Boris Wertz knows a thing or two about what it takes to launch--and scale--a new business.
The Vancouver, Canada-based entrepreneur turned founding partner of version one ventures is known by advice-seeking and funding-hungry entrepreneurs as one of the leading angel investors in North America, with investments in companies such as Indiegogo, Wattpad, Julep and Frank & Oak. After having raised $18 million, his fund is now in the process of doling out an additional $35 million.
Which cities does he think are producing the next big startups? And what advantages, as well as challenges, do entrepreneurs have depending on their particular geographies? Our discussion has been edited for clarity.
Everyone tends to focus on Silicon Valley. But how have you seen startup activity change over the years?
Boris Wertz: It's never been easier to build a company outside of The Valley. The costs of starting have gone down dramatically.
There are also much more efficient marketing and sales channels--think about Google AdSense, Google search, Facebook etc. Today you can sit almost anywhere to reach buyers around the world. That was much harder 10 years ago.
You've recently seen venture capitalists looking outside of The Valley to fund new companies. Which cities are emerging as bigger players?
B.W.: Seattle has always been strong, especially on the enterprise side. New York had a great run that started five or six years ago. Here in Canada, it's Toronto-Waterloo that's really, really strong.
Having said that, all these ecosystems are relatively immature compared to The Valley. There's often not one reliable source of entrepreneurs. Sometimes these ecosystems have a great run of three of four companies that get founded in one year and have a dry spell for the next few years.
What's missing to keep that cycle going?
B.W.: The first thing is the tremendous amount of entrepreneurs trying out things. If you look at The Valley they have many sources of entrepreneurs: universities--Stanford or Berkeley--accelerators like Y Combinator or 500 Startups and incumbent companies like Facebook and Twitter spitting them out. It's people moving there--from the Midwest, China or India. You just have a tremendous amount of different sources.
You compare that to the ecosystem of Toronto, and the only reliable source of entrepreneurs is Waterloo--and they've done an amazing job. But that's just one source compared to 10 to 15 The Valley has.
What else is missing?
B.W.: The second factor is the network of advisers, mentors, early-stage investors and late-stage investors. While it has gotten easier to raise money somewhere else, the best place is still The Valley.
The last factor is when you think of scaling a company: The Valley has a deep pool of talent... [In other regions,] you get into that vicious circle--you can't scale, there's not the return for investors, there's not the return for the founders to become angel investors etc. That's the beauty of The Valley; it's such a virtuous cycle of startups, scaling, selling.
You often get asked about where's the right place to build a company, and where do you find emerging companies?
B.W.: Our own portfolio is roughly one-third in The Valley, one-third in Toronto-Waterloo and one-third everywhere else, which includes pockets of L.A., Seattle, New York, Vancouver, Montreal.
We definitely understand the advantages of The Valley ecosystem. We're super fond of Toronto-Waterloo as an emerging ecosystem, but in the end we're really open to investing in great entrepreneurs--wherever they are.