The following post includes my answers to Chris Herbert and Mi6‘s 7 Question Interview Series: Angels and Venture Capitalists. You can find the full version here.
When would it be appropriate for a startup to seek investment from you?
Warm us up first; let us get to know you. Start with developing a relationship. The best investments are the ones where I have invested after knowing and following the progress of the founders and company for a longer period of time â€“ and this doesnâ€™t mean for a month! Iâ€™m talking six months to a year.
In terms of what you need to have in place prior to asking for an investment, it depends on the stage of the company and the use of funds. We go quite early in some cases where we co-invest with angels to help fund the product build. This is more typical in the deeper technologies with a longer development cycle and canâ€™t simply be built by two people on the cheap in someoneâ€™s basement. Overall and ideally, there would be an early prototype to demonstrate product innovation and a balanced team with domain expertise and unique insights into the problem and the customers you are targeting. In this ideal world, you would have also achieved some customer validation via deep customer discovery, understand your competitive landscape and have started testing plans for how you are going to monetize and get your solution to market.
If the company is light on technology and it is more of an execution play, you need to be further along; particularly as it relates to product, traction, and how you are going to scale the business.
Whatâ€™s more important: the idea, the team or both?
Both are required, but the team is more important. A great team can generally turn a terrible idea around. A terrible team likely wonâ€™t deliver on a great idea. Itâ€™s all about execution.
What are you looking for in a startup team? What does a winning team look like?
Hustle and/or scrappiness â€“ defined as drive, determination, perseverance, and relentlessness â€“ itâ€™s imperative, particularly in Canada. As previously mentioned, the team should be complementary and balanced with deep domain expertise and unique insights into the problem and customers they are targeting. Ideally, the team has worked together before, has been through a few rough patches together and has come out the other side still able to look at each other every day.
What are you looking for in an idea? What does a winning idea look like?
I love highly differentiated, deep technology where the founding team has built a similar solution and is applying it disruptively (the first time being commercially available or in a new vertical, ripe for change) in a large market.
In general, a winning idea for us is one that is disrupting a large market in a differentiated way â€“ either via product innovation, substantial simplicity or applying known concepts in a new area.
As for fund economics â€“ we welcome, but donâ€™t require, mythical creatures.
Does a startup really have only one shot?
No, particularly at the early stage we invest in. We realize it may take a few kicks to get it right. The exception is if you are an ass. Then you only have one shot.
Can you describe your due diligence and investment process? Whatâ€™s important for a startup to know about it?
Sequentially, we take some time getting to know the company and the market, we have initial discussions with the larger investment team, bring the company in to pitch, vote re: progression and then enter into a more formal due diligence process. All the while, we are trying to figure out how well you understand the key drivers of your business and the probability of your team to execute.
In your view, is Canada a fertile ground for tech startups? If so why and in what ways is Canada unique and competitive in this regard? Are you investing in Canadian startups? If so, why? If not, how come?
Absolutely. Canada is unique; our entrepreneurs are resourceful and smart. Itâ€™s true, our government may be controversial in terms of its level of involvement, but itâ€™s supportive. It backs the growth of a knowledge-based economy and helps build Canadaâ€™s dynamic high-growth entrepreneurial culture. Weâ€™re in an apprenticeship business, so retaining and fostering talent is imperative in order to build more billion-dollar companies in Canada. And a number are on their way â€“ HootSuite, DHX Media, Shopify, Desire2Learn, FreshBooks and D-Wave Systems, etc.. So now itâ€™s game time. Letâ€™s encourage, support and keep smart people here.
And thank you for not referencing Silicon Valley of the North! We need to be different. As a nation, and as regions, we need to think of ecosystems and communities similarly as you would for a business. What are your resources? What are your strengths? Where can you really differentiate and drive your own niche? We need purposeful city/region building.