Built by Angels: Road to Venture Capital

Government Funding to Survive the Crisis: Opening Remarks by Claudio Rojas, CEO at NACO

May 26, 2020 National Angel Capital Organization Season 1 Episode 40
Built by Angels: Road to Venture Capital
Government Funding to Survive the Crisis: Opening Remarks by Claudio Rojas, CEO at NACO
Chapters
Built by Angels: Road to Venture Capital
Government Funding to Survive the Crisis: Opening Remarks by Claudio Rojas, CEO at NACO
May 26, 2020 Season 1 Episode 40
National Angel Capital Organization

The combined impact of the health pandemic and economic crisis hit hard and fast. This resulted in initial government relief taking what was described as a “people first” approach, with an emphasis on employees at risk of layoffs, and trying to minimize the impact on individuals. –– All of this was focused on helping to flatten the curve. And the curve is flattening. 

As provinces begin to slowly open up, the longer-term economic realities are starting to take hold. 

In a recent survey conducted by the Council of Canadian Innovators (CCI), 76%  of  respondents  said that without capital and customers, their companies will continue to be reliant on government relief programs to sustain themselves and their workers. 

Compounding this issue is the lack of available capital in both the current environment, which was already an issue in emerging ecosystems prior to the crisis.

In preparing NACO’s Canadian Angel Activity Report, to be released next month, our research indicates that angel investment activity continues to be distributed unevenly across Canada. Central Canada (Ontario and Quebec) account for 86% of investments compared with 13% in Western Canada and 1% in Atlantic Canada. Central Canada’s dominance is even greater in terms of the amount invested, accounting for 94% of the total. 

Big cities do not have a monopoly on great founders or world-class companies. 

When entrepreneurs in emerging ecosystems don’t have adequate access to local capital, as a nation – we miss the opportunity to produce more world-class companies like Skip the Dishes in Winnipeg, Slack in Vancouver, Solium in Calgary, and Verafin in St. John’s. 

According to Entrevestor, most funding generated by Atlantic Canadian companies comes from outside the region. 

St. John’s based Verafin - supported by local investor Mark Dobbin from Killick Capital and Toronto-based Information Venture Partners - speaks to the importance of national connectivity between regions - and the power of local capital within an integrated national funding continuum. The combined effect of local angel investors in St. John’s and venture capital from Southern Ontario, is Verafin – a company that has 300 employees in Canada, over $100 million in annual recurring revenue, and this past September announced the completion of a $515 million equity and debt recapitalization. 

Verafin is a massive Canadian success story. 

What does all this have to do with unlocking government funding to survive the crisis?

As has been discussed in past roundtables, the current focus of the policy response is emergency relief – with the view that later, weeks or months from now, the role of startups in the “economic recovery” will move into greater focus. However, if high growth companies don’t survive the crisis, there will be nothing to recover from. Startups in particular are at risk with a lack of financing options available to them. 

That said recent announcements to extend relief to pre-revenue companies is promising. And we commend the government on their efforts. But the point still needs to be made ––– 

Without startups there are no scale-ups. Without angels, there is no funnel of high growth companies for venture capital. 

In our last roundtable Janet Bannister, Managing Partner at Real Ventures, referred to the narrow focus on scale-ups in recent years, as equivalent to Canada producing a strong cohort of graduate students, and pulling back support for earlier education. 

In the economic recovery following the crisis, we need an even stronger and more vibrant pipeline of startups than existed in the past, to produce a stronger and more robust wave of scale-ups and high growth companies to lead the economic recovery.

The stakes are high and Canada’s economic future hangs in the balance. 

Show Notes Transcript

The combined impact of the health pandemic and economic crisis hit hard and fast. This resulted in initial government relief taking what was described as a “people first” approach, with an emphasis on employees at risk of layoffs, and trying to minimize the impact on individuals. –– All of this was focused on helping to flatten the curve. And the curve is flattening. 

As provinces begin to slowly open up, the longer-term economic realities are starting to take hold. 

In a recent survey conducted by the Council of Canadian Innovators (CCI), 76%  of  respondents  said that without capital and customers, their companies will continue to be reliant on government relief programs to sustain themselves and their workers. 

Compounding this issue is the lack of available capital in both the current environment, which was already an issue in emerging ecosystems prior to the crisis.

In preparing NACO’s Canadian Angel Activity Report, to be released next month, our research indicates that angel investment activity continues to be distributed unevenly across Canada. Central Canada (Ontario and Quebec) account for 86% of investments compared with 13% in Western Canada and 1% in Atlantic Canada. Central Canada’s dominance is even greater in terms of the amount invested, accounting for 94% of the total. 

Big cities do not have a monopoly on great founders or world-class companies. 

When entrepreneurs in emerging ecosystems don’t have adequate access to local capital, as a nation – we miss the opportunity to produce more world-class companies like Skip the Dishes in Winnipeg, Slack in Vancouver, Solium in Calgary, and Verafin in St. John’s. 

According to Entrevestor, most funding generated by Atlantic Canadian companies comes from outside the region. 

St. John’s based Verafin - supported by local investor Mark Dobbin from Killick Capital and Toronto-based Information Venture Partners - speaks to the importance of national connectivity between regions - and the power of local capital within an integrated national funding continuum. The combined effect of local angel investors in St. John’s and venture capital from Southern Ontario, is Verafin – a company that has 300 employees in Canada, over $100 million in annual recurring revenue, and this past September announced the completion of a $515 million equity and debt recapitalization. 

Verafin is a massive Canadian success story. 

What does all this have to do with unlocking government funding to survive the crisis?

As has been discussed in past roundtables, the current focus of the policy response is emergency relief – with the view that later, weeks or months from now, the role of startups in the “economic recovery” will move into greater focus. However, if high growth companies don’t survive the crisis, there will be nothing to recover from. Startups in particular are at risk with a lack of financing options available to them. 

That said recent announcements to extend relief to pre-revenue companies is promising. And we commend the government on their efforts. But the point still needs to be made ––– 

Without startups there are no scale-ups. Without angels, there is no funnel of high growth companies for venture capital. 

In our last roundtable Janet Bannister, Managing Partner at Real Ventures, referred to the narrow focus on scale-ups in recent years, as equivalent to Canada producing a strong cohort of graduate students, and pulling back support for earlier education. 

In the economic recovery following the crisis, we need an even stronger and more vibrant pipeline of startups than existed in the past, to produce a stronger and more robust wave of scale-ups and high growth companies to lead the economic recovery.

The stakes are high and Canada’s economic future hangs in the balance. 

The combined impact of the health pandemic and economic crisis hit hard and fast. This resulted in initial government relief taking what was described as a “people first” approach, with an emphasis on employees at risk of layoffs, and trying to minimize the impact on individuals. –– All of this was focused on helping to flatten the curve. And the curve is flattening. 

As provinces begin to slowly open up, the longer-term economic realities are starting to take hold. 

In a recent survey conducted by the Council of Canadian Innovators (CCI), 76%  of  respondents  said that without capital and customers, their companies will continue to be reliant on government relief programs to sustain themselves and their workers. 

Compounding this issue is the lack of available capital in both the current environment, which was already an issue in emerging ecosystems prior to the crisis.

In preparing NACO’s Canadian Angel Activity Report, to be released next month, our research indicates that angel investment activity continues to be distributed unevenly across Canada. Central Canada (Ontario and Quebec) account for 86% of investments compared with 13% in Western Canada and 1% in Atlantic Canada. Central Canada’s dominance is even greater in terms of the amount invested, accounting for 94% of the total. 

Big cities do not have a monopoly on great founders or world-class companies. 

When entrepreneurs in emerging ecosystems don’t have adequate access to local capital, as a nation – we miss the opportunity to produce more world-class companies like Skip the Dishes in Winnipeg, Slack in Vancouver, Solium in Calgary, and Verafin in St. John’s. 

According to Entrevestor, most funding generated by Atlantic Canadian companies comes from outside the region. 

St. John’s based Verafin - supported by local investor Mark Dobbin from Killick Capital and Toronto-based Information Venture Partners - speaks to the importance of national connectivity between regions - and the power of local capital within an integrated national funding continuum. The combined effect of local angel investors in St. John’s and venture capital from Southern Ontario, is Verafin – a company that has 300 employees in Canada, over $100 million in annual recurring revenue, and this past September announced the completion of a $515 million equity and debt recapitalization. 

Verafin is a massive Canadian success story. 

What does all this have to do with unlocking government funding to survive the crisis?

As has been discussed in past roundtables, the current focus of the policy response is emergency relief – with the view that later, weeks or months from now, the role of startups in the “economic recovery” will move into greater focus. However, if high growth companies don’t survive the crisis, there will be nothing to recover from. Startups in particular are at risk with a lack of financing options available to them. 

That said recent announcements to extend relief to pre-revenue companies is promising. And we commend the government on their efforts. But the point still needs to be made ––– 

Without startups there are no scale-ups. Without angels, there is no funnel of high growth companies for venture capital. 

In our last roundtable Janet Bannister, Managing Partner at Real Ventures, referred to the narrow focus on scale-ups in recent years, as equivalent to Canada producing a strong cohort of graduate students, and pulling back support for earlier education. 

In the economic recovery following the crisis, we need an even stronger and more vibrant pipeline of startups than existed in the past, to produce a stronger and more robust wave of scale-ups and high growth companies to lead the economic recovery.

The stakes are high and Canada’s economic future hangs in the balance.