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I had heard for months the rumours that the Toronto Venture Group was going to fold due lack of satisfaction from its members, which is a very surprising and disappointing thing considering these are the guys who are supposed to help feed Toronto’s start-up future. I took a quick look at the website and the following is posted:

Effective May 18th, 2007 the Toronto Venture Group has ceased operations. As of the same day a proposal has been filed and all suppliers, sponsors, annual subscribers, members and angels will be receiving a communication package outlining the process that is underway.

The Board of Directors would like to acknowledge the support we have enjoyed over the years from our corporate sponsors, subscribers, members and those who have given so generously of their time as speakers, volunteers and board members. We are proud of our 17 years of service to the industry and we wish all investors, entrepreneurs, business founders and service providers a healthy future of continuous success.

Does the problem in Toronto rest on the shoulders of the VC’s or is it the start-ups? Looking back over the first half of 2007, Geosign is the largest recipient of VC funding with$160 million, after that there really hasn’t been any significant funding for a Toronto-based start-up. Most VCs tend to want a deal handed to them without putting time and effort to coach the start-up. However at the same time in the current “Web 2.0″ crazy where there are people launching companies on a monthly basis, many of the business models are “me-too” services that don’t offer any unique value to the market place. Another common problem is the lack of professionalism that founders are putting into their ideas, I recall attending a local Toronto DemoCamp where one presenter was asked what is he company’s business model to which his answer was “it is the same as our product in beta.” Sales 101 teaches us about features vs. benefits, too often I come across businesses that are basd on things such as social bookmarking such as StumbleUpon which moved down to the US. While a handy tool to get more traffic to a blog, it is not enough to make it as a product by itself, so it is no wonder that eBay picked them up and will no doubt integrate the service into their existing infrastructure.

Another problem that I keep seeing is the lack of what I refer to as “recession proof business models”, again let’s look at the example of StumbleUpon, while people might have that extra minute to share their bookmarks with others today, but when there is a shift in economic times, possibly a recession, will consumers have that extra minute? Will they even care about being all that social or will they have to focus on getting their bills paid.

It is a huge statement though that an association based mainly on VCs doesn’t have enough money to keep itself a float and sends a loud message across Toronto business community, but also other VCs around the world. Some of which are hearing the cry from start-ups such as Greylock Venture and North Bridge Venture Partners, who recently invested in iUploaded, changed the company name to Awarness Inc. and moved the team down to Boston. Unfortunately there are others who are getting courted by US based VC’s to make similar moves, the model is obviously broken and it is time for a change. Maybe the upcoming Startup Weekend might help.  What will Toronto based VC’s such as Brightspark or JL Albright do to continue to support local start-ups?

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