New venture capital fund hopes to make Toronto the next Silicon Valley

Thanks for the write up Eric Wood @ IT Business Canada.See original posting here: Link

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A new Toronto-based venture capital fund co-founded by a Canadian tech veteran is aiming to change at least a corner of Canada’s startup landscape.

Launched on Jan. 13 by former Rypple co-founder David Stein, former OMERS(Ontario Municipal Employees Retirement System) investor Gideon Hayden, and former Workbrain COO Steve DeBacco, Leaders Fund will draw from a pool of $100 million to support new Canadian enterprise SaaS companies, a sector the co-founders feel is underserved.

“In Canada especially, there aren’t a ton of people in the technology investing world that have actually started or built multiple technology companies,” Stein says. “And so one of the things that we wanted to do in setting up this business was to offer [Canadian entrepreneurs] the opportunity to work with a team of people that have been where they want to go, and who can offer real advice on what it takes.”

Stein’s ultimate goal is to create a “rich network” of talent with experience in a variety of positions at multiple companies, and use them to support the creation of more tech startups across Canada.

If that business model sounds more like Silicon Valley than Don Valley, it should: Stein says that Canada’s tech industry has been lacking both the scale of funding available to its U.S. counterpart, and experts with enough operating experience to use it wisely.

“In Silicon Valley you’ll have multiple generations of companies and people coming out of them,” he says. “The more we can help grow companies that have Canadian content in them, the more we’ll develop a field of established folks who can then go onto other businesses and be valuable.”

From left, Leaders Fund venture partner Howard Gwin, co-founder David Stein, and co-founder Gideon Hayden. (Not pictured is co-founder Steve DeBacco, who is based in Atlanta.) Courtesy Leaders Fund.
From left, Leaders Fund venture partner Howard Gwin, co-founder David Stein, and co-founder Gideon Hayden. (Not pictured is co-founder Steve DeBacco, who is based in Atlanta.) Courtesy Leaders Fund.

In addition to co-founding Rypple, which was eventually acquired bySalesforce, Stein served as the co-founder of Workbrain, which was acquired by Infor. DeBacco, who is based in Atlanta, recently served as CRO of Applied Predictive Technologies, which was acquired by MasterCard, and Hayden worked with several high-growth SaaS portfolio companies during his tenure with OMERS, including Hootsuite, 360 Incentives and Klipfolio. The company is also being supported by venture partner and industry veteran Howard Gwin.

Stein notes that while much of the fund’s capital is from institutions, a significant portion is being covered by the partners themselves.

“We wanted to send a strong signal… that our group and partners have their own skin in the game,” he says.

So what will Stein be looking for when considering potential B2B cloud-based software companies to invest in? He shares four key criteria with

  • Whether the talent leading the company has the right mix of skills, tenacity, commercial instinct, and dedication to pursuing their idea to its best possible conclusion;
  • If it’s developing software that a large enough market segment can use, or creating a new market, like Uber did, that is growing quickly;
  • Whether its product has what Stein calls “favourable unit economics,” and can be manufactured with a reasonable margin of profit;
  • Whether the company’s leaders are appropriately ambitious – a uniquely Canadian problem, Stein admits.

“We’ve found sometimes in Canada that instead of saying, ‘how am I going to build a company that in five years’ time is going to be doing $100 million in sales?’, certain folks are thinking, ‘how can I build a company that in five years’ time will be doing three million in sales?’” he says.

The ideal company seeking assistance from Leaders Fund will have enough customers and sales to prove their product has an established market, and that rather than being “three guys in a garage with an idea,” Stein says, they need help raising their efforts to another level.

“If someone says, ‘Look – we have this product and we know that when people buy it they stay with us a long time and become evangelists, but not enough people know that we exist and we need more money to recruit more people and build our marketing,’ that’s a good place to be,” he says.

Stein sees two major trends in Canadian tech that he expects to dominate his attention for the foreseeable future: One is the reinvention of traditional business challenges such as sales, marketing, and distribution into what he calls a mobile-first perspective; and machine-learning, with companies figuring out how to create smarter and more proactive systems that can effectivelypredict what users will do based on prior behaviour.

“I think it’s a pretty exciting time for tech in general, and also for tech in Canada,” he says. “We’re bringing this money, this capital, and operating experience to the table, and looking forward to collaborating with entrepreneurs and other investors to really help foster and develop the next generation of talent in Canada and beyond.”