Three firms have made the shortlist for Venture Capital of the Year at the Canadian Startup Awards: iNovia, Real Ventures, and Relay Ventures.
Below is a summary of what each has been up to lately and their outlook for the future of startup capital in Canada.
Real Ventures is one of Canada’s largest and most active early-stage venture capital firms, having invested in more than 350 founders over the past 10 years including some of Canada’s most promising startups such as Frank & Oak, Breather, Sonder, Blockstream, League, and Hubba, among others.
The VC was founded in 2007 by John Stokes, JS Cournoyer, and Alan MacIntosh with a goal to create an entrepreneurial ecosystem in Montreal by providing pre-seed capital, mentorship, and community support.
Real Ventures established its second fund in 2010, launched Founder Fuel accelerator, and helped to found Notman House, a communal space for startups, investors, technology partners, and community groups. Four years later, Real Ventures launched its third fund and set up an office in Toronto to help support more companies in the Toronto-Waterloo corridor.
Real Ventures will be launching its fourth fund this year as well as regional pre-seed initiatives to foster the ecosystem, according to general partner Janet Bannister.
Element AI, which Real Ventures co-founded in 2016, will also be scaling up to help AI researchers “solve some of the most challenging AI problems, in partnership with large corporations and start-ups,” Bannister said.
She said the start-up ecosystem and VC environment has taken off over the past five years. Bannister cites CVCA data showing VC dollars invested in the first half of 2016 is double that of the first half of 2013.
“We are seeing a lot more founders who are repeat entrepreneurs and management teams with more experience scaling companies. This is exciting as it bodes well for the next five years,” Bannister said.
She says the digital revolution will continue to disrupt a wide-range of industries, driven in large part by AI technology, which should sow a new crop of startups in the near future.
“Every successful company will require outstanding applications of AI in order to win,” Bannister says. “This creates a huge opportunity for Canada, given its status as a world-leader in AI talent and research, to build the next generation of AI-first, world-leading companies.”
However, to realize this opportunity, Bannister said Canada must do a better job of keeping that talent in Canada and building great companies here.
She says her firm’s launch of Element AI was in-part a response to this “challenge and opportunity of keeping world-class AI talent in Canada.”
Relay Ventures was founded by Kevin Talbot and John Albright in 2008 (when it was called Blackberry Partners Fund), with a focus on mobile computing and software.
The concept was considered “a little crazy” at the time, said Relay Ventures associate Jake Cassaday, given that it was still early days (remember: the iPhone came out in 2007).
“The thesis that mobile would take on a meteoric growth trajectory was the right one, and we’ve continued to stay focused on mobile throughout Relay’s history,” Cassaday said.
Today, one in two smartphones in the world run software from Relay portfolio companies.
The fund rebranded to Relay Ventures in 2012 and opened a permanent office in Menlo Park. It has raised three consecutive USD$150 million funds since it started nine years ago, the latest was last fall.
Cassaday said the company’s decision to launch a dual office structure in the U.S. and Canada has given its Canadian fund an added boost.
“Relay has well-established networks of entrepreneurs, advisors, investors and industry experts throughout North America with strong clustering around our two strategically located offices in Toronto and Menlo Park,” Cassaday said.
“While not every company has to be located in Silicon Valley, we believe that Silicon Valley needs to be in every startup,” added managing partner Kevin Talbot. “This is Relay’s differentiation, the rationale behind our full-time team in Silicon Valley, and why our entrepreneurs describe us as a top tier venture investor. It’s an anchor in our fund strategy.”
Relay’s focus is on the early-stage, traditionally Series A, Cassaday said, while noting a trend of startups reaching key milestones earlier in their business lifecycle.
“Strong teams are raising larger Seed rounds at higher valuations, and for the most part this is justified by performance,” says Cassaday. “Seed is the new Series A.”
Looking ahead, Relay believes the IoT and connected home markets will continue to realize more value, driven in large part by the convergence of voice platforms such as Alexa, Siri and Google Home that are becoming more mainstream.
AI and machine learning are also going to be big, he added.
“We see the value of AI as a horizontal component of many different value chains, so although we are not investing in AI as a sector, we are focused on how AI is changing market segments in which we have developed strong theses,” Cassaday said.
Montreal-based iNovia was founded in 2007 by Chris Arsenault and a group of entrepreneurs and operators, with the goal of building a Canadian-headquartered, tier-1 North American Venture Capital Fund.
According to Arsenault, they wanted it to be “with the reach and returns of comparable California fund managers” and “to attract and back Canadian entrepreneurs in building real-huge global tech businesses.”
Today, iNovia manages $450-million across three active early-stage IT-focussed funds and is behind a number of successful startups including Allocadia, AppDirect, Lightspeed, Vidyard, TopHat, Clearpath Robotics and Thalmic Labs, to name a few.
Its investment focus is in next-generation digital platforms and “entrepreneurs that have a passion to solve large problems in valuable markets,” according to its website.
Arsenault said entrepreneurs today are building big companies today and scaling them much more quickly than in the past.
“Canadian companies are attracting larger amounts of capital instead of selling early,” he said in an email interview, but that the majority of growth capital still comes from the U.S.
Arsenault is expecting to see “some very large exits” this year, in terms of size.
“More companies attracting a large amount of capital to support their growth becoming category leaders,” he said
The challenges for the industry will be attracting more Canadian capital, as well as talent to help grow Canada’s startup ecosystam.
iNovia recently added two technology industry veterans to its team in Silicon Valley, Scott Munro and Todd Simpson.
“iNovia is about helping awesome entrepreneurs build next generation digital platforms and services,” iNovia partner Shawn Abbott said in a recent blog post. “Having been founders and CEOs ourselves, we understand the journey from start-up to scale-up. We know how important it is to build strategic relationships and attract talent. We know that you expect your capital partner to be present where it matters for your business, and now we are!”