Sanjay Singhal’s start as the head of 500 Canada — 500 Startups’ $30 million fund dedicated to Canadian startups — began with Singhal not wanting to be a venture capitalist at all.
“I invested in 500 as an LP, and then, three years ago, fell in love with the organization. I would go to San Francisco, attend events, and just get to know people. And I liked it more and more, so the question was how I could get involved with 500, not how I could become a venture capitalist,” Singhal said.
So when the opportunity to start 500 Canada came up, Singhal jumped at the chance. The serial entrepreneur was moving away from his role as CEO of Audiobooks.com and thinking about the next way that he could make an impact on the startup community.
First announced back in March, the 500 Canada team has now expanded beyond Singhal, who has been hard at work convincing other startup heavyweights ready to pursue their next big project to join him. “I told my story and it resonated with the other partners, who were in similar situations to myself, trying to figure out what to do with their lives, and I just caught them at the inflection point,” Singhal said.
“500’s model is based on massive diversification, though there’s a notion that 500 is ‘spray and pray’. That comes from a foundational of lack of understanding of our portfolio theory.”
The team has grown to include Neha Khera, who formerly acted as a senior investment manager with the MaRS Investment Accelerator Fund. Khera has also held roles like Scotiabank’s manager of business innovation, and organizes Toronto’s Girls in Tech meetup. “I’m a huge supporter of women in tech. Just recently, I was added to a mailing list of all women VC partners at funds across both Canada and the U.S. Everyone knows that so much of venture capital is based on network and relationship, and I feel fortunate to bring my female network to this fund to ensure we diversify our investments,” said Khera.
“500 Startups overall is dead set on diversity, and it’s another reason why I chose to join the team. Prior to joining, I actually made a trip down to the Valley to meet the U.S. team and was blown away with the number of female partners.”
Mike Cegelski, a well-known angel in Montreal named NACO’s 2015 Angel of the Year, will run 500 Canada’s Montreal office with David Dufresne, working with analyst David Bureau. Dufresne, for his part, has eight years of experience as a VC, and has spent the last five years as CEO and executive in two web companies.
“When Mike told me about the plan to launch 500 Startups in Canada, what got me excited is that we will quickly become one of the most active seed-stage investors in the country,” said Dufresne. “We’ll be able to leverage the 500 global network, provide our startups with growth education and training, and find experts within the network that can help at all steps of each deal’s lifecycle. Then, our best companies will have access to the most strategic investors for later rounds, and to the right connections to maximize exit values and ultimately the return for our investors.”
iStockphoto co-founder Patrick Lor, one of the first microstock photography websites that sold to Getty Images for $50 million, will be heading the Calgary office. Rounding out the team is Emily Dagneau in Toronto, who is acting as 500 Canada’s community and portfolio manager.
It’s an experienced team well-versed in many aspects of the startup world, but what stands out when talking to all of them is that they joined mostly because they really like each other.
“Joining a fund is a long-term commitment, so there has to be a high level of respect amongst the partners, and additionally, they have to like working with each other,” said Lor. “I really admire Sanjay for pulling together a team that has achieved so much. We also met a vast majority of the 500 Startups team from the U.S. and the rest of the world, and it’s amazing to see what a diverse, talented, and passionate team this is. It’s a team that has had many successes, and yet humility prevails.”
The 500 Canada team is still looking for partners in Vancouver, Waterloo, Ottawa, and Atlantic Canada.
Singhal characterized the approach to building the 500 Canada team as atypical, as similar 500 Startup funds across the world tend to employ younger, enthusiastic partners with good deal flow networks, but not necessarily as well-connected in fundraising. Currently, the 500 Canada team is still looking for partners in Vancouver, Waterloo, Ottawa, and Atlantic Canada.
The 500 Canada fund is looking for startups with a $2 to $10 million valuation with co-founders (they find them more stable), lean capital requirements (e.g., not working on deep technology that requires large amounts of capital before launch), and wants to invest in one startup a week — a hearty target in a Canadian venture environment that tends to be more conservative. “We’ve already invested in over 40 Canadian startups over the past several years,” said Dave McClure, founding Partner at 500 Startups. “Our 500 Canada team is local, entrepreneurial, and experienced. The $30M microfund will do 30-40 deals per year. Canada already has wins with Shopify, Hootsuite, and Kik.”
500 Canada will write $150,000 first cheques, and $500,000 follow-on cheques if the startup is promising (hint: watch this space for more information on when that will start happening in earnest).
“500’s model is based on massive diversification, though there’s a notion that 500 is ‘spray and pray’. That comes from a foundational of lack of understanding of our portfolio theory,” Singhal said. “Traditional venture is that we’re smarter than you, so we’re going to invest in six to eight companies a year, manage the hell out of them, and then make them successful. Dave McClure’s attitude is that we’re not as smart as we think we are. So we find companies that have some possibility to success, invest in a lot of them, and then as they demonstrate some success double down on them.”
Khera, who wrote a report called Borderless Investments, analyzed the top Canadian startups and what they had in common — noting that most had connections to top U.S. investors, who helped them scale. With 500 Canada, Canadian companies will be connected back to investors and talent from down south. As the 500 Canada team seeks their next regional hires, they look forward to bringing an injection of capital and a brand with global recognition to Canada, which has traditionally struggled to grow past the early stage.
“A big part of 500’s mission is to dispel the myth that there aren’t enough good companies in Canada to invest in. The entire Canadian ecosystem needs to step up and help with – investors and entrepreneurs included. We’re going to make early bets on talented founders with great ideas,” said Lor.
Feature photo by Yiying Lu