Many US venture firms or angel investors are not even aware of the reporting requirements under Canadian section 116 of the Income Tax Act.  But those that are, have often foregone investing in Canadian private companies because of it.  It’s been a big barrier, and it’s finally been removed.

In a nutshell, section 116 required that, upon a share sale, the purchaser must withhold 25% of the purchase price from non-resident shareholders until the shareholder obtained a clearance certificate from CRA, which could take many many months.

Special thanks to Steve Hnatiuk at Yaletown for his work via the CVCA for working so hard to get this issue resolved, who emailed me this:

The fact that US VCs would have to file clearance certificates for every single one of their underlying fund investors was a massive disclosure and administrative burden that significantly complicated distributing exit proceeds to the investors.  This was simply too big a deterrent and tax risk for many US venture investors to take on, and resulted in complicated and expensive structures often being put in place for Canadian deals as a work-around.  All of these things impaired the ability of Canadian companies to access venture capital from the US.

And, I will quote Keith Spencer from Fasken who put it simply:

Practically speaking, US vc’s can now invest directly in Canadian technology companies, pay no tax in Canada on their gains, and not be subject to any filing or withholding requirements. We’re open for business baby!

This is a great step toward helping capital flow across the boarder in both directions. Since, The more deals that are done by US VCs in Canada, the more deals Canadian VCs are invited to participate in south of the boarder. The circle life is complete.

Read on for the full press release and details.

P.S. Thank you to all the people that we connected with on the trip down to the valley. It was a great visit, more coverage to follow.

VANCOUVER, BRITISH COLUMBIA – February 4th 2009
John Stapleton, Business Tech, AP

“Thursday was a huge, huge day for us” exclaimed Noah Bloom, co-founder of Zedmo, a Vancouver-based startup developing the universe’s greatest location-based mobile social community.

“I was just going about my day as I normally would – checking my email, browsing the news stories on my America Online portal, and updating my eHarmony profile, when I received a phone call from an angel, who claimed his name was Mike” continues Bloom. “I didn’t believe Mike for a second, so I quickly looked around the room of 2010 cohort enemies – uh, I mean companies – to see who could be playing this evil trick on me. Anthony was sitting in his chair not on the phone, Jamie was busy tweeting his next publishable masterpiece, Mack was under his desk wearing a hood, and Team Romania was hard at work shining their Google pens. Daniel, my co-founder, was busy complaining about his recent ski accident, so it surely wasn’t him pranking me.”

What happened next, forever changed the face of Zedmo. A struggling startup duo of Bloom and Wolfe, who dropped everything to join the 2010 Bootup Labs Cohort, were, until yesterday, surviving off leftover sandwiches found in dumps around the city, and the occasional “fresh” peanut butter and tuna sandwich.

“Being a startup is very tough” says Wolfe. “It’s not like in the movies where you can rub a lamp and a naked woman comes out of it. It’s tougher than that.”

As you can tell by now, the Associated Press mandates us writers to write our stories in such a way that the reader needs to read all the way to the end of a story to find out what the story is actually about. But, because I know my audience is fairly small, I will cut to the chase here.

Nester’s, a top-notch grocer (according to some, but not all… ANTHONY NICALO…) located just steps from the Bootup Labs office in one direction, and steps from Zedmo’s underground home lair in the other, has made a significant investment in Zedmo. Without acquiring any equity in Zedmo, Nester’s has injected $5,200 worth of groceries into the startup. Terms of the deal are still a bit shady, but a spokesperson for Nesters, Mr. Michael Grocerman, has told the Associated Press that, “…the orange juice cannot be diluted.”

So, how did Daniel Wolfe ever score such a great co-founder, with the ability to close investments so early in the game? We asked, and he explained.

“I have what’s called a silver tongue. That’s it.”

And you thought the Olympics were the biggest story out of Vancouver.

When asked what Zedmo plans to do with this influx of food, they were quick to point us in the direction of their appointed PR agency, for reasons of secrecy and not giving too much away to the competition:

“First, they supplied the 2010 Cohort with Odwalla juices, so as not to cause any unfriendly conflict or envy around the office. Further to this, Zedmo hopes to build on this investment by purchasing fancy foods and supplies, such as turkey, cheese and crackers, and non-generic cling wrap. No further comments, my clients are very tired from the celebrations last night.”

Although this recent investment has placed Zedmo founders Noah and Daniel in the spotlight among “everybody who’s anybody” from the Valley up to Vancouver, the dynamic duo promises to remain down to earth, although sources tell the AP that Daniel was spotted drinking Tropicana orange juice, while Noah was seen washing his hands with a bar of Lever 2000 – for all his 2,000 body parts (including hands).

For more information on Zedmo and their location-based mobile application, please contact info@zedmo.com

PLEASE NOTE: Zedmo is still accepting further investment, so don’t be shy.

Why beer labels? Well, Dave himself is well known in the international web design community, and he’s also known locally for enjoying a beer or two, especially at the Alibi Room.

Also, the new Flack Block offices that Bootup Labs has several full size old bank vaults. While thinking about what do with it, we came up with the concept of everyone pitching in to brew beer, and storing it in the vaults. Couch Beers are about to get a lot more interesting in the coming weeks!

Check back throughout the day as we start posting the beer label designs.

Dave started with the colour palettes of all the companies, and then figured out two complimentary palettes, so each company started out with either the red or blue base. Each company has a style of beer, the Bootup “power button” icon has been incorporated around the neck of the bottle, and the border around the label recognizes the archway of the Flack Block building that all our offices are in.

These are awesome beers, and now the next challenge will be sourcing how we brew them. I know foodtree is busy sourcing green apples already…

What was remarkable to me is that Reshma worked with SoftBank Venture Capital in Mountain View back in 1999/2000 to get their incubator started. My first startup, Spinway, was funded by SoftBank at the same time.  I would often visit the incubator and work with some of the founders there.  I dug around and found this picture of it.  If you look closely, you can see a much younger version of me talking to the then DoDots founders, George and John Kembel, while Willie Quinn looks over Michael Perone’s shoulder as he shows him something on that huge CRT monitor.

Another twist is that TechStars co-founder Brad Feld was a Venture Partner at SoftBank at the same time as well. There must have been something in the water at the Softbank offices, or maybe it was the vodka ice louge… but that’s a different story (and different pictures)

Incubators and Accelerators

Time: February 18, 2010, 2:30-3:30pm

Description: There is an increasing number of incubators and accelerators appearing around the country. What has been their effect? What models are working? How are they succeeding, and what challenges are they facing? This panel will examine the growing role of incubators.

If have any intrest in learning more about how the funding world is changing, and how fast, I encourage you to attend.  Here’s a 50% off link.

Lyle Stafford for National Post Traditional venture-capital funding is often more than new Web players need, says Danny Robinson, Managing Director of Bootup Labs in Vancouver.

Jacques Simoneau, executive vice-president for investments at the Business Development Bank of Canada, says the economic slowdown has also had an impact. “The main way we exit from our investments is the merger and acquisition market,” he says. “All those VC funds haven’t been able to exit from their investments. So those companies are still part of the VC’s portfolio.” The investment pipe is clogged.

Some startups and investors argue the VC model is inherently broken. Most VC firms have a 2% management fee, encouraging them to raise more capital for their funds, argues Danny Robinson, managing director of Bootup Labs, a Vancouver-based incubator specializing in seed funding for software-based startups.

“If they spent all their time looking for $100,000 investments, they’d never make it through their $50-million in funds,” he says, explaining why the average deal size in the Canadian VC market still rests at $2-million. But savvy software companies want far less funding than that, making VC funds inappropriately large for them. “The Web world doesn’t need that much capital anymore,” Mr. Robinson says.

Danny was interviewed in the old, chalkboard-decorated Strutta office. TrevorO from Layerboom gets a ton of quotes on page 2 as well.

The folks from all of the companies at Bootup Labs and the rockstars of Strutta get together for another great holiday video. Includes “Last Christmas” by Wham.

Jordan did a great job of pulling together the holiday lip dub again this year.

Today, we’re happy to announce the companies that will be joining us as the January 2010 Cohort:

• Blast Ramp is collaborative distribution platform for companies that sell and ship consumer products.
• Compass Engine helps developers create the next generation of location based games.
• foodtree brings the community and transparency of the farmers market online.
• ReadFu brings contextual summaries for every link
• Status.ly is a device-independent lifestream aggregator with focus on personalized customization and real-time filtering.
• Zedmo lets you find events and social topics. You can discover these Zedmo “channels” according to their location, popularity, or topic

Full details, logos, links to Twitter accounts, and all that good stuff are available on the portfolio page.

Want to get involved? Well, our May 2010 application process will open up in the new year, so register to get notified when applications open. Also, BES is still looking for companies to join us for Demo Days.

We were also covered on ReadWriteWeb as part of The Advantages of Launching Outside the Valley. Hat tip to Techvibes for catching Foodtree and Zedmo before they were officially officially announced

2010 is going to be an exciting year, and I’m looking forward to kick things into high gear and working with such a great crew of people to build their businesses.

Bootup Labs has neither the time nor resources to work through the immigration red-tape every time.  I have to believe that reversing the brain-drain has to be a priority for the government.  So, I am asking for your help.  Let’s make Vancouver (and Canada) an easy place for entrepreneurs to set up shop!

The startup community in the US is rallying behind a way to streamline the immigration of foreign startup founders.  I say, let’s take advantage of Canada’s nimbleness (relatively speaking of course) and beat the Americans to their Startup Visa concept. This is how is could work for us:

1. VC Firms and Investors apply to become “Sponsors”
2. Founders apply to Immigration Canada along with an accepted Term Sheet from the pre-approved VC Firm
3. A temporary work visa is approved for the founders with certain conditions:
   1. They incorporate a canadian company within X days of Landing in Canada and become employees of that company.
   2. They close on the financing.
   3. They cannot work for another company.
   4. They can apply for a more permanent status after a “probationary period” of some amount of time.

<<  –  SIGN THE PETITION —  >>

more links:

• Start-up Visas Can Jump-Start the Economy – Wall St. Journal
• The Founders Visa Movement – Brad Feld
• The Founders Visa – Paul Graham
• The Startup Visa And Why The Xenophobes Need To Go Back Into Their Caves – Techcrunch