Jettison the raunchy atmosphere that would induce nightmares for any human resources department and Matt Toner doesn’t mind likening his ideal investment target to that of Pied Piper, the tech startup featured in HBO’s Silicon Valley:
“We expect them to be pre-revenue or early revenue. We expect them to have early partners that are already set up – relationships with people that can help them grow, whether it’s technology or marketing or distribution networks,” said the entrepreneur-turned-venture capitalist. “And we’re looking for founders that have had a couple of scrapes on the bumpers already.”
The founder of gaming company Biba Ventures Inc. launched his latest VC endeavour this month, Vancouver-based Shred Capital Ltd., as the pandemic-battered economy remains precarious.
But even amid the current climate, Toner and other West Coast venture capitalists seem confident about the prospects of investing in early-stage companies tackling problems brought to the forefront by the COVID-19 crisis.
“Officially launching and closing the new fund couldn’t be more timely because there was already a whole bunch of trends, for example, within health that were driving technology usage,” said Maria Pacella, senior vice-president and portfolio manager at PenderFund Capital Management Ltd.
The Vancouver-based diversified asset manager this month officially launched a new brand, Pender Ventures, with $100 million in assets under management aimed at spurring growth within Canadian tech companies.
Pacella said the COVID-19 crisis has only accelerated trends in the types of companies Pender Ventures was already eyeing for investments.
“Whether it’s having … more personal medical data, wanting to be preventative about our health, having access to more imaging technologies, etc., it was sort of already happening. COVID really highlighted some of the challenges within our hospital systems, within delivery, within technology,” she said.
“[The pandemic] has eliminated some of the hurdles faster than would normally happen.”
Earlier this week, Vancouver-based Telus Corp. (TSX:T) revealed it was launching a $100 million VC fund aimed at "purpose-driven" startups.
Investments targeting for-profit, early stage companies will typically range in size from $500,000 to $1 million, with follow-on dollars reserved for down the road.
Shred Capital also has its sights set on early-stage Canadian tech companies that are navigating changes brought on by the pandemic, according to partner Toner.
“With the pandemic today, I think there are a lot of pain points that have been suddenly revealed that need solutions,” he said. “From education, and travel, and conferences. All these physically intense activities that we all can’t wait to get back to are now needing an augmentation.
“So we’re very curious [about] companies that are looking at the present landscape and saying, ‘You know, there’s intense, short-term disruption that’s occurring in this vertical right now. But we think that there’s going to be a longer-term trend change that needs better solutions, and that’s where we want to play.”
Shred Capital will begin deploying investment dollars in the next six to 12 months, although Toner said he wouldn’t pass up a solid opportunity that comes before then.
While he wouldn’t reveal how much capital the company plans to deploy over the coming years, Toner said his firm is supported by “fairly deep-pocketed backers in New York” – a reference to Shred co-founder Yechiel Kopelowitz, managing director of Leonite Capital LLC.
Investments will range from $250,000 to $750,000, although in some cases Shred Capital may deliver up to $1 million.
“We approach it really not from the perspective of bankers or accountants,” Toner said.
“We’re founders ourselves, we started companies ourselves, we know how awkward and ugly those early months and years can be.” •