After spending the past few years building out the Canadian tech investment operations of Germany’s Global Founders Capital, Alex McIsaac has set his sights on a new challenge with Toronto-based venture capital (VC) firm Northside Ventures.
Through Northside, which he quietly founded in January as a solo general partner, McIsaac hopes to help fill what he views as a “gaping hole” in the market: the lack of institutional VC funds in Canada being invested in pre-seed—often pre-product and pre-revenue—Canadian tech startups.
Armed with $6.25 million USD and buy-in from big-name investors and experienced operators, Northside intends to back Canadian founders on both sides of the border at the point of inception. Targeting a total fund size of $15 million, McIsaac aims to complete a final close for Northside in the coming months.
“I think this year and the next year or two are going to be great cohorts from an early-stage investment perspective.”
In an interview with BetaKit, McIsaac laid out his plans for Northside, explained why he decided to launch his own pre-seed fund during a market downturn and spoke about what he’s learned investing during a whirlwind few years for Canadian tech and the sector at large.
“We’re seeing exceptional founders start really, really interesting in companies with strong business models, and that’s really exciting,” said McIsaac. “I think this year and the next year or two are going to be great cohorts from an early-stage investment perspective, so I think the timing for a pre-seed fund couldn’t be better.”
In Canada, McIsaac noted that there are relatively few institutional VC funds that invest in pre-seed startups, particularly pre-product, pre-revenue ones. “Compared to the US, it’s just a really kind of scarce landscape,” he added. Northside and a slew of other new entrants, including Staircase Ventures, CMD Capital, Gambit Partners, and Storytime Capital have joined established Canadian firms like Panache Ventures and Golden Ventures to help fill this gap.
For its part, Northside will target Canadian-led pre-seed and seed-stage startups across North America. While Northside will be sector-agnostic, McIsaac sees opportunities in a few core categories, including artificial intelligence, B2B SaaS, FinTech, and cleantech.
The fund aims to participate in founders’ first rounds of external capital, often at inception and ideation. McIsaac plans to back 25 companies through Northside with initial investments of between $100,000 and $500,000, typically as the second or third-largest cheque in a funding round. To date, Northside has already invested in seven startups, including On Order, Round, Switch, Veritree, and Terminal.
The fund’s institutional LPs include a mix of notable VC firms from across both sides of the border: Inovia Capital, Intact Ventures, Bain Capital Ventures, Golden Ventures, FJ Labs, Bling Capital, Coolwater Capital, and Garage Capital. Northside also counts angels like Wave Financial co-founder and former CEO Kirk Simpson (now co-founder and CEO of Qui Identity), ex-PayBright CEO Wayne Pommen (now CRO of Affirm), Uber senior VP Andrew Macdonald, and Kindred co-founder George Babu among its investors.
McIsaac said he saw value across two types of LPs: VC funds that could provide follow-on capital to portfolio firms—at both the seed-stage and beyond—and successful founders, executives, and senior employees from across the tech ecosystem.
“We invested in Alex and Northside after having had the opportunity to work with him closely in his previous roles,” Golden Ventures partner Ameet Shah told BetaKit. “His focus on pre-seed and speed to conviction fills a gap in the market.”
Bain Capital Ventures’ Amit Bhatti (head of the firm’s seed fund program) and Alysaa Co (associate) told BetaKit that the firm was attracted to McIsaac’s track record and focused investing approach. The pair expect Northside to give Bain “exposure to some of the best early founders and companies in Canada.”
Born in New York, McIsaac grew up in Toronto and Vancouver, beginning his tech career as an associate at Northwater Capital focused on cleantech investing. McIsaac joined Northwater-incubated Toronto-based energy storage tech startup NRStor as its first employee. During his seven years with NRStor, McIsaac led business development until around when the company was acquired by Blackstone.
In 2019, McIsaac left NRStor for BDC Capital, where he worked for about a year as a principal on its Women in Technology Venture Fund and Seed Fund before joining Global Founders Capital as its first and only Canadian partner in February 2020, sensing an opportunity to build a brand from the ground up.
Over the following three years, McIsaac invested close to $40 million across 30 Canadian tech startups across a wide variety of sectors, including Float, AutoLeap, Pine, Ledn, Clutch, Shakudo, Secoda, Aviron, Disco, EnPowered, Spatula Foods, Branch Energy, and Fraction. McIsaac described his time at Global Founders Capital as “the closest thing you can have to running your own fund without actually running your own fund.”
McIsaac left the firm in December 2022, handed over its Canadian portfolio to Global Founders Capital’s European investment team, and launched Northside, securing a first close of $5 million in February and a second close in the summer, for a total of $6.25 million to date.
Speaking to the timing of Northside’s official launch, which comes during a downturn, McIsaac noted that amid such conditions, it becomes harder for startups and VCs alike to raise capital. “But from an investment point of view, the quality generally goes up,” he added. “The quality of founder and the quality of deal flow—especially at the pre-seed stage—that I’ve seen this year is exceptionally strong. Some of best deal flow I’ve seen in the last five years.”
Per McIsaac, a few factors have helped drive this state of play, including a higher bar for founders deciding to launch a new startup on their own amid this environment, which he argued has led to more conviction among entrepreneurs who have opted to take the leap.
As interest rates have risen, McIsaac said investors have applied more scrutiny to business models, and more focus on profitability or the potential for profitability within those models.
For his part, McIsaac also believes that the flood of tech exit activity and liquidity events that the Canadian tech ecosystem has seen in the past few years have fuelled a new cohort of Canadian founders “that are exceptional from an experience point of view.”
Speaking to the challenge of raising a VC fund as a first-time manager amid these conditions, McIsaac said, “There’s no question it’s a difficult process raising capital for any emerging manager,” adding, “It’s harder in this environment.”
Noting that Northside currently has 49 LPs, McIsaac acknowledged that cheque sizes right now are generally smaller and the process has been slower given market conditions. “The metric I’ve heard from within my networks is that it’s three times harder to raise a fund in this market, and so funds are either raising three times less or it’s taking longer,” he added.
“It’s just really about the founder first before the idea. [That’s] more true than ever when times are hard.”
– Alex McIsaac
The past few years have been a whirlwind for the tech sector, from the COVID-19 pandemic to the VC boom of 2021, the current downturn with its rampant markdowns, and the collapse of Silicon Valley Bank.
One of McIsaac’s biggest learnings as an investor during this time is “the importance of investing in great people and great founders” that you like, trust, and are aligned with.
“When things get tough and a company goes through challenging situations, it comes back to the people running the company,” said McIsaac. “At the end of the day, it’s the founders that drive the ship.”
Given that they are often backing companies without a full-fledged product, customers, or revenue, many early-stage investors tend to focus on the founders and the idea. In company evaluation and diligence, McIsaac intends to index most heavily on the founding team.
“As an early-stage investor who is investing in people—two founders and a deck is my sweet spot—it’s just really about the founder first before the idea,” said McIsaac. “[That’s] more true than ever when times are hard.”
Feature image courtesy Northside Ventures.