The Six Things We Look For When Investing

By: 2nd July 2015 Strategy 1 Comment

TheSixThingsWeLookFor

Finding capital is one of the biggest challenges facing startups, in Atlantic Canada or around the world. Most traditional lenders are leery of investing in unproven startups, and friends and family support will only take you so far.

At Build Ventures, our focus is on identifying and investing in Atlantic Canadian startups with clear potential. Still, not every startup is right for every venture capital firm. Here are the six big things we look for when considering an investment:

  1. People

First and foremost, we are looking for outstanding founders. We want to see people with unique technology or a novel insight into a market that has real growth potential. We expect them to convince us why we should be investing in their sector, proving with facts, data and compelling arguments why their startup is headed for success. The early stage team needs to have the right ingredients to build a successful company. Passion counts, a lot, but so too does business acumen, technological prowess and marketing savvy.

  1. Sector

At Build we don’t have a top down investment thesis. While the startup sector in Atlantic Canada has evolved quickly over the past few years, as a region we still don’t have critical mass in any given sector. For that reason, we don’t specialize in certain sectors to the exclusion of others. Instead our focus is broadly defined as the technology sector. However, our investment decisions are informed by major technology trends. We want to be sure our portfolio companies are leading the way in a space that will deliver customer traction, growth and profits. Our first six investments cover a lot of ground: a platform for digital media creation, social selling enterprise application, hardware for manufacturing efficiency, image analysis for agricultural applications, social media analytics, and brain sensing technology.

  1. Geography

Rob and I are focused on leading rounds in Atlantic Canadian companies and so far we have made investments in Newfoundland and Labrador, Nova Scotia and New Brunswick. We are always on the road, visiting with entrepreneurs, supporting local startup organizations, and getting to know all the players. We also have capital available to invest outside the region and may do investments from time to time if the right kinds of opportunities come up, such as our recent investment in InteraXon. For most of these we will participate in syndicates with great co-investors.

  1. Stage

There is a lot of confusion in the startup world about what constitutes a “Seed” or “Series A” funding round. Our take on the Atlantic Canadian funding ecosystem is that there has been considerable angel investor activity over the past few years from groups like East Valley Ventures, Innovacorp, NBIF and individual private angels. These rounds are typically in the hundreds of thousands range and are often leveraged with other forms of non-dilutive financing. There is a large cohort of these companies in the region at the moment and we are focused on their next round of financing.

  1. Early Traction

We usually work with companies that have already built a product – even at the Minimum Viable Product stage – that is in the hands of early adopter customers, ideally paying customers. These companies have already done of lot of important work and are well positioned to use funding to nail product-market fit before beginning to scale up the business. We’re planning to go deeper on what constitutes “traction” in a follow-up post.

  1. Deal Size

Our minimum investment to date has been $1M and we have gone as high as $3M. With all our investments we keep reserves to support investment in future rounds.

We’ve been excited by the entrepreneurs and startups we’ve encountered since Build Ventures launched two years ago. We have seen tremendous growth and momentum in the East Coast startup scene.

1 Comment

  1. Comment by Lisa Walsh
    September 27, 2015 @ 2:26 pm

    Great blog post, very informative Patrick. I hope to meet you at Invest Atlantic next week.

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