The Next Generation of Venture Capitalists

The next generation of venture capitalists | BCBusiness
From left to right: Danny Robinson, Vicki Levine, Stephanie Palmeri, Shivon Zilis and Kristina Kerr Bergman

Early stage startups can grow in Vancouver, but a glut of young, funded ventures can make finding the right investor a challenge

It’s been a bumper year for B.C.’s tech companies sourcing out-of-province funds. Vision Critical’s $20 million round last August, D-Wave Systems‘ $35 million raise in October and HootSuite’s record-breaking $165-million round earlier this month, have all helped to anchor Vancouver’s reputation as a city where tech companies can scale-up and prosper.

But for the thousands of early stage startups that aren’t quite batting for a multimillion-dollar private placement, the hunt for the right venture capital partner, especially in a relatively small market like B.C., can be tough. 

The problem, according to Wednesday’s venture capital panel: there’s a glut of seed investors and micro-funds that have left seed-stage companies in periphery markets in desperate search of the right funder who can bring them to the next stage.

“Every week there’s a new $5-million seed fund and two new guys with a taco truck,” said Stephanie Palmeri, a principal at Palo Alto-based fund SoftTech VC.

Sourcing early stage funding—Series A through C rounds that come after founders have tapped out friends and family, angel investors and seed investment—is a particularly difficult proposition for entrepreneurs. Vancouver’s distance from the Bay Area’s big funds only compounds that problem.

The good news? With the right connections, high-growth Vancouver startups stand a chance, and no longer face the previous pressure to relocate south to Silicon Valley.

Smart referrals and pre-existing investments go a long way in driving interests from VCs, says Kristina Kerr Bergman, principal at Ignition Partners, and warm words from the right investor can lead funds into new geographic markets.

And increasingly that destination for deep talent pools is the Lower Mainland.

“Vancouver has a lot of great talent,” says Kerr Bergman. The legacy of enterprise players like Crystal Decision, Business Object and SAP, and Electronic Arts, left Vancouver with a specific talent pool well-suited for the data space, she says.

“Teams are cohesive and there’s less attrition than in the Valley,” said Shivon Zilis, a venture capitalist at Bloomberg Beta, a New York-based micro fund. And for better or worse, talent is cheaper, added Zilis.

“When we look to invest in a market we want to know that the company can grow where it sits,” says Kerr Bergman, “Sometimes it’s necessary to relocate a company to the Bay Area, but if a company starts here and is operating in one of those areas where there is a particular concentration of talent, it’s a lot more comfortable for an investor to invest in that company where it is.”

But at some point, it helps to have a presence close to your sources of funding, especially if you’ve got Silicon Valley-area investors on your board of directors, noted Vicki Levine, Principal at Lightbank.

Stephanie Palmeri, a Bay Area-based VC, agreed. “If you’re looking for capital outside your home market, you need to find balance, and build a [Silicon] Valley presence.”