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‘Gangbuster’ year for tech tapping U.S. resources

About $8.3 billion in venture capital raised by Canadian entrepreneurs in 2021’s first half
Cmd co-founder Jake King (left) with Expa partner Milun Tesovic. The entrepreneurs co-founded Cmd at Expa’s Vancouver office | Submitted

Most entrepreneurs would be happy with one successful exit. Two would be icing on the cake.

Milun Tesovic, who sold his third tech company in a decade this past summer, still has an appetite for more.

“With Cmd, I was fortunate enough to have a good network to help me validate the idea, and also a great network that was very supportive in helping me build out that initial team,” Tesovic said, referring to the cybersecurity firm he sold to Elastic NV back in August. Terms of the deal were not disclosed but the serial entrepreneur said he was very happy with what the Vancouver company commanded on the market.

In the cases of Cmd and coding analytics firm Gitalytics – Tesovic sold the latter in 2019 to Microsoft Inc. (Nasdaq:MSFT) subsidiary GitHub Inc. – both emerged from San Francisco startup studio Expa.

And while Canadians have long sought resources from the U.S., the pandemic has seen more American firms turn their attention northward as remote interactions become the norm.

A total of $8.3 billion in venture capital has been raised in over 394 deals in Canada during the first half of this year, according to research from the Canadian Venture Capital and Private Equity Association. That figure eclipses all previous full-year totals on record.

“It’s a very interesting time, because I think we’re all waiting for the bubble to burst,” said Canadian lawyer Natasha Allen, a partner at Foley & Lardner LLP in San Francisco specializing in mergers and acquisitions, and venture capital.

Many investors were cautious during the early goings of the pandemic, which led to a buildup of extra capital, and “it’s been gangbusters ever since,” she said.

“People are recognizing that you can effectively do business while not being in the same room with somebody. I know that a lot of investors previously liked to go visit sites and touch or be in contact with the companies that they’re investing with. But I think that what the pandemic has proven … with Zoom, you can touch the companies that are doing fantastic things all over the world.”

Tesovic, who sold his first tech company, MetroLyrics, to CBS Interactive in 2011, said tapping a resource like Expa during his first crack at launching a business would have been a boon to the young entrepreneur.

While a tech accelerator begins with a team at its early stages of product development and scales from there, the less common startup studios like Expa generally begin with an idea, which becomes the catalyst for staff development and company expansion.

After departing MetroLyrics, Tesovic reached out to Garrett Camp, the Canadian co-founder of Uber Technologies Inc. (NYSE:UBER), for advice on what to do next.

Camp had already launched Expa, and Tesovic came on board as a partner when he began collaborating with Jake King, the former security operations lead at Hootsuite Inc.

The pair eventually decided on pursuing a server security platform geared towards the enterprise market and designed to help security experts log, understand, predict and control user behaviour within the Linux operating system.

While Expa began as a startup studio, it’s turning more of its attention towards funding companies, including those based in Canada.

Litebulb Technologies Inc., the Toronto company led by current Vancouver resident Gary Lin, tapped a pre-seed investment from Expa earlier this year. Expa typically offers startups US$250,000 to US$400,000 for 7% to 10% equity. Mentorship, networking and other resources are also provided to companies within Expa’s portfolio.

To date, Expa-backed companies have reached US$8B in valuations and raised more than US$1B in funding.

“One of the things about Expa that we find relatively unique and why founders do like working with us is the vast majority of our team are ex-founders. We’ve all built companies, we’ve sold companies, we’ve faced challenges that all the founders are going to be facing,” Tesovic said. •