You're a late-stage startup in Canada. How do you find the right venture capital firm to fund your growth?

Finding the right Investor to fund growth depends significantly on several factors: 1) Size (Revenues) 2) Profitability (Cash Flow/EBITDA) 3) YoY Growth 4) Product/Service Offering 5) Geography (Where are your Employees | Where do you do Business) 6) Exit Strategy (Do you want a Majority Buyer or Minority Investor) VC & Private Equity Funds are highly specialized. The Top Software Firms can go anywhere in the World to find Investors. Slower Growing Less Profitable Companies that operate in more mature industries are often limited to localized investors.

Canadian companies are not limited to raising funds exclusively from Canadian investors. Many Canadian companies actively seek investment from investors in the United States. The US has a significantly larger pool of venture capital and private equity investors compared to Canada. Many US investors have a North American investment mandate, including Canada. Be aware of the legal and regulatory considerations when raising funds from U.S. investors.

This first thing is to not frame your self as a Canadian startup. Instead focus your positioning on how big your market opportunity is.

From my experience, for late-stage startups approaching a VC, conducting an in-house DD or Vendor DD is key. It involves some expense but not only prepares you for a deal, allowing you to tidy up before advancing to the next business phase, but also provides leverage for negotiation.

Understand the stages of startup development, from seed to Series A, B, C, or later stages. This will help align your investment expectations with the appropriate stage. Additionally, maintain ongoing dialogue with mentors and experts to gain insights into your stage, what a realistic valuation would be, and, most importantly, how to defend it. Coupled with this, craft a narrative that highlights your progress, make it clear how this valuation reflects the future potential of your business, and be open to negotiation based on strategic investors for your growth.

Startups in every stage and in every geography should have researched the VC landscape before fundraising. For a later-stage startup, they must have by now built their Rolodex of local and global investors that fit their business. No matter where the startup is located, they should not limit themselves to their local investors. While local investors have various benefits, a startup might find better fits elsewhere. In the case of a late-stage Canadian startup, they should know all the Canadian VCs and CVCs that invest in their sector and stage. Canada has several growth-stage VC funds (check CVCA.ca) that invest in series A+ in fintech, AI, impact, and SAAS. However, the startup should be ready to reach out to VCs and CVCs anywhere.

There are quite a few ways of researching and identifying potential investors. Based on my experience, leveraging existing investors' network has been instrumental for many startups. Existing investors can point a founder to the right VCs who are a good fit for the stage, ticket size and sector. Cold emails to all the investors on Pitchbook could potentially be "disheartening", to say the least. Another approach could be to find the lead investor and while they are in DD/closing, ask them to connect with their "partner investors", a group they like to co-invest with. This can save the founders many sleepless nights as negotiation becomes a lot easier and faster.

Research the VC landscape by software tools such as Pitchbook is easy and quick. Personally, I find it most efficient to reach out to someone from the Canadian startup ecosystem e.g. Ministère des Relations internationales et de la Francophonie du Québec and Invest Vancouver where they organize frequent startup delegations worldwide. Some of the local Canadian late stage investors include Ontario Teachers' Pension Plan, PSP-Canada Growth Fund, etc. From there, you may ask for warm introductions to their co-investors.

Many provinces in Canada (eg Ontario and Quebec) have their own retirement plans that have their own growth equity arms. Networking with these firms can be effective, because they also co-invest with a large number of other growth equity firms in the US and Europe.

One thing that most founders fail to consider is the compatibility between their working style and the VC’s level of engagement with their portfolio companies. Founders who desire more founder autonomy would do better to take capital with VCs that take a more hands off approach, whereas founders who desire more input and guidance from their investors should look at VCs that are more involved in venture building. The best way to find out a VC’s style is to chat with founders of existing portfolio companies - in short, founders, do your diligence on your investors as well.

I think the first step in building a great pitch is creating an elevator/60-second pitch. The constraint of having to pitch your company in 60 seconds is a forcing function for actually defining what you actually do. That's because it forces you to use concise and simple language to get to the root of what your business does. This is not only a communication exercise, it's an introspective exercise as well. I’ve seen founders pivot their entire idea based on not “feeling” their 60-second pitch. There's a hidden power in succinctness.

In addition to what has been offered in this article, you should build your list of perspective venture funding sources by doing the following: 1 Make all your current equity owners aware that you're raising another round of capital and request their assistance for referrals. It is in there vested interest to help you continue to grow and obtain the capital needed to do so. 2 Reach out to all the venture capital firms you previously applied to but did not invest. Let them know of your progress and now have a new opportunity to invest at the current valuation. 3 Expand your target outreach to private equity funds that invest in your industry. Make sure that you're targeting growth oriented PE funds and not leveraged buyout PE funds.

Pitch materials should be prepared in two parts: an introductory section with general content that can be used by any investor, and a negotiation section with a different focus according to the characteristics of the venture capital. In the negotiation section, research the venture capital's focus areas, standard holding period, basic scheme (IPO, buyout, carve-out, etc.) and past investment performance in advance, and focus on the content that the investor is more interested in.

Well that is the currency we deal in, right? Pitch deck is a lot more than just a slide deck with the problem, solution, team, traction and ask. It tells a story. After hosting, 50+ VCs on the podcast, everyone says one thing 'You need to figure out why your pitch deck will stand out so as a VC I remember that one deck after reviewing more than 500'

Your pitch has to parts - story and numbers. Your pitched worked in helping you secure Series A. Build upon it and show the significant problem you're solving and product/market fit. Your business model and how you're going to win - what's your sustainable competitive advantage? The key milestones you've reached and planning to reach. Don't forget to talk about key risks/challenges and your plan for managing those risks. Enlist the VC's feedback on how they've helped their portfolio companies manage similar risks.

Unfortunately, VC requires warm intros. Make sure you network into the right investor (person) at the right fund who would be most likely to understand the opportunity and most likely to argue internally for an investment.

Kiss a lot of frogs If you are late stage, your numbers should be investable, now it’s timing and chemistry. It’s more about Team than TAM now — scaling success is mostly people and distribution, the tech is the tech. Work on the “why we win” part of the pitch and show sustainable momentum from thought capture and execution. Creating demand is much more important than anything else for the next phase of going to market.

Venture capital firms receive a huge number of incoming communications, and it’s important to remember that and be empathetic to it in your outreach. A couple of pointers: 1. Introductions are always better than cold emails. Most firms simply don’t respond to cold outreach. So if you put in the effort to generate 5 personal introductions that’s typically more productive than 100 cold emails or calls. Research the right firm for you and search LinkedIn or other networks for connections. 2. Diligence the firms you speak with. Know the person and firm ahead of time and tailor your presentation. 3. Don’t take rejection (or non-response) personally. Be unfailingly polite and respectful. You won’t be a fit for everyone, and it’s a small world!

The investment decision-making process differs from one venture capital company to another, but in all cases it is necessary to have the opportunity to meet directly with the partner class at some stage in order to get them to give serious consideration. This is because the partners are in a position to understand the fund management philosophy of the VC best, and whether or not they intuitively want to invest will make a big difference to the process ahead.

Especially in earlier-stage deals, the decision to invest can be as much (or more) about the founder as it is about the market and idea. Help investors understand your grit and your passion & fit for the space - as well as your capabilities as a leader - even before you reach out officially with a pitch deck. Some of the questions that early-stage investors ask themselves include: how do I feel about the founder after multiple, deep interactions? Is the founder someone who can't wait to get things done? Would I personally work for the founder? How does the founder face rejection and challenges? Use every opportunity to showcase your technical and personal qualifications as a founder and CEO.

Regarding term sheets, ensure you fully understand dilution from round to round, including SAFEs, and how much you are "giving away" as the founder. Post-money SAFEs with valuation caps convert into guaranteed ownership percentages, so they dilute founder ownership in an absolute way. If you're not careful, you could accidentally greatly reduce your ownership in the startup you're working hard to build. Some other terms to consider and evaluate with your lawyer include liquidation preferences (especially important!) and founder stock vesting (when does it start, what are the cliffs, what happens if co-founders leave).

Consider engaging mentors and a second VC lawyer to provide a second opinion on the terms before signing. This additional review offers extra protection for your company.

One of the really important things you would like to consider is how much you would like to raise through equity and how much debt. Don't get into the trap that most of the people are raising through equity so you also have to do that same. Remember, debt is always cheaper than equity.

I dont think you need to looking just in Canada for that matter anymore. Deals are happening over zoom everyday and VCs in the US dont think twice before investing in Canadian companies. We are preparing a database of more than 25,000 VCs, Family offices and Angels from US and Canada for all stages for exactly the same thing. Hopefully that will help

Use the network of other VCs! The venture journey starts by capable founders presenting a solution which can monetise a large addressable market. Each successive funding round is made with progressively higher valuations as the founders build a company which is able to demonstrate more certainty of realising and scaling the solution. As such late stage VCs don't operate as independent providers of capital but work closely with funds at earlier stages who had the conviction to provide capital earlier on the journey and will sell them on the companies in their fund. Getting into the VC network and building conviction about the company to build FOMO will change the fund raising experience from having VCs compete for the cap table.

Sometimes at later stages you can get more creative with funding. Banks and programs like RBCx offer convertible notes and debt financing that works for series A/B and later. You have options from organizations like the BDC. but it's also good to narrow down into corporate venture arms for companies in your industry. E.g. if you're a late stage startup in the mental health space, try reaching out Telus Pollinator Fund or bell community fund, etc Find the big corporations that are investing in later stage companies with possible acquisitions in mind.

There is a lot of capital chasing great opportunities that are led by high-integrity growth mindset startup founders. Each fund has a mandate and preferred check size. You'll have more success pitching a Fintech to a VC investing in Fintech rather than one that invests in Pharma/Genomics. Most funds syndicate with other VC firms. Look at which one's they have syndicated with and the map into (get intros) all of those firms.

A thing to consider is the values that drive the VC and most importantly the people or the executive team behind it. If your firm and the VC investor share common ground on those values, the way you see the growth and development of your business, many issues will naturally get resolved when encountered. Your VC will show you at that time if it acts as a true partner. The human aspect of the investment process and getting a VC involved is often overlooked.