When Kevin Talbot co-founded Relay Ventures in 2008, he knew two things: that this up-and-coming “mobile thing” was going to be huge, and if he could build a venture capital fund that focused on companies solely on this sector, it would build a strong network of entrepreneurs that could work together and learn from each other.
Eight years later, Toronto-based Relay Ventures has stayed true to this focus on mobile, which is now surpassing desktop in internet use, as well as their focus on building a network. Talbot says that this strategy has clearly served the company well until now, as the firm officially announces it has closed $200 million in its third fund. Limited Partners in Fund III include Northleaf Capital Partners, Kensington Capital Partners, Generation Capital, La Caisse de dépôt et placement du Québec, EDC, AEC, and Royal Bank of Canada.
“$200 million is a large fund [in Canada], certainly for an early stage venture fund, and it’s the largest fund being raised in Canada this year,” said Talbot. Currently, the company has $670 million in capital under management, making it the largest venture fund manager in Canada.
Since its inception, Relay Ventures has focused on verticals being disrupted by mobile technology, such as IoT, consumer healthcare, and commerce. This hyper-focus has led to a network of 76 companies in its portfolio that can share best practices and resources, introduce each other to investors, and even use each other’s products — thanks to their similar backgrounds.
“Ithink there’s an excitement because we see Canadian entrepreneurs who are out to win, and that’s a big change over last 10 years.”
In 2012, Relay Ventures opened a full-time office in Menlo Park, California, which Talbot says has been beneficial both for Relay Ventures and its portfolio companies. Before founding Relay Ventures, Talbot was a commuter investor, which made it tough to make investments in the Valley. With a full-time office, Relay Ventures can find investing opportunities in the “epicentre of the mobile tech space”, while also being able to measure companies in the Valley against Relay Ventures’ Canadian investments to evaluate global competitiveness.
“We live by the philosophy that not every company needs to be in Silicon Valley, but Silicon Valley needs to be in every startup,” said Talbot. “The reason for this is that software companies are global companies from day one; regardless of where you’re located, your customers are around the world. As a Canadian-based VC fund, being the best in Canada or any specific region is simply not good enough.”
For their part, the entrepreneurs get a chance to spend time in the Valley with Relay Ventures to meet potential follow-on investors and spend time with companies that could be partners.
“Capital flows like water flowing downhill, so if there’s an exciting company in Canada, regardless of where it is, investors will find it.”
“It’s a lot of work because we cover a large geography, but we get better results because we have a real differentiator in companies we invest in. At the end of the day, money is money. It’s all the same and it achieves the same things,” said Talbot. “But if we can bring in network, expertise, and assets from Silicon Valley to companies outside of Silicon Valley, this is valuable to entrepreneurs. It’s the same thing for companies in the Valley, because we differentiate inside the Valley by the expertise we have and by the network effect we’ve got.”
As the Canadian startup ecosystem matures, there are many conferences as of late dedicated to conversations about the best ways to support Canadian entrepreneurs as they scale, as well as challenges they face — including the very Canadian trait of being too polite and too safe.
In the six years since he’s been living in the Valley, Talbot said it’s a good thing Canadian entrepreneurs have now become indistinguishable from their American counterparts. In his past experience, Canadian entrepreneurs have been hesitant to toot their own horn, and had a launch strategy focusing on building in Canada and figuring everything out at home before even thinking about global expansion.
“Now, when we meet Canadian entrepreneurs, it’s much more forward-thinking, more ambition, and more of an understanding and recognition that it’s a global software market,” said Talbot. “I think there’s an excitement because we see Canadian entrepreneurs who are out to win, and that’s a big change over last 10 years.”
While raising the fund, the firm has invested in Canadian companies like FreshGrade, 7shifts, and Automat.ai, though Talbot stresses that there is no geographic mandate to its fund (it has investments in San Francisco-based UJet and Sunnyvale and Tel Aviv-based Kwik Commerce). And while Canadian investors are known for being more conservative, Talbot said that the best Canadian companies will continue to attract capital regardless of whether or not they’re working in hubs like the Valley.
“The best companies in Canada are attracting capital. There is no problem with that. Capital flows like water flowing downhill, so if there’s an exciting company in Canada, regardless of where it is, investors will find it,” he said, admitting that Canadian entrepreneurs do face the challenge of attracting global senior talent to help them scale. “But if you want to get companies started, and you have a good company with top-tier people with with a unique value proposition, then money will find those opportunities.”