One year after launching Backbone Angels, the group of current and former Shopify leaders are proving there is a market for investing in founders who are often overlooked.
“We launched with the intention of investing in women and meeting a lot of really great women entrepreneurs and founders, and seeing how we could support in the ecosystem,” said Backbone founding partner Arati Sharma in an interview with BetaKit. “Turns out, women are still grossly underfunded. We didn’t think it would be a big deal when we launched, but it ended up creating a lot of momentum.”
“What we’re doing for the overall ecosystem is expanding and diversifying the founders that have the resources they need.”
When Backbone launched on International Women’s Day last year, the collective wanted to help fill a gap in the investment landscape – one where it’s hard for first-time founders, especially women of colour and non-binary people, to raise capital.
Over the past year, Backbone’s 10 angel investors have invested a collective $2.3 million USD in 42 companies with 56 percent of those run by women of colour. Seventy-two percent of the angel group’s investments are in first-time founders.
Now, the group is looking to make it easier to pitch deals to Backbone investors, while adding programming and tools that will allow them to share the knowledge they garnered building Shopify.
“We believe that there is space for many founders to thrive and be successful, and we know that access to the resources it takes to succeed are not equitably distributed,” the group said last year. “We are here to help close the gaps.”
The individuals behind Backbone are part of an emerging class of angel investors in Canadian tech that is leveraging its startup experience to share not only knowledge but financial returns.
Recently, former Shopify product lead Fahd Ananta raised a $6.4 million fund to invest in early-stage internet businesses. This emerging class of angel investors that are also operators can be seen from the likes of Michael Litt’s Garage Capital, the Hyatt brothers – who invest in a number of early-stage companies – and in rounds like that of Mayday, which secured money from angels such as Luke Vigeant of Inkblot after his company was bought by Green Shield Canada.
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Arati Sharma, the former director of product marketing at Shopify who left to start her own company, Ghlee, was also named Canada’s Angel of the Year by the National Angel Capital Organization (NACO). Sharma alone has invested in approximately 50 companies over the years, with a portfolio that includes Willful, Disco, Fable, Sheertex, Kotn, and #paid.
“Operator investors, especially as an angel, are the people that you want to have on your cap table because they’ve been through it,” argued Sharma.
“What sets us apart is that we have all built and led, and continue to build and lead, organizations that are really high functioning … through many different stages of growth,” said Backbone founding partner Anna Lambert, also a director of product acceleration at Shopify.
The 10 individuals behind Backbone have been integral parts of building Shopify, seeing the company from its startup phase through its initial public offering and beyond to become one of the largest companies in Canada. Brittany Forsyth, for example, started as Shopify’s first human resources employee before departing as chief talent officer late last year.
Shopify VP of commerce intelligence Solmaz Shahalizadeh also recently announced her departure from the company after nine years to focus on Backbone.
Some bittersweet news: After 9 amazing years, I’m leaving @Shopify next month to focus on @backboneangels. I joined Shopify in 2013. We had less than 100k merchants, and a data team of only 10. Today, we have millions of merchants, and a data team of hundreds and growing. 1/9
— Solmaz Shahalizadeh (@solmaz_sh) February 28, 2022
While focused on early-stage investing, the angel group’s experience from startup to IPO has led to Backbone joining later-stage rounds as well. In addition to the likes of Sheertex and Willful, Backbone joined 1Password’s cap table as part of its recent $744.3 million CAD Series C round.
“All 10 of us have built a company that has thrived after going public,” said Sharma. “So I think for companies that are later stage raises, they’re looking at angels like us that have that expertise that can help their teams now cross that next threshold. And I don’t think there’s anyone that can do that except the 10 of us.”
Backbone is focused on addressing a prevalent gap in angel investing: the amount of capital that goes to female-founded firms is minimal, and those numbers become bleaker when factoring in people, most notably women, of colour. Beyond women and people of colour, there’s sadly not enough collected data on non-binary founders raising capital to evaluate.
Backbone also looks to invest in non-binary founders, with Sharma noting that most of the capital the collective has invested has gone to women as well as non-binary founders. Backbone would not disclose how many non-binary founders it has invested in, stating “we prefer not to share the exact number in order to protect founder privacy.”
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Regarding the lack of capital going to underrepresented founders, Sharma noted, “Oftentimes when we talk about women being underfunded, it’s usually experience – so the type of business that they’ve started – but we know that it’s easier for VC to write a check to a second-time founder. And it just shows me that … the 72 percent signifies that capital is being funnelled to these right founders.”
“What we’re doing for the overall ecosystem is expanding and diversifying the founders that have the resources they need to bring their ideas and their vision to life,” added Lambert.
In order to connect with more founders this coming year, Backbone is making some changes to its process. To make its process of sourcing deals faster, Backbone will now run multiple application windows a year where founders can submit their business for review.
The group is also hiring a chief of staff to help build out stronger processes and tools, as well as potential programming for Backbone portfolio companies.
Backbone is also exploring working with other organizations to amp up their support for portfolio companies and potential investments.
“It’s not just about investing in women founders. I also think it’s about having more women on cap tables, and therefore having more women in leadership roles,” said Sharma.
Feature image courtesy Backbone Angels.