idea. It would only take one of those to make Montreal a magnet for new startups, so I hope Montreal Start Up succeeds!