Business in Vancouver’s “How I Did It” feature asks business leaders to explain how they achieved a business goal in the face of entrepreneurial challenges. In this week’s issue, Boris Wertz talks about how he used the fortune he made after Amazon.com Inc. bought AbeBooks to become an angel investor, the first step to becoming a venture capitalist last year with his early stage investment fund Version One Ventures.
“I started investing on a small scale in 2007. I did about 30 investments as an angel over the course of four years and had a few exits myself. But, initially, the capital really came from the Amazon exit. That was the big one.
“When I started angel investing, it was a new career, after having been an entrepreneur. I gave myself two years to figure out if that was my career for the future. If you raise a [venture capital] fund, then you’re committed for the next 10 years to doing that. I wanted to be 100% sure this was the career I wanted to go down.
“Once I had a feeling that things were coming together, I started raising a fund. I had my first four exits in 2011, so there were some proof points that this product was actually working.
“A venture capital fund just gives you access to more capital so you’re not limited to your own abilities to invest in a start up. Sometimes I had amazing companies that I was in, where I invested $50,000 or $70,000 in an initial round, but there’s just no way I could protect that ownership stake because I just didn’t have access to the capital. Today that’s a different story.
“There’s a tremendous amount of people trying to raise venture capital funds and not many are successful. For me, having a good product, being able to show traction with the exits, having a really sound story and having some early commitments helped.
“You have some people committing super quickly, then suddenly not returning your calls anymore. I had one investor that had committed all the way along, and the day before the initial close, suddenly called me up and said they had changed their mind.
“The biggest part is certainly the early commitment from Jeff Mallett, former COO and president of Yahoo (Nasdaq:YHOO). I knew him from a joint investment here in a Vancouver company called Indochino. We both sit on the board of Indochino and had built up a relationship.
“I was reaching out to raise $10 million. With my own commitments and some key commitments, including Mallett’s, I got pretty quickly to half of that amount. If you’ve got half the amount committed to a fund, usually the second half is much easier. In the end, it was $19 million.
“I have a few dozen investors. It’s mostly high net worth individuals and entrepreneurs. I have one institutional investor in the Business Development Bank of Canada.
“I had made three angel investments in 2012 that my lead investor asked me to roll into the fund, so they became fund investments. To date, I’ve invested in about 12 companies. That works out to around 20% of the fund. Half the fund is new investment; half the fund is follow-on.
“Now comes the hard part, which is making money for the investors.” •
