Grammer on Investing in #Startupeast
A few years ago, my partners and I at Rho Canada Ventures began to notice the opportunities occurring in Atlantic Canada, and I started spending more time here.
Today, we feel really lucky I did.
We’ve found a rich vein of tech companies on the East Coast, and we were able to invest in them before many of our competitors had heard of them.
We set up Rho Canada in Montreal in 2006 with the vision of establishing a truly national fund. Though half our investor base was in Montreal, we wanted our coverage to extend from Vancouver to Halifax. So I began to make scouting missions to the East Coast and was pleased with what I found. By 2013 we invested in our first Atlantic Canadian company and there are now four in our portfolio.
When I first arrived in Atlantic Canada, I spent a lot of time understanding what was happening on the ground. I visited the universities and talked a lot with Gerry Pond, the chair of East Valley Ventures. I looked at the different accelerators, at investors like New Brunswick Innovation Foundation and Innovacorp.
What we saw was a lot of interest in pure technology, especially what was coming out of the universities. And it was supported by a strong ecosystem that features superb mentorship.
We wanted a presence, but we had learned that it was always easiest in venture capital if you have more than one investment in a geographic location. It means your visits to the area (and I now visit Atlantic Canada twice a month) are more productive because you’re meeting with more than one portfolio company.
Our first investment in the region came in September 2013 when we were lead investor in the A Round for Halifax-based Karma Gaming, which develops video games for regulated lotteries. Our co-investors were Innovacorp and Vanedge Capital of Vancouver.
What I like about Karma is it was dealing in an international market place and its founders, Paul LeBlanc and Jay Aird, are experienced executives.
After we closed the Karma deal, I spent more time in New Brunswick. After about seven months, we joined Build Ventures, GrowthWorks Atlantic Venture Fund and NBIF in a $3.9 million funding round for Smart Skin Technologies of Fredericton. I was impressed with the technology, which can detect pressure on a surface and chart it in real time on a computer or device. The management team’s been able to sell it into multiple verticals. The fact that Gerry Pond had been instrumental in developing the company didn’t hurt either.
Next, we invested in another Halifax company, Analyze Re, which was developing administrative and risk analysis software for the reinsurance industry. Innovacorp and BDC Venture Capital also invested in the company, which had just graduated from the Launch36 accelerator.
And, just in November, we invested in Resson Aerospace of Fredericton, a precision agriculture outfit that had also graduated from the Propel accelerator.
It’s worth noting that two of our investments came out of the Propel accelerator program, where they received great mentorship. It’s also notable that we were in the seed round or A round on each of these companies.
The fact that not a lot of venture capitalists operate in Atlantic Canada meant that we were able to find gems other VCs weren’t aware of. But it’s more significant than that. It also means that Atlantic Canadian startups are used to launching with little more than technology and determination. They’re used to solving a problem and getting going without a lot of backing.
So what we’re doing here is good old-fashioned venture capital. I’m meeting regularly with these companies and helping them through the growth stage of their business. It’s what VCs should do, and I hope more venture capitalists discover what is happening here.
What the Atlantic Canada startup community needs now is longevity. You don’t wake up one day to discover you’ve got a thriving startup community. There will be highs and lows and we have to work through all of them.
We need to support the angel groups, accelerators and mentors that are supporting this community. We need to work with the universities to encourage more technology to get out in the entrepreneurship community. It’s an exciting time. I’m glad to be part of it.
Jeff Grammer is a Partner with Rho Ventures Canada, the Canadian arm of Rho Capital Partners, which has offices in Palo Alto, Calif., New York and Montreal. This column first appeared in the most recent Entrevestor Intelligence report.
Disclaimer: Entrevestor receives financial support from government agencies that support startup companies in Atlantic Canada. The sponsoring agencies play no role in determining which companies and individuals are featured in this column, nor do they review columns before they are published.