Vancouver is increasingly being seen as a boom-town when it comes to tech startup innovation. That assessment goes down a few notches when it comes to access to capital for those new tech ventures. The entrepreneurs-turned-investors behind the Vancouver Founder Fund (VFF) are looking to change that impression.
This week, they announced the close of a $14.1 million fund “built by founders, for founders,” targeting ventures in Western Canada.
Fraser Hall and Dan Eisenhardt may be better known by their legacy as founders of Recon Instruments, which they sold to Intel for $175 million. “We set out to be the funding partner we always wished we had as entrepreneurs,” Eisenhardt said.
The fund was first launched in October 2015 with $10 million in capital. “We succeed by helping founders succeed,” Hall added. “Sometimes, that’s getting in the trenches and other times it’s having to step back.”
While the fund would fall into the smallest category of venture fund in North America, for Vancouver, $14.1 million is quite significant and they’re just getting started, Hall added. “Vancouver is starved of this kind of capital.”
For tech venture funding to grow regionally, resource investors will want to be able to piggyback on the experience of tech founders.
He noted that venture investment in this city has typically come from those who have already had successes in the resource, mining, or real estate sectors. Until recently, those sectors dominated the economy and still have a lot of clout. Many of those kinds of investors don’t seem to understand that experience in those industries may not provide valid perspectives into the unique challenges of the tech sector, he explained.
For instance, investors who got their start in mining may look to quick reverse takeovers and IPOs as the goal. They may create interesting but overly complex corporate structures to maximize tax savings. The idea is to give a company just enough money to fail quickly if it’s going to fail, rather than build it for success in the long term.
That approach doesn’t work as well for the tech sector, where companies may need a number of funding rounds throughout its life cycle to meet different milestones, along with a relatively straightforward corporate structure, Hall said.
For the tech venture funding sector to grow regionally, those resource investors will want to be able to piggyback on the experience of veteran tech founders. The way forward is educating these experienced resource investors around process, by collaborating with the tech investor crowd.
VFF’s investors include BDC Capital, as well as local and European investors. “BDC Capital is one of the few institutional limited partners in Canada that invests in emerging and first-time fund managers,” Hall said.
“There are many promising IT companies in and around Vancouver and a vibrant angel community, but there’s a definite lack of institutional seed-stage investors,” said BDC Director of Fund Investments Charles Morand, explaining the organization’s enthusiasm for the new fund.