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Six Toronto VCs discuss COVID-19 and the post-pandemic era
As North America’s fourth-largest city, Toronto is one of the world’s top startup ecosystems.
After spawning companies like Eventbrite and Crowdmark, Ontario’s capital has attracted international talent that complements its homegrown population of entrepreneurs and technical talent.
Six investors we surveyed who work and live in the area said they believe Toronto will continue to thrive after the COVID-19 storm passes. Some of them focus exclusively on the region, while others invest elsewhere as well. As they explained, the city has a lot going for it: It’s diverse, has access to locally trained engineering and business workers, and the area has already fostered many companies that are doing very well.
Investors expect Toronto to remain a fintech hub
Fintech is one of the city’s top industries, and the investors in this survey expect this to continue. Stephanie Choo, head of investments at Portag3 Ventures, said “fintech continues to see massive tailwinds from the fallout from COVID-19 as incumbents struggle to fully digitize their offerings.”
Ameet Shah of Golden Ventures listed fintech as one of Toronto’s key industries. Eva Lau of Two Small Fish Ventures agreed, adding that “blockchain has also been doing well because many blockchain-related technologies or companies were started in Toronto.”
Other investors point to fintech business leaders in Toronto like CEOs Mike Katchen of Wealthsimple, Daniel Eberhard of Koho, Andrew D’Souza and Michele Romanow of Clearbanc and Kirk Simpson of Wave Financial.
Diversity is one of Toronto’s strengths
Nearly all of the surveyed investors cited diversity as a key reason to live and work in Toronto. Probal Lala, chairman of Maple Leaf Angels, says, “Beyond having a vibrant technology ecosystem, Toronto has one of the most diverse communities in North America and is not only a great place to find the intellectual horsepower and funding to build a great global startup, but also the mosaic of social communities that makes it a great place to live and raise a family.”
Choo said the United States’ current battles over immigration could benefit Canada. “Small, nimble teams that need to move fast may still choose to co-locate in person — and many will still want access to amenities that only a large, vibrant and diverse city like Toronto can offer.”
She also pointed to Toronto’s claim of being one of the most diverse cities in the world. “[This] not only makes the city interesting but also very welcoming for those who relocate from elsewhere; a strong startup and tech scene, and, lastly, a vibrant cultural and food scene, especially through the lens of cost-of-living compared to comparable major cities.”
Shopify’s executives are key players in Toronto’s ecosystem
Several VCs listed Shopify executives as local leaders, while others acknowledged the growing unicorn’s impact. Ameet Shah of Golden Ventures says, “Toronto has traditionally been strong in fintech, B2B SaaS, crypto and AI. The explosion of Shopify should also benefit companies focused on e-commerce and supply chain solutions.”
Adam McNamara and Ameet Shah, when asked about local business leaders, both listed Satish Kanwar. Kanwar is GM and VP of Product at Shopify after the company purchased Jet Cooper, a startup co-founded by Kanwar. McNamara also points to Farhan Thawar, Shopify’s VP of Engineering, as a local leader.
Who we spoke to:
- Probal Lala, chairman, Maple Leaf Angels Capital Corporation
- Stephanie Choo, head of investments, Portag3 Ventures
- Adam McNamara, founding partner, Ramen VC
- Ameet Shah, partner, Golden Ventures
- Matt Golden, founder and managing partner, mGolden Ventures
- Eva Lau, founding partner, Two Small Fish Ventures
Probal Lala, Maple Leaf Angels Capital Corporation
How much is local investing even a focus for you now? If you are investing remotely in general now, are you filtering for local founders?
Prior to COVID-19 hitting, a requirement for the majority of my investments was a face-to-face visit with the founding team. For the most part, this meant founders spending time in Toronto. As we primarily invest in seed and pre-seed, this usually meant local founders.
When the pandemic hit, we shifted our process to primarily Zoom meetings (including due diligence) and as a result the mix of founding teams has expanded beyond our typical catchment area (two-hour drive from the city) to a broader base. Investment cycles appear to have slowed a bit due to the remote approach but our reach to founding teams has expanded to a broader base of geographically distributed founding teams (Mostly Canadian although we have recently seen a number of international opportunities).
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Minted.com CEO Mariam Naficy shares ‘the biggest surprise about entrepreneurship’
At TechCrunch Early Stage, Minted CEO and serial founder Mariam Naficy got into the weeds with us on some of the topics founders don’t often discuss. What’s the difference between expectations and reality when it comes to entrepreneurialism? How do you split responsibilities between co-founders? What’s the key to being great at hiring?
We also talked about some of the harder parts of being a leader, including how to handle layoffs and what to do with an employee who likes to rock the boat.
Minted is an e-commerce platform that connects indie designers with customers for products like stationary, art and home goods. The company has raised nearly $300 million and generates hundreds of millions in revenue. And it’s not Naficy’s first stint as a founder: she previously co-founded Eve, which she eventually sold for $100 million+, according to reports.
We covered a lot of ground in the interview, including some questions from the audience, which you can check out in the video below. You’ll also find a lightly edited transcript of the conversation.
The most surprising part of being an entrepreneur
I didn’t realize what was, I think, one of the biggest differences, which is how much, if you are successful, you become a leader of people, whether you are a reluctant leader of people or an enthusiastic leader of people. If you’re successful, your company will inevitably grow and you end up, believe it or not, being a role model for people. People actually look at you and they emulate your behavior and that is not something that I expected.
I thought I was just going to be making products and selling products. I just didn’t think that it was gonna be such a people job — a management job, a talent development job, a leadership job — and that people would care when you walked in the building every day whether you said hello to them in the morning. They would actually notice whether you said “hi” or not to them at the coffee bar when you’re half asleep. What you do every minute actually matters. Every minute of the day. So I think that’s probably the biggest surprise about entrepreneurship.
Being a sole founder versus starting out with a co-founder
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The race to building a fully functional quantum stack
David Cowan is a partner at Bessemer Venture Partners and one of the world’s leading investors across cloud infrastructure, cybersecurity, consumer and space technology.
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Tomer Diari is a vice president at Bessemer Venture Partners, where he focuses primarily on cybersecurity, big data and deep tech opportunities.
Quantum computers exploit the seemingly bizarre yet proven nature of the universe that until a particle interacts with another, its position, speed, color, spin and other quantum properties coexist simultaneously as a probability distribution over all possibilities in a state known as superposition. Quantum computers use isolated particles as their most basic building blocks, relying on any one of these quantum properties to represent the state of a quantum bit (or “qubit”). So while classical computer bits always exist in a mutually exclusive state of either 0 (low energy) or 1 (high energy), qubits in superposition coexist simultaneously in both states as 0 and 1.
Things get interesting at a larger scale, as QC systems are capable of isolating a group of entangled particles, which all share a single state of superposition. While a single qubit coexists in two states, a set of eight entangled qubits (or “8Q”), for example, simultaneously occupies all 2^8 (or 256) possible states, effectively processing all these states in parallel. It would take 57Q (representing 2^57 parallel states) for a QC to outperform even the world’s strongest classical supercomputer. A 64Q computer would surpass it by 100x (clearly achieving quantum advantage) and a 128Q computer would surpass it a quintillion times.
In the race to develop these computers, nature has inserted two major speed bumps. First, isolated quantum particles are highly unstable, and so quantum circuits must execute within extremely short periods of coherence. Second, measuring the output energy level of subatomic qubits requires extreme levels of accuracy that tiny deviations commonly thwart. Informed by university research, leading QC companies like IBM, Google, Honeywell and Rigetti develop quantum engineering and error-correction methods to overcome these challenges as they scale the number of qubits they can process.
Following the challenge to create working hardware, software must be developed to harvest the benefits of parallelism even though we cannot see what is happening inside a quantum circuit without losing superposition. When we measure the output value of a quantum circuit’s entangled qubits, the superposition collapses into just one of the many possible outcomes. Sometimes, though, the output yields clues that qubits weirdly interfered with themselves (that is, with their probabilistic counterparts) inside the circuit.
QC scientists at UC Berkeley, University of Toronto, University of Waterloo, UT Sydney and elsewhere are now developing a fundamentally new class of algorithms that detect the absence or presence of interference patterns in QC output to cleverly glean information about what happened inside.
The QC stack
A fully functional QC must, therefore, incorporate several layers of a novel technology stack, incorporating both hardware and software components. At the top of the stack sits the application software for solving problems in chemistry, logistics, etc. The application typically makes API calls to a software layer beneath it (loosely referred to as a “compiler”) that translates function calls into circuits to implement them. Beneath the compiler sits a classical computer that feeds circuit changes and inputs to the Quantum Processing Unit (QPU) beneath it. The QPU typically has an error-correction layer, an analog processing unit to transmit analog inputs to the quantum circuit and measure its analog outputs, and the quantum processor itself, which houses the isolated, entangled particles.
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Dear Sophie: How can we sponsor H-1B transfers and extensions?
Sophie Alcorn is the founder of Alcorn Immigration Law in Silicon Valley and 2019 Global Law Experts Awards’ “Law Firm of the Year in California for Entrepreneur Immigration Services.” She connects people with the businesses and opportunities that expand their lives.
Here’s another edition of “Dear Sophie,” the advice column that answers immigration-related questions about working at technology companies.
“Your questions are vital to the spread of knowledge that allows people all over the world to rise above borders and pursue their dreams,” says Sophie Alcorn, a Silicon Valley immigration attorney. “Whether you’re in people ops, a founder or seeking a job in Silicon Valley, I would love to answer your questions in my next column.”
“Dear Sophie” columns are accessible for Extra Crunch subscribers; use promo code ALCORN to purchase a one- or two-year subscription for 50% off.
Dear Sophie:
I work in people ops at a startup. We have no experience with H-1B visas. We recently received applications for job openings from a couple of strong applicants who are on H-1B visas with other companies. What should we know about hiring an H-1B visa holder?
One of the job applicants will need to have her H-1B renewed next year. What should we know about filing for a renewal? Are H-1B transfers and renewals still possible given that H-1B visas are no longer being issued at consulates?
—Newbie in Newark
Dear Newbie,
Exciting that your company is hiring. Congrats! Yes, H-1B transfers and renewals are still possible. The only current restriction is that H-1B visas can generally not be issued to people outside the U.S. right now. They were halted through at least the end of 2020 under last month’s executive proclamation.
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No pen required: The digital future of real estate closings
Jeanne Casey is a principal on the investment team at MetaProp, where she leads new investments into compelling proptech companies and works closely with portfolio companies on strategic growth initiatives.
On a Wednesday at 4 p.m. in June 2017, I was in a small, packed office in midtown Manhattan.
The overcrowded conference room, with at least five more people than any fire marshal would recommend, was stacked comically high with paperwork and an eclectic collection of cheap pens. As I neared the end of the third hour and the ink of my seventh pen, I realized the mortgage closing process may be somewhat antiquated.
After closing on my first home, it was inconceivable to me that every other expense in my life has gone digital, but the most significant purchase I’ve ever made required hundreds of signatures and several handwritten checks delivered in person. By comparison, I have been able to repay my student loans, comparable in magnitude to a down payment, exclusively through online portals.
How COVID-19 is accelerating digital advancements
The COVID-19 pandemic has changed nearly every facet of our lives. One potential silver lining for the real estate world may be a forced reckoning with the mortgage closing process. Technological advances like e-closings are accelerating this arduous process into the digital age. The U.S. Census Bureau released figures in July citing the rise in homeownership across the country as the pandemic fuels the demand for single-family properties outside of urban areas. This is confirmed by the significant spike in mortgage applications seen in the second quarter of 2020.
The first signs of digitization of the mortgage origination process were seen in mid-2010 when lenders began adopting digital disclosures. Despite the availability of technology, the market has been slower to fully embrace digital closings that enable the full loan package to be electronically reviewed, recorded, signed and notarized. A true e-closing includes a digital promissory note (“eNote”), a virtual closing appointment and the electronic transfer and recording of documents by the county, all of which can be remotely coordinated and executed by the parties involved. The market started to pick up pace in recent years, and we’ve seen the number of e-mortgages increase by more than 450% from 2018 to 2019.
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Emergence’s Jason Green still sees plenty of opportunities for enterprise SaaS startups
Jason Green, co-founder and partner at Emergence, has made some solid enterprise SaaS bets over the years, long before it was fashionable to do so. He invested early in companies like Box, ServiceMax, Yammer, SteelBrick and SuccessFactors.
Just those companies alone would be a pretty good track record, but his firm also invested in Salesforce, Zoom, Veeva and Bill.com. One consistent thread runs through Emergence’s portfolio: They focus on the cloud and enterprise, a thesis that has paid off big time. What’s more, every one of those previously mentioned companies had a great founding team and successful exit via either IPO or acquisition.
I spoke with Green in June about his investment performance with enterprise SaaS to get a sense of the secret of his long-term success. We also asked a few of those portfolio company CEOs about what it has been like to work with him over time.
All in on SaaS
Green and his co-founders saw something when it came to the emerging enterprise SaaS market in the early 2000s that a lot of firms missed. Salesforce co-founder and CEO Marc Benioff told a story in 2018 about his early attempts at getting funding for his company — and how every single Silicon Valley firm he talked to turned him down.
Green’s partner, Gordon Ritter, eventually invested in Salesforce as one of the company’s earliest investments because the partners saw something in the SaaS approach, even before the term entered the industry lexicon.
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How Moovit went from opportunity to a $900M exit in 8 years
Omar Téllez is a private investor in several tech companies based in LatAm and Silicon Valley. A member of Niantic’s executive team, he was previously president of Moovit.
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In May 2020, Intel announced its purchase of Moovit, a mobility as a service (MaaS) solutions company known for an app that stitched together GPS, traffic, weather, crime and other factors to help mass transit riders reduce their travel times, along with time and worry.
According to a release, Intel believes combining Moovit’s data repository with the autonomous vehicle solution stack for its Mobileye subsidiary will strengthen advanced driver-assistance systems (ADAS) and help create a combined $230 billion total addressable market for data, MaaS and ADAS .
Before he was a member of Niantic’s executive team, private investor Omar Téllez was president of Moovit for the six years leading up to its acquisition. In this guest post for Extra Crunch, he offers a look inside Moovit’s early growth strategy, its efforts to achieve product-market fit and explains how rapid growth in Latin America sparked the company’s rapid ascent.
In late 2011, Uri Levine, a good friend from Silicon Valley and founder of Waze, asked me to visit Israel to meet Nir Erez and Roy Bick, two entrepreneurs who had launched an application they had called “the Waze of public transportation.”
By then, Waze was already in conversations to be sold (Google would finally buy it for $1.1 billion) and Uri was thinking about his next step. He was on the board of directors of Moovit (then called Tranzmate) and thought they could use a lot of help to grow and expand internationally, following Waze’s path.
At the time, I was part of Synchronoss Technologies’ management team. After Goldman Sachs and Deutsche Bank took us public in 2006, AT&T and Apple presented us with an idea that would change the world. It was so innovative and secret that we had to sign NDAs and personal noncompete agreements to work with them. Apple was preparing to launch the first iPhone and needed a system where users could activate devices from the comfort of their homes. As such, Synchronoss’ stock became very attractive to the capital markets and ours became the best public offering of 2006.
After six years with Synchronoss while also making some forays into the field of entrepreneurship, I was ready for another challenge. With that spirit in mind, I got on the plane for Israel.
I will always remember the landing at Ben Gurion airport. After 12 hours traveling from JFK, I was called to the front of the immigration line:
“Hey! The guy in the Moovit T-shirt, please come forward!”
For a second, I thought I was in trouble, but then the immigration officer said, “Welcome to Israel! We are proud of our startups and we want the world to know that we are a high-tech powerhouse,” before he returned my passport and said goodbye.
I was completely amazed by his attitude and wondered if I really knew what I was getting into.
The opportunity in front of Moovit
At first glance, the numbers seemed very attractive. In 2012, there were roughly seven billion people in the world and only a billion vehicles. Thus, many more people used mass public transport than private and users had to face not only the uncertainty of when a transport would arrive, but also what might happen to them while waiting (e.g., personal safety issues, weather, etc.). Adding more uncertainty: Many people did not know the fastest way to get from point A to point B. As designed, mass public transport was a real nightmare for users.
Uri advised us to “fall in love with the problem and not with the solution,” which is what we tried to do at Moovit. Although Waze had spawned a new transportation paradigm and helped reduce traffic in big cities, mass transit was a much bigger monster that consumed an average of two hours of each day for some people, which adds up to 37 days of each year*!
What would you do if someone told you that in addition to your vacation days, an app could help you find 18 extra days off work next year by cutting your transportation time in half?
* Assumes 261 working days a year, 14 productive hours per day.
Image Credits: Moovit (opens in a new window)
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Accessing social groups through referrals
Julian Shapiro is the founder of BellCurve.com, a growth marketing team that trains startups in advanced growth, helps hire senior growth marketers and finds vetted growth agencies. He also writes at Julian.com.
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We’ve aggregated many of the world’s best growth marketers into one community. Twice a month, we ask them to share their most effective growth tactics, and we compile them into this Growth Report.
This is how you stay up-to-date on growth marketing tactics — with advice that’s hard to find elsewhere.
Our community consists of startup founders and heads of growth. You can participate by joining Demand Curve’s marketing training program or its Slack group.
Without further ado, on to our community’s advice.
Accessing social groups through referrals
Excerpt from Demand Curve’s Growth Training.
A surprising benefit of referrals is how they often lead to social partnership opportunities.
Consider this process:
- Find your happiest users.
- Figure out what social groups they belong to. This could be anything from a female founders group, to university alumni networks, to a restaurant management trade association.
- How do you find out? Just ask them what groups they belong to. Don’t be afraid of conversation.
- Ask the happy user to connect you with the heads of those groups. Solve a problem they collectively have — even if it’s only tangentially related to your business. What matters is that more of these ideal customers know and trust you. You can also refer speakers, offer deals, write content for them or offer free office hours.
- Down the road, these people inevitably send you referrals.
- Reach out cold to people in other, similar groups. Reference the endorsement of the original group and provide a case study (with their permission).
Going through groups can be a high-leverage way to land and expand into ideal audiences.
Pixel-sharing tactics
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Building a fintech giant is very expensive
Venture capitalists and other investors have poured capital into fintech startups around the world in recent years, including a record number of rounds worth $100 million or more in the second quarter of 2020. In Q2 2020 venture-backed fintech startups raised 28 nine-figure rounds, underscoring the scale of the bet investors are making on fintech’s long-term success.
The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.
Inside that fintech wave are various hubs of activity, including payments tech, investing and banking. That last category has helped give rise to so-called neobanks, startup banking entities that offer mobile-first, consumer-friendly banking tools and services. Given the old-fashioned nature of banking in many countries (and how far out of reach banking remains for many) neobanks have seen strong uptake by users in recent years.
And the startup cohort has raised oceans of capital to help fuel its growth. In America, Chime was most recently valued at $5.8 billion after raising hundreds of millions in late 2019. More recently, neobank Revolut added $80 million to its Q1 2020 round worth $500 million. Revolut is also worth north of $5 billion. Monzo is well-funded (albeit at a recent valuation reduction), Latin America-focused NuBank is worth $10 billion, according to Crunchbase, Starling recently raised another £40 million, while Germany’s N26 is worth over $3 billion after its most recent nine-figure round.
From the fundraising perspective, then, neobanks are killing the game. And thanks to recent tailwinds from the COVID-19 pandemic that have bolstered interest in savings-related products, many of the same entities could be enjoying a strong year thus far. But recent self-reporting of some neobank’s 2019-era results details ample red ink — perhaps more than we might have anticipated.
Of course, startups don’t raise money for fun; they raise it to invest it in their operations and drive scale. So, we knew that these megafundraisers were losing money on purpose. All the same, let’s peek at the economics of several neobanks, as their now dated and thus not at all current results can provide useful context on two points: Why investors are excited to put their capital to work in neobanks, and why neobanks always seem to have another check to announce.
Monzo, Starling and Revolut
To prevent my receiving unhappy emails from irked fans of these companies, please bear in mind that we’re looking several quarters back when observing the following results.
It would be lovely to have more recent data, but with European neobanks reporting their — roughly — 2019 results in recent weeks, this is what we have. We are going to parse the numbers, but we will not conflate past performance with current results. We do not know much about 2020 neobank financial performance.
Anyhoo, to the numbers. You can read the full documents from Monzo here, Starling here (or here, if that link is struggling) and Revolut here.
Let’s start with Monzo, which has a clear set of figures for us to peek at:
Image Credits: Monzo
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Y Combinator President Geoff Ralston shares actionable advice for startup founders
Running a startup accelerator comes with a number of occupational hazards, but “skepticism is the easiest thing to fall into when you’ve seen too many companies,” said Y Combinator President Geoff Ralston, “and it’s the thing you have to avoid the most.”
Ralston joined me last week for an hour-long Extra Crunch Live interview where we talked about several topics, including how YC has adapted its program during the pandemic, why he has “never stopped coding” and what he sees changing in tech.
“We try to not be too smart, because great founders often see things beyond what you’re seeing,” he said. “If you try to be too smart, you’ll miss the Airbnbs of the world. You’ll say ‘Airbeds in peoples houses? That’s stupid! I’m not going to invest in that,’ and you could’ve bought 10% of Airbnb for like nothing back then… 10% of that company… you can do your own math.”
Extra Crunch Live is our new virtual event series where we sit down with some of the top founders, investors and builders in tech to glean every bit of insight they care to share. We’ve recently been joined by folks like Hunter Walk, Kirsten Green and Mark Cuban.
To watch the entire interview with Geoff Ralston, sign up for ExtraCrunch — but once you’ve got that covered, you can find it (and a bunch of key excerpts from the chat!) below.
Advice for getting into YC
I prefer it when an Extra Crunch Live conversation starts out with actionable advice, so we kicked things off with any suggestions Ralston had for folks looking to apply to YC. And he had plenty! Such as:
- Mind the deadline, but all hope is not lost if you miss it: “If you miss the deadline, it’s not the end of the world,” says Ralston. “Don’t tell anyone on the admissions team that I said this, but it’s a little bit of a soft deadline. We would never turn down the next epic company because you missed the deadline… although your odds go down of getting in if you don’t make it in by [the deadline]. Why shouldn’t your odds be as high as possible?”
- Don’t change things up for YC’s sake: “Do whatever you can do to make your company as successful, as real as possible… but don’t try to like, pretty up your company for YC,” he says. “That’s never smart [to do] for an investor. Don’t make bad short-term decisions because you think there’s a deadline that you should do wrong things for. Instead, build your company for the long term, and do the best you can possibly do to find product market fit, to build the right product, to build the right technology, to build the right software or whatever it is you’re building.”
Later in the video (around the 40:55 mark), a question from the audience leads Ralston back to the topic, and he has a few more pieces of advice:
- Stick to the instructions: “The instructions are fairly clear. It says: do a one-minute video, have all the founders there, and talk to us. That’s a good idea! Don’t give us some marketing video, we’re not interested in that. That’s not how we’re making our decision.”
- Hone your pitch: “Think about expressing yourself concisely, with great clarity. It does not help to write a book in the application. Be kind to us! We’re reading, you know, hundreds of applications. Get your idea across as clearly as you can. That’s actually a really good signal to us, if you can describe what you’re doing with a minimum of words. That helps us a ton.”
- Tell your story: “Do not skimp on talking about yourselves!” Ralston notes. “We are super interested in you, who you are, and why you’re doing what you’re doing.”
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