Clio CEO Jack Newton believes Canadian VCs should be willing to pay a higher price than US competitors to invest in Canadian companies.
The news: Newton made the remark during a fireside chat with RBC senior vice-president John Stackhouse at the Design Exchange in Toronto on Wednesday, where Clio was hosting a luncheon to celebrate new additions to its platforms, including Canadian case law and accounting capabilities.
As Stackhouse and Newton discussed the state of AI, investment, and legaltech in Canada, Newton recounted the difficulties of raising money as a young Canadian company, when Canadian VCs thought they could get a “hometown discount.” To spawn the next Shopify or Clio, Newton said every level of government and every Canadian investor should instead think about how to create a “home-field advantage” for Canadian companies.
From the source: “Because we know these founders,” Newton explained. “Because we know the ecosystem we’re in, because we know that we can help bridge deals within Canada, we’re willing to give a higher valuation than the US VCs.”
“I think that’s one macro-level change we need to see if we’re going to see Canada being more self-sustaining, especially in that early stage,” Newton added.
The context: Newton has spoken before about his company’s struggles to raise in Canada, including at the 2024 BetaKit Town Hall in Vancouver. At Wednesday’s event, Newton said Canadian term sheets were so uncompetitive compared to the likes of Clio’s Series C lead investor, US-based Bessemer Venture Partners, that he didn’t even return calls. Clio’s struggles to find Canadian investors extended all the way to its $900-million USD ($1.3-billion CAD) Series F round in 2024, which was backed entirely by US investors.
Canadian VC does have its structural problems, including a thin base of limited partners, as some investors noted on an April episode of the BetaKit Podcast. The general lack of exit activity in the country has also led to a lot less capital available to be deployed.
Final thought: Stackhouse noted Newton’s challenges with the pressure to accept hometown discounts, and forwarded another concern he’d heard from founders: speed. Stackhouse said Canadian VCs often take too long to get offers back to companies. Both speakers agreed that the most important asset in the age of AI is velocity.
Newton added that Canada needs its entrepreneurs to decide that their home is the best place to start a company. He said the Canadian home-field advantage he spoke of should include updated tax policy that incentivizes founders to start companies in Canada by giving them more upside if they “take off.”
Feature image courtesy of Alex Riehl for BetaKit.