For this week’s blog post I wanted to discuss the value of targeting fast-growing start-ups. As we have mentioned in a previous blog post, while start-up companies account for only 3% of overall employment in the US, they represent nearly 20% of new job growth.
I decided to reach out to a former ROI teammate, Laviva Mazhar, and gather some insights from an expert. Laviva is an investment analyst at Luge Capital and she spends a lot of time immersed in the North American start-up scene, mostly focusing on the fintech vertical – a sector that is top of mind for a lot of EDOs. Here’s the interview!
Paul Brogan (PB): Laviva, what can you tell us about the Canadian start-up ecosystem?
Laviva Mazhar (LM): Toronto-based tech start-up Hockeystick’s public database lists over 17,000 Canadian start-ups and AngelList’s public database shows 14,000+ start-ups headquartered in Canada. While some of these start-ups may not exist anymore (and may have forgotten to take down their social profiles) it’s safe to state that the Canadian start-up ecosystem, and in general the tech sector, is in the midst of a boom. Startup Genome’s 2018 Global Startup Ecosystem Report highlights, amongst 100 global regions, six top Canadian innovation regions – Toronto-Waterloo, Montreal, Vancouver, Ottawa, Quebec City and Edmonton. These regions demonstrated strengths in specific sub-sectors including Fintech, Life Science & Health, AI, Big Data & Analytics, Advanced Manufacturing & Robotics, Gaming, Cleantech, Blockchain and Cybersecurity.
PB: The biggest tech clusters are always characterized by venture capital investments. How does Canada rate in this regard?
LM: Any discussion of start-up landscape is incomplete without an overview of the venture funding landscape. According to the Q3 2018 MoneyTree Report, Canadian companies have raised $2.47 billion in venture funding in 2018. Although this covers more than 96% of the total size of venture funding in 2017, the report points out that venture funding has declined for two consecutive quarters after a strong start in the first quarter of the year. In terms of funding availability, White Star Capital’s Canadian Venture Capital Landscape 2018 report shows that over $1.3 billion in new capital was raised by VC firms this year alone. Industry players including myself will be monitoring the venture funding landscape closely over the next few quarters to understand whether funding is trending upwards or downwards overall.
PB: Aside from VC firms, are existing players investing in new tech innovation?
LM: Corporates have shown increasing activity in innovation in multiple ways over the last few years and 2018 data just confirms this upward trend. On the venture investment side, the MoneyTree report points out that corporate participation in deals has increased to 39% in Q3 2018 from 25% in Q3 2017. Corporates are also forming more and more partnerships with start-ups – for example, within the fintech vertical, we have seen a number of Fintech – Financial Institution partnerships established within the 2017-2018 timeframe. Lastly, corporates are also launching their own innovation labs and venture studios and making investments in venture funds.
PB: Is there much of a structure of support within the Canadian start-up market to foster continued growth?
LM: The Canadian start-up ecosystem is also being strongly supported by an ever-increasing group of ecosystem organizations, events and initiatives. While it’s not possible to mention each of these supporters within this post, one 2018 initiative that I’m a big fan of is Prospect, a talent platform launched by Golden Ventures and supported by several launch partners including our firm, Luge Capital. Prospect’s goal is to create a start-up career hub for Canada’s tech industry.
Overall, 2018 has been a great year for the Canadian start-up ecosystem and I’m looking forward to seeing how all of the above-mentioned areas progress next year.
PB: So are we! Thanks very much for your time Laviva!
How are you identifying and targeting high-growth start-ups? How do you reach a decision-maker when there are no phone numbers or emails listed on their website?
Reach out to me and I can share a few tips and tricks we use in-house!