Broad Street Bull VC (BSB), a Regina-based firm that invests in innovative companies in Saskatchewan and the Prairies, has launched its second fund with $2.5 million CAD.
The capital was raised from around 40 investors from Saskatchewan and across Western Canada. While the exact LPs were not disclosed, BSB noted that they consist of local business owners and operators in the region.
“The group was extremely successful in finding opportunities for investment in prairie-based companies.”
BSB is a small investment firm focused on pre-seed and seed-stage companies in the Prairies. It brings together individual investors, creating what it calls an affordable vehicle that is meant to make it easier for individuals to source, assess, and invest in early-stage Prairie startups. Fund II will be focused on tech companies.
“The larger network allows for a greater pool of capital, which will not only support more companies but also allow for larger commitments as companies continue to grow,” said Trevor Phenix, who recently joined BSB as managing partner.
Phenix explained that the relatively small size of the fund is a function of what is expected for Saskatchewan and Prairie-based pre-seed and seed investments and a desire to focus on bringing together local, individual investors.
BSB was originally launched in October 2018 by local entrepreneur and investor Jason Drummond and 12 other angel investors in Regina. The firm’s first fund of $425,000 officially closed in December, having fully deployed its capital across eight investments (four Regina based, three Saskatoon, and one in Winnipeg).
The firm’s founders felt that the deployment of Fund I proved the need for early-stage capital in the Prairies startup ecosystem.
“The group was extremely successful in finding opportunities for investment in prairie-based companies,” Phenix told BetaKit. “It became clear that not only was this an opportunity to invest, but it also had a larger potential of becoming a key contributor to a growing ecosystems[sic].”
“Fund II brought together a larger network of individual investors and entrepreneurs from across the prairies that would not otherwise have had an opportunity to get involved in tech investments, or may have lacked the experience or risk tolerance to do it alone,” he said.
BSB’s model allows its LPs to take advantage of the Saskatchewan Technology Startup Incentive (STSI) a provincial government, non-refundable tax credit for individual, corporate, or venture capital corporations investing in eligible startup businesses. The STSI offers a 45 percent tax credit, with an investor able to earn a maximum of $225,000 in tax credits per investment.
Phenix emphasized the benefit the STSI brings to local startups, adding that its an incentive BSB’s LPs likely would not have had a chance to benefit from if it was not for the fund.
The provincial government program, which is running on a two and a half year pilot, has also attracted the likes of Conexus, which decided to launch the Conexus Venture Capital Fund in Regina last year. According to Sean O’Connor, Conexus’ fund manager, about half of the investors in Conexus’ fund are likely to benefit from the tax credit.
“If you look at what the province of Saskatchewan does here, it’s exceptional to see how much momentum they’ve created through their tax credits, through their incubator, and things like that,” O’Connor told BetaKit when Conexus closed $30 million for its fund.
“What the province of Saskatchewan does here, it’s exceptional to see how much momentum they’ve created.
“[Since BSB launched] we have seen a massive increase in connections being made from both [Saskatchewan] based companies and opportunities coming to us from Alberta,” Phenix told BetaKit. He attributed this, in part, to the Alberta government’s decision to cut its own tax credits, something that has left local investors and companies worried.
“Although we are a relatively new fund in this space, we have begun to establish ourselves as one of the premier early-stage partners in the prairies,” added Phenix. “Before Broad Street Bulls, opportunities existed for funding at later stages of a startup’s growth. Yet, not enough opportunities existed at earlier stages.”
“This is not only apparent by the number of founders coming to us for potential investment, but also by the collaboration and opportunities we are seeing through angel funds and incubators from neighbouring provinces and beyond,” he said.
Phenix added that the majority of the individual investors participating in BSB’s Fund II choose to invest with the hope of growing opportunities in Saskatchewan and the Prairies.
Despite being home to big tech companies like SkipTheDishes and Vendasta, Saskatchewan – and more broadly the Prairies – is a region often overlooked when it comes to venture capital injections. A 2018 report by Canadian Venture Capital and Private Equity Association suggested Saskatchewan startups received less than 0.5 percent of all venture capital invested across Canada.
While this is still the case, a White Star Capital report on the Canadian venture capital landscape in 2019 found that Saskatoon ranked eighth highest for activity by region. This was likely due to deals from local startups Vendasta and 7shifts, pointing towards a larger trend that has seen growing interest in major Prairie tech companies like Bold Commerce, Coconut Software, and Attabotics, to name a few.
Phenix and Drummond, BSB’s founder and chairman, are bringing on Jonathan Lipoth as an analyst to help manage Fund II. The firm plans to cut cheques of $25,000 to $250,000, with an average cheque size of around $75,000. Phenix noted that larger investments will typically be associated with follow on investments into existing portfolio companies.
While BSB announced the launch of Fund II this past week, it has already deployed $400,000 of the $2.5 million into three early-stage Saskatchewan based companies: SafetyTek, SalonScale, and Offstreet.
BSB plans to have 20 to 25 companies in its portfolio over the next two to three years. Some of its existing portfolio companies include Manitoba’s Callia, an online flower delivery company, Saskatoon-based car buying platform Curbie, and TeamLinkt, a Saskatoon-based company that has developed a team management app.
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