Bigger is Better: Larger Networks Lead to More Funding

By Omer Gulzar
Turns out the rules of elementary school prevail even when it comes to securing venture capital funding for your startup. Only this time Tim sitting in the sandbox alone, with his smaller network will be suffering not only from ridicule from his classmates, but will have the added drawback of possibly losing out on millions of dollars of funding from a venture capitalist. These along with a few other insights are the main finding in a study conducted by the Ontario Cross Border Technology Innovation Ecosystem. There are some of the findings:

  • Bigger the social networks  the better  the funding opportunity
    The ability of a firm to create a buzz through social media and develop a network is monumental because social media acts as a marketing outlet to attract customers to your product or idea. This allows the business to be seen and criticized. The entrepreneur can take can incorporate this feedback to refine their technology. Through the ease of access of social media more interested parties are given a chance to look over the idea and propose a possible partnership or investment.
  • Half of investor funding in Ontario originates from San Francisco, Boston & New York
    The business advisors for these firms originate from the United States understandably, they may have close ties to VC’s who show interest in the startups. What I find curious is individuals such as government employees, informal advisors and professional service providers is that they seem to show a marked interest in startup ventures as being the principle sponsors.
  • Investors like to pick new entrepreneurs versus experienced ones
    Coming back to the elementary school examples, we were all weary of the new kid who recently got transferred over and tried to concoct up long fables of how he ended up in our class. Fortunately, for the new kid this does not represents how VC’s think. After all, this study shows that the new kid is more likely to secure larger amounts of funding.

Every year millions of dollars are spent in an effort to improve innovation and harbor growth in this segment of the Canadian economy. This study was itself an innovative force that shed light on the topic.  The take home message here is that to better utilize the finding of this study, stakeholders from all parts of the innovation ecosystem need to contribute to the conversation to create a better understanding of the market. This will ultimately help shape future startups for success.

Omer is currently at the University of Toronto finishing his undergraduate degree in Biotechnology. At the RIC he is undertaking an internship as a Bio-business intern, where he brings together his science based analytical skills and merges them with business development.

The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers provide a wealth of information based on their personal experiences. Visit Altitude Accelerator for more information on how RIC can accelerate your ideas to market.

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