A new $10 million angel fund founded by two ex-Shopify leaders is hoping to give back to the Toronto tech ecosystem by helping pre-seed startups get their companies off the ground.
Co-founding partners Adam McNamara and Joshua Tessier have been working on Ramen Ventures over the past two years, having invested in nine companies like Fiix, Every, and ChefHero thus far. The partners have allocated $10 million—$5 million for initial investment, and $5 million for follow-on funding—to invest in 100 Toronto companies.
“The best problem a founder can work on is a hard problem in a huge market.”
Speaking with BetaKit, McNamara stressed the importance of exits in the Canadian ecosystem and the need for angel investors with operational experience. After their startup Select Start Studios was acquired by Shopify in 2012, the two worked as VP of product (McNamara) and head of core product engineering (Tessier) before Shopify underwent its IPO in 2015.
“By investing your own money and your own experience, and having seen a template for it working before, we’re able to take risks that maybe other people can’t in the positions that they’re in, because they have fiduciary responsibility to LPs and investors,” McNamara said.
Ramen Ventures invests $50,000 in pre-seed software startups with a strong team and a large potential market. The team works with founders to help them build up the product, talking to customers and finding gaps or issues in design and development work. The goal is to help these companies identify product-market fit and get ready to raise a seed round.
McNamara noted that for most investors, funding companies at this early of stage is not a “rational” financial decision, but the hope is that activity from Ramen Ventures will encourage ambitious investing in Canada and spur other exited companies to give back.
The team plans to reinvest its returns back into Ramen Ventures to continue investing for as long as possible.
“There wasn’t a lot of funding from people who have helped build multi-billion dollar software companies in Canada, and all the lessons that come along with that,” McNamara said of the motivation to launch Ramen Ventures. “If you look at companies going public in the past 10 years, there was like 120. And five of them created 50 percent of the value—the winners win big.”
McNamara said Ramen is intentionally keeping the team small to focus more of the money on investments; the team includes McNamara, Tessier, and Ali Zahid, the founder of smart bike maker Vanhawks, which was acquired by Concord-based Warren Industries last year.
As for what will happen with money that comes from successful investments, the team says it plans to invest its returns back into Ramen ventures to continue investing for as long as possible.
“We owe everything to people investing in ways to improve the world, so I’d rather people work on big things that have the chance to move the needle than small things that have a chance to be inconsequential and kind of a waste of time and effort,” McNamara said.
“The best problem a founder can work on is a hard problem in a huge market. Hard problems require two times more effort, but have 10x to 100x more reward. It’s easier to hire and retain the best people. You’ll have less competition. And as a founder, you’ll experience more purpose and personal growth from working on something meaningful.”