Worst Day on the Job: When investor Mike Winterfield had nowhere to turn

When Mike Winterfield started Active Impact Investments, he had no idea it would turn into Canada’s largest climate tech seed fund. He just knew he’d have a hard time finding investors to back him as a leader with no prior experience in the venture capital space. But, despite some challenges, Winterfield’s North Vancouver firm was able to raise $10 million for its first fund and $60 million for its second. It has invested in 35 climate companies to date. Now in the process of lobbying for Active Impact’s third fund (targeting $120 million), Winterfield remembers how it felt to lose a major investor for the first time and explains why he wouldn’t react the same way today.

In 2017, I was trying to raise my first impact venture capital fund. When you’re raising your first fund, not a lot of people are willing to trust what you’re doing.

One of the only institutional investors that was known in the Canadian market to be progressive enough to look at a first fund was a mid-sized community foundation with an allocation for impact investing. I had built relationships with its senior leadership, and one of its major donors was an investor of ours and a reference for us.

Sure enough, they ended up doing due diligence on us. We spent hours answering questions for a consultant they had hired, who assured me he was making the recommendation they invest $1 million (10 percent of our target). Some of the investors in our first fund came in for $100,000 or even less, so a $1-million cheque was a big deal to us. In fact, I think it would’ve been the largest commitment that we had ever had at that point.

The foundation asked me to fly out to Hamilton to present to their 20-person investment committee (a major expense for a business with no revenue yet… like, I’m working in the basement of my house, I’m incurring all these expenses to get the business up and going). I flew to Toronto, rented a car to drive to Hamilton and walked into this room to present. It was enormous. I mean, this is a small community foundation, but they had brought in every advisor. It was super intimidating. But the presentation went well, and they sent me off smiling.

I was sure the answer would be yes.

At the time of the decision, I was on my first kid-free vacation in almost a decade with my wife and some close friends. It was this lovely night, we were going to go for a beautiful dinner, it was one of our last nights in Europe. We were just about to get seated for dinner when I saw the email I had been waiting for from the foundation. I thought, “This is awesome, I’ll buy a round of drinks for everybody and share my good news. We can all celebrate together.”

But what followed was a rejection letter. The email said, “We love everything you’re doing, but I’m so sorry, we just can’t take that amount of risk with the foundation’s money. Please keep in touch with us.”

I look back—and I’m embarrassed that this is the case, but it just ruined my night. I was so crushed by this. Here we are on this beautiful vacation, away from our kids for the first time, and I just ruined the night. I couldn’t snap out of it because I was so sure that this was going to happen in the other direction.

There are a couple of things that I learned. For one, the foundation ended up watching us, building a relationship with us and investing in our second fund. They said, “Mike, you didn’t read the room wrong, we just couldn’t get that unanimous approval.” I realized, if you want somebody to invest in fund three, then call them about fund two. For investors that do a lot of due diligence, they often want to watch your behaviour over a long period of time, and I didn’t fully appreciate that. So, pitch people on fund one, know that they’re not going to come into it, but just simply ask their permission: “Would you be willing to watch us for the next three years to see if it makes sense to be a part of a future fund?” And that’s been effective for us—letting people watch us, get to know us.

The second thing was, with fund one, we were originally targeting $5 million and we ended up raising $10 million. So we didn’t need that $1 million in the end, right? I over-indexed on the importance of trying to get this foundation as a credibility booster. I thought we really needed it. I learned that there are a lot of other places to go, there are a lot of fish in the sea.

We now have three funds with over $140 million to deploy to incredible climate founders, 10 incredibly engaged employees who love what we do, 35 investments with no write-offs, strong financial returns, and over 1,000,000 tonnes of CO₂e averted—and each fund has welcomed a higher and higher number and percentage of institutional investors. At this point, every “no” still stings but each one stings a little less and our team is very intentional about moving on quickly.

This interview has been edited and condensed.