Perspectives From Venture Capital Leaders…Who Just Happen To Be Women

March 6, 2020 | By: Jon Jackson
This article is part two of a two-part series providing insights from leading women in Canadian private capital in celebration of International Women’s Day.

The CVCA will be publishing its 2019 year-end report next week and the preliminary numbers show Canadian venture capital heading towards another record year for investment and private equity continuing its momentum.

However, there’s volatility at seemingly every turn. In Canada, we’ve been battling the spin-off impact from the federal natural gas pipeline project and the slow economic recovery in the province of Alberta. Over the last year globally, trade uncertainty, yield-curve models and an escalation of political relations between the US and Iran have caused significant strain on performance.

More recently, all eyes have been on the coronavirus and the resulting economic damage. Not only did global public markets post their biggest one-week decline since 2008, companies like Mastercard, United Airlines and Apple and dozens of others have warned that the virus will hurt profits.

What are the strategies available to limit portfolio losses and even log some gains during a downturn?

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.

This year, to mark International Women’s Day, we’re uncovering the valuable insights from leading women in our industry. Separated by asset class in the membership, we’re closing the series with the perspectives from leaders in venture capital.

Most exciting trend right now in Canada?
I’ve spent the majority of my career in venture investing and if we look at long-term trends over that time, we believe that today’s market conditions are the best we’ve ever seen for Canadian start-ups to scale. Of course, it remains to be seen if there is a lasting impact from the current market reaction to COVID-19. Fundraising rounds are bigger than they’ve ever been before. More importantly, Canadian companies have broken through an exit ceiling with 5 exits over $500M in the last 18 months.

Biggest challenge facing VC right now?
Canada ranks second globally when it comes to the amount of VC capital invested annually, but only 13th in terms of the number of unicorns that we create for every $100 million in funding. So, the biggest challenge is to invest capital efficiently and scale effectively to create billion-dollar businesses.

We also need to address the gap between Canadian and US companies when it comes to raising Series B financing. According to our research, Canadian companies are four times less likely to raise a Series B round compared with their US counterparts. There could be a number of reasons for this, but it is unlikely to be a lack of availability of capital.

Economic Factors impacting OV’s fund strategy and global implication to our fund?
There are two primary economic factors that could have an impact on us this year.

The first relates to talent. Canada has experienced strong economic growth over the last decade and this is expected to continue into 2020 (though we are keeping a close eye on the recent market behaviour). In January, economists forecasted a 1.7% growth rate for the Canadian economy this year. Canada’s skilled labour shortages are at a record high across the country. In our ecosystem, there just simply isn’t enough talent supply to meet the demand of our growing innovative companies. Tech CEOs are finding it increasingly difficult to hire top-tier talent at an affordable rate.

In order to help address this with the companies we invest in, we’ve recently added experienced operational experts (including a Talent Director) to our team, as a resource for our portfolio companies.

The second factor is around the prominence of over capitalized companies subsidizing growth and ignoring business fundamentals over the past 18 months. At OMERS Ventures we’re not looking to just invest big and then cash out quickly — that’s not our strategy and it’s not our culture. And in today’s market I think that works in our favour. From our founding, we have been focused on building long-term, sustainable businesses that are disrupting some of the biggest industries.

What is the most exciting trend right now in Canadian venture capital?
It has been exciting to see how venture capital investments in Canada have grown in the past few years, breaking all records. On the technology side, opportunities created by applying artificial intelligence to health data are changing health care in a profound way.

What is the biggest challenge facing venture capital right now?
Canadian VC funds are typically not large enough to fully support Canadian start-ups as they scale up. That specifically applies to funds focusing on life sciences and has been a longstanding issue.

More recently, coronavirus outbreak and its impact on the global economy may have a negative effect on the growth of the VC industry in Canada.

Which economic factors do you feel have the most impact on your fund’s strategy?
Equity tax credits in Nova Scotia have recently expanded to include corporations and VC funds. There has also been a significant increase to the amount that individual investors can claim, with a special consideration for life sciences and ocean technology companies. This has opened new opportunities for our fund to leverage the pool of capital available to start-ups in the region.

What is the most exciting trend right now in Canadian venture capital?
Canada has great momentum right now, there is more local growth capital than ever before, yet the bulk still comes from the USA. Canadian entrepreneurs can truly build massive companies now, and attract the talent and capital they need to grow. We are excited by the opportunity to build more Lightspeeds!

What is the biggest challenge facing venture capital right now?
Likely the lack of diversity across founding teams, technical teams, investors and BOD. It would be great to have a world where everyone has equal access, and interest in technology opportunities!

Which economic factors do you feel have the most impact on your fund’s strategy?
Hard to say, whether we have an economic downturn or not, our fund strategy is to continue to invest in amazing founding teams, in people that have the will, the wisdom and the wit to create a world that will be obvious to all tomorrow. So every challenge is just another challenge!

What is the most exciting trend right now in Canadian venture capital?
Our ecosystem has a rapidly growing cluster of funds and inflow of capital that supports companies who are solving the worlds climate challenges. The purpose of the capital deployed transcends growth and profit with a broader mandate of sustainability and I suspect is one of the fastest areas of growth in Canadian VC/PE.

What is the biggest challenge facing venture capital right now?
Valuations are running very high across many sectors in public and private markets at this point in the business cycle. In order to secure good returns for investors, judicious entry points are important. I think providing long term patient capital is also important as the long term trend is more important than quarter to quarter noise.

Which economic factors do you feel have the most impact on your fund’s strategy?
I’m not sure if the global level of “human consciousness” counts as an economic factor but our investment thesis is that people and industry will strengthen in our conviction that our planet and resources are valuable and worth protecting and that we have the ability to influence that and vote with our dollars. Our generation feels more personal responsibility to reduce our carbon footprint and minimize our resource use and the companies we support provide technologies and products that make those choices easier.

 

Banner for Invest Canada '20


If you would like to submit an idea for content, contribute to an article, or are interested in submitting an op-ed, contact the CVCA’s editorial department here.