Perspectives from Venture Capital Leaders…Who Just Happen to Be Women
There are women in Canada that wield significant influence in our industry that oversee millions and billions in assets. These expert opinions are needed now more than ever. Strategies are looking to adjust for where markets are heading and to focus on the many variables that will spell future investment success or failure.
Again, this year, to mark International Women’s Day, we’re uncovering valuable insights from leading women in our industry.
Separated by asset class in the CVCA membership, this article will explore the perspectives of leaders in venture capital.
What is the most exciting trend right now in Canadian venture capital?
The Canadian tech industry is extremely well-positioned to continue growing and to play an increasingly important role in the overall Canadian economy. Canadian tech start-ups and scale-ups are benefiting from a fast-growing and maturing ecosystem, world-class talent, and door-step access to the global market. Venture funding in Canada has grown faster than that in the US and the Global markets in recent years and the number of venture financings in Canada is now greater than in Israel. Importantly, the venture market is not only growing but also maturing, as the ratio of late-stage VC deals to total VC deals is now similar in Canada and the US. This growth is being driven by our world-class talent in AI and deep tech, fueled by strong academic institutions and immigration. In addition, we are seeing stronger scale-up talent in non-technical roles as the number of repeat founders and seasoned scale-up executives increases. Finally, Canadian tech companies benefit from having the world’s largest economy just south of the border as well as supportive governments, universities, accelerators, and other programs. There has never been a more exciting time for Canadian tech entrepreneurs!
What is the biggest challenge facing venture capital right now?
One of the biggest challenges facing private equity and venture capital right now is the same as that faced by all companies and institutions: how to support individuals and teams in the current environment in which stress, isolation, and anxiety are at all-time highs. At Real, we spend a lot of time thinking about the development and well-being of our founders and their teams. We think about what tools, resources, and guidance we can provide to assist them in their efforts to build their companies’ cultures, support their teams, and recognize individuals’ unique needs. We understand that organizations need to provide flexible solutions, create new ways to keep people connected, monitor the well-being of their teams, and establish safety nets to support individuals’ mental health.
Which economic factors do you feel have the most impact on your fund’s strategy?
At Real Ventures, we are thrilled to invest in great Canadian start-ups. We collaborate with founders to accelerate the growth of their companies and help them achieve their visions. While we know that entrepreneurs are resourceful and skilled at overcoming obstacles, we also know that a fertile start-up ecosystem with favourable policies facilitates and speeds growth. The Canadian government has a significant impact on the attractiveness of the ecosystem and hence the success of Canada’s tech companies. Several Government policies and initiatives directly impact the tech ecosystem such as funding advanced research, developing an appropriate IP-strategy, enabling rapid immigration for tech talent, creating incentives for venture capital investing, putting in place appropriate tax structures for entrepreneurs and investors, and others. The Canadian Government’s continued commitment to prioritize the development of the next generation of Canadian tech companies is critical to ensuring a strong, growing Canadian tech sector, which is one of the keys to the long-term health and vibrancy of the Canadian economy.
What is the most exciting trend right now in Canadian venture capital?
What is most exciting to me is the meaningful shift towards ESG and responsible investing as a facet of “the new normal.” Canada’s investors are placing a real and significant emphasis on considerations for ESG and impact factors and on investing for the “triple-bottom-line” – what I like to call the 3Ps: Performance, the Planet, and People. BlackRock CEO Larry Finks’ annual CEO letter is a great proof point, and what I appreciated most is that it articulated why placing climate and sustainability at the forefront of investment decisions drives results and value for stakeholders.
Private market investors are also working at building their understanding of how to integrate ESG matters into their investing strategies and taking a ground-up approach, that is by focusing on where benefits and risks exist and are generated: with portfolio companies. Responsible investing is the heart of Yaletown’s ethos. Our funds are focused on investing in the Intelligent Industry to build for climate-resilient growth and on doing so in an equitable, diverse, and just manner, seeking to address not only the “how” but also “what” impact is generated and risk is mitigated. We are firm believers that responsible investing doesn’t just go alongside growth, but actually engenders it, and our portfolio holds dozens of examples.
I’m very proud of my firm’s leadership in this regard and I’m pleased to see that this approach and attitude to investing is becoming normalized – because we can no longer afford to think otherwise.
What is the biggest challenge facing venture capital right now?
Two things really stick out: climate change and diversity, equity, and inclusion.
On the diversity piece, unquestionably this past year brought with it an accelerated pace of learning within the PE/VC space, but there is still so much more work to do. It is one thing to talk about diversity, which is very much in vogue, it is another thing to practice it every day. I am proud of the work being led by the members of CVCA’s Diversity and Inclusion Committee, and honoured to act as their Co-Chair, and of the work of individual firms like Yaletown, who supported my work and played an integral role in Co-Founding the Equality Fund, a new model for sustainable investment in global feminist movements that will activate more than $1B for gender equality, making it the largest self-sustaining fund for gender equality in the world.
With all forms of systems-level change, the only way to be successful in the long-run is to address root causes. Strategies for transformation in our industry need to stem beyond commitments to diversity and embed their way into values and firm philosophy. At Yaletown, more than 50% of our people identify as being racialized or ethnically diverse and more than 50% identify as women. We did not wake up that way accidently. It is a reflection of our belief systems and the work we’ve done to prioritize them. I think this has given us an edge, which has manifested in delivering consistent returns for our investors and having a top quartile fund performance.
On climate change, it is, unquestionably, both the biggest threat and opportunity of our lifetime. Fighting climate change is not merely a matter of mitigating our carbon footprint. To meet the urgent challenge of climate change, we must leverage the use of digital technologies to evolve all industrial processes to be more productive and less carbon intensive – building Intelligent Industry. That is why at Yaletown we have consistently taken, and continue to take, a holistic ESG framework approach integrated across our entire investment cycle from diligence to exit.
Which economic factors do you feel have the most impact on your fund’s strategy?
2020 – 2021 has been an extremely interesting time to be in the private equity/venture capital space. The COVID-19 pandemic has entirely upended what we understood as the traditional economy. However, as is often the case, when a challenge is presented an opportunity is not far behind.
For example, economic sectors historically defined by heavy physical capital are being reshaped. These include built environments, such as buildings and infrastructure, industry activity, manufacturing, transportation, logistics, agriculture and cities. The ‘x’ factor here is can Canada keep up with these emerging trends and cement a competitive advantage in this space?
At Yaletown, we are big believers in the economy of tomorrow. I feel this will largely be driven by three trends: digitalization, transformation, and sustainability. In essence, this can neatly be summarized as the Intelligent Industry. I believe that being a first mover on this investment opportunity, setting a path to physically and ideologically restructure our economy to shed the old ways of thinking and drive down emissions, will pay dividends for Canada. My hope is that our policymakers start trending in this direction, because if they do, all of Canada will win. To build back better, we must build smarter.
What is the most exciting trend right now in Canadian venture capital?
It goes without saying that the pandemic took all of us in the venture capital industry through a roller coaster of a year. But as we reflect on where we ended up in late 2020, it became clear that the pandemic was an accelerator and technology startups would benefit from this fundamental shift. I’ve been reading Scott Galloway’s book – Post Corona: From Crisis to Opportunity. He describes in detail some of the changes and I’m seeing these trends playing out in our portfolio and in the new ventures that are launching in the market.
The first trend I’ve seen has been in healthcare and the adoption of virtual medicine. As an early investor in Maple in 2018 (not all that long ago!) I remember a diligence call where physicians told us with strong conviction that medical practitioners would never start seeing patients on-line. Fast forward to 2020 and Maple has since raised $75m in a round led by Shoppers Drug Mart. I think we can all agree that the way healthcare is delivered will be forever changed and our team is closely tracking future innovations in the digital health sector.
The second trend we’ve observed is the digital transformation at the enterprise level. And to do that successfully, the adoption of cloud infrastructure and leveraging data insights has never been more important. Many of our technology ventures have seen strong year-over-year growth as their customers have accelerated the adoption of their solutions.
Lastly, the founders in our portfolio have been able to raise large follow-on rounds, largely over Zoom or other video platforms. The efficiency of the process will have a long-lasting effect post COVID, but I believe we will return to a more “hybrid” approach to fundraising. We are also excited to see more 2nd and 3rd-time founders starting new ventures and actively investing at the pre-seed or seed-stage and also becoming LPs in funds.
What is the biggest challenge facing venture capital right now?
I have the pleasure to co-chair the CVCA D&I Committee with Sophie Gupta from Yaletown Partners. While there has been some tremendous progress since the committee first came together in 2017, and I believe the discussion has evolved from “why is this important” to “how can we best effect change”, we are just starting to scratch the surface and we are still in the early days of a fundamental transformation. We have a very engaged committee, and we’ve set an ambitious agenda for 2021. Stay tuned for some announcements at Invest 2021 in June.
Which economic factors do you feel have the most impact on your fund’s strategy?
The success of our portfolio companies is predicated on their ability to access capital, talent, and customers. I’ve had several discussions with our portfolio companies over the past quarter, and the #1 challenge that is top of mind across the board is access to the right talent to scale their company. The team at Prospect has published this recent report that explores these challenges in-depth.
