Photo courtesy of iNovia CapitalShaunvir Sidhu: iNovia’s boots on the ground in Waterloo Region Anthony Reinhart March 26, 2015 Columns, Ecosystem, Small to Mid Size, Startups, View from the ‘Loo For what felt like forever, growth capital seemed almost nonexistent for mature Waterloo Region startups looking to level up. But for a couple of years now, substantial follow-on rounds have been flowing to local companies, all but silencing the cries of a venture capital drought. Since March 2013, we’ve reported the following post-seed raises: Vidyard (Series A, $6 million; Series B, $18 million); Kik (Series B, $19.5 million; Series C, $38.3 million); Pebble (Series A, $15 million); Auvik (Series A, $6 million); Thalmic Labs (Series A, $14.5 million); eSentire (Series B, $7 million; Series C, $14 million); D2L (Series B, $85 million); Miovision (Series B, $30 million) and Clearpath Robotics (Series A, $14 million). That’s $267.3 million in two years, from an array of institutional investors across North America, including some top Silicon Valley firms. And those are just the ones we were able to report. It was therefore not surprising when Montreal-based iNovia Capital announced last October that it was setting up a permanent presence in Waterloo Region, where it has made several investments. In the coming weeks, iNovia Senior Analyst Shaunvir Sidhu will haul his belongings down Highway 401 from Toronto to Kitchener, to take up duties as the firm’s eyes on the street for Waterloo Region. Sidhu will be stationed inside Vidyard, a video marketing software company and fast-growing iNovia investee that now occupies two levels of the historic Simpson Block building on King Street West. I caught up with Sidhu by phone earlier this week to find out more about the gig, and what the recent uptick in growth-stage investing says about the region’s tech community. Q – Tell me about your role as iNovia’s man on the ground in Waterloo Region, and what it entails for you. A – I’m essentially going to be managing iNovia’s partnerships with existing Waterloo companies – because they already have a really strong, existing network in Waterloo Region – and also developing new relationships. The approach I have going in is much more of a value-driven one. I’m really, really curious to see what iNovia can add to the Waterloo community, to make it grow and be all that it can be. I know that if that happens, it’s going to be good for everyone involved. Q – How many companies does iNovia have partnerships with in Waterloo Region, beyond Vidyard and Clearpath Robotics? A – They’ve made some seed investments through a vehicle with some other Waterloo founders, at a smaller stage than what we’d typically do, as an introduction-type deal before a larger deal. So we have a number of those. And we’ve had some exits in the Waterloo area as well, like BufferBox. Right now, the two biggest in the area in terms of our portfolio are Vidyard and Clearpath, which was just announced. Q – What was it about this role that appealed to you? A – I think the opportunity is tremendous. I love the people who are around VC, whether they’re entrepreneurs or angels or later-stage investors. Everyone seems to have this neat kind of drive to build things from the ground stage up that I don’t really think that you get from a later, more-corporate-finance type of thing. In terms of Waterloo, it’s not really a hidden gem any more by any means, but I think it’s still kind of crazy how no one has really had a permanent presence there yet. So the opportunity to be the first major VC with a presence there really, really appealed to me. I think the talent there is (the best) bar none. If you look at all the great startup ecosystems in the world, I think the most culturally similar to Silicon Valley might be Waterloo, and I really think that’s what appeals to me. Beyond just having a bunch of talented people in the same place, you have that culture of founders who have done it and then come back to the community to help others do it, and then they come back, and you have that cycle established. And now you have a cycle where companies are staying in Waterloo. I can name three Bay Area companies – they’re all run by Waterloo grads who are under 30 or around that age – that would all be, or on their way to becoming, billion-dollar companies for the Waterloo area had they stayed: Pebble, Wish and Instacart. (Regarding) the idea of, ‘When is the next big company going to come out of Waterloo Region?’, I think that question has been answered; there have been several to come out already. The only change now is that they’re staying in Waterloo Region, so the opportunity (for iNovia) to actually be permanently there is really, really exciting. Q – The lack of growth-stage capital in Canada has been a complaint for several years, and has been perceived as a gap in the funding ecosystem. What do recent raises, such as those at Vidyard, Miovision and Clearpath, say about the nature of that gap? A – I think it’s certainly easier to raise money now than it was last year at this time, or a few years ago. And I think there are certainly a couple of things driving that. I think one of the factors is just that seed-stage deals are growing so much in size, and that necessarily pushes the other rounds up in size as well. So, a seed deal with a valuation of $10 million or $15 million was kind of unheard of five years ago, or very, very uncommon. And now those kinds of things are becoming more common. Because there’s an increase in the valuation in seed deals in particular, it’s causing a bunch of different changes in valuations. The other thing is, because companies are IPOing at later stages now – you’re seeing these massive, massive IPOs – there’s a lot more value captured in the private market, and that means there’s a lot more competition for those kinds of deals, then, because guys in the public market still want to play there. So you have strategic investors, corporate VCs, VCs and then later-stage funds all competing for these later-stage deals now. I think it has increased competition and increased deal size in general, and we also have an environment where there are a bunch of government incentives and programs for capital to get to these companies a bit easier. I think the outlook is good. I think Waterloo is positioned particularly well for the next raise after that, because that’s when you’ll see companies getting a lot more scrutiny, and where being an actual good operator matters. And Waterloo has a history of producing lots of those. Q – What does it say about the future of Waterloo that we have this many companies raising funds at this level? A – I think it’s amazing. I think the one thing that it really does is solidify that it’s totally OK – I mean, it’s more than OK; it’s almost even encouraged – to start your company and keep it in Waterloo Region, whereas before – and this is referencing Pebble, Instacart and Wish – there was pressure, that if you were successful and you were in Waterloo, then your next step was to move to the Valley to “make it.” That doesn’t exist anymore, and you’re seeing it proven out. The fact that those deals keep on happening just kind of adds to the momentum. Before, you had to move to Silicon Valley, and then it was ‘I guess we’re OK with you staying in Waterloo,’ and now it’s ‘Oh, you’re in Waterloo? That’s even better.’ For us, now that we’re in Waterloo permanently, it matters a bit less, but for investors in the Valley who didn’t want to invest in Waterloo companies because they don’t want to take board meetings up there, because it’s hard to get to – that mentality doesn’t exist anymore. And the more deals and the more investors that you have there, the easier it becomes. It’s very much a network-driven type of thing, so it’s just more momentum. Q – Where are you seeing the next big opportunities for the types of tech entrepreneurs we have here? A – I don’t think I have a particular scope or focus, like an industry or trend, that I’m particularly excited about. I think the really awesome thing about Waterloo is just the raw, intellectual curiosity that is instilled in the students and the people who work here. A lot of the ideas, they don’t really exist, or you can’t really conceive of them as even being a market, before you actually see them. A cool example would be Voltera. They print circuit boards, and that’s not something I could ever describe to you as an industry that I’m interested in. I’m honestly really, really interested in intellectually curious, technically gifted founders, and Waterloo has tons of them. Q – What would be your best piece of advice for a Waterloo tech entrepreneur who’s considering VC to help them scale? A – It’s a little bit lame, but I would say be yourself. And that’s in every sense of the word. You’re pitching to the VC as much as the VC is pitching to you, and the best deals are truly partnerships, where you feel like you’re getting value and the VC’s getting value – not value in dollar terms, but actual relationship value. So, it’s important to be yourself, and there’s no specific way to act or anything like that. You want to find a good fit for yourself, and you can’t do that unless you are yourself. Anthony Reinhart is Communitech’s Director of Editorial Strategy and senior staff writer. View from the ‘Loo looks at the issues, people and events that shape Waterloo Region’s technology sector.