This morning Andrew Willis of the Toronto Globe & Mail touches on something I have mentioned here before: the death of geography in venture capital. He uses a report from Fusion Capital to make the argument in Canada, where it is increasingly common to see U.S. venture firms come up from Boston, Seattle, and Menlo Park to grab the best deals:
“U.S. VCs have stepped up in a big way and are back as a significant presence in the Canadian market,” said Mike Middleton, managing director at Fusion Capital. “If the Canadian VCs don’t step it up, they could find themselves looking a little like a traditional sports franchise farm system,” Mr. Middleton said.
“They take the risk on early-stage companies and then see the product of their hard work, blood, sweat and tears moving on to ‘the show’ just as the investment is ready to bear fruit.”
As he points out, something similar has already happened in crossborder takeovers and in private equity, it’s just taken venture capital a little longer. To be fair, of course, there is a world of difference between coming up and taking over a Series A versus being the main provider in a Series C/D mezz round. The latter money has always been fluid, even in venture capital, while the earlier stage money has always been much less so. Nevertheless, to the extent that the deal gets repriced in the Series C/D in a way that favors the later-stage investor over the earlier-stage folks then Willis’ argument matters.