Author: Patrick Hankinson

May 8, 2022

Venture Capital Investors in Atlantic Canada

It’s a pretty good time to be an entrepreneur in Atlantic Canada. A decade ago there were only a couple of firms investing in startups. Now, however, there are over a dozen firms based here. Let’s take a look at these VCs in Atlantic Canada.

The New Brunswick Innovation Foundation (est 2003) is an independent, private organization focused on venture capital and research funding. They help New Brunswick innovators solve globally relevant problems through research, solid advice and access to capital.

Website: www.nbif.ca

Innovacorp (est 1995) is Nova Scotia’s early stage venture capital organization. They work to find, fund and foster innovative Nova Scotia start-ups that strive to change the world. Early stage investment is at the core of their business model. They also give entrepreneurs access to world-class incubation facilities, expert advice and other support to help them accelerate their companies.

Website: http://innovacorp.ca

BDC Capital exists to help turn great ideas into great companies. And similarly, great companies into engines of jobs, growth and wealth creation. In fact, they are Canada’s largest and most active venture capital investor.

Website: https://www.bdc.ca/en/bdc-capital/

Build Ventures (est 2013) is a Venture Capital firm that provides early stage capital to emerging Atlantic Canadian technology companies. The company is managed on behalf of its Limited Partners by Patrick Keefe and Rob Barbara.

Website: http://www.buildventures.ca

Concrete Ventures (est 2018) finds great ideas and founders in Atlantic Canada that are ready to build massively scalable businesses and work with them to grow their businesses.

Website: http://www.concrete.vc/

Sandpiper Ventures (est 2020) provides a platform where women investors and founders can radically disrupt the venture capital environment.

Website: http://sandpiper.vc/

East Valley Ventures (est 2011) is a community of innovative entrepreneurs in the business of transforming early stage ideas into successes. They help passionate Atlantic Canadian founders launch meaningful and enduring technology companies.

Website: http://www.eastvalleyventures.com/

Killick Capital Inc. (est 2004) is a leading Atlantic Canadian Private Equity firm, dedicated to partnering with Atlantic Canadian businesses and Global Aerospace businesses. Specifically, they focus on identifying and funding investments with the potential for substantial growth, long-term value creation and capital appreciation.

Website: http://www.killickcapital.com/

Pelorus Venture Capital Ltd. (est 2015) is a Venture Capital fund focused on Newfoundland and Labrador. They invest in pre-seed innovation companies with founders who disrupt and develop their bold ideas.

Website: https://www.pelorusvc.com/

Island Capital Partners is an early stage venture capital fund that is in the business of investing in high potential Prince Edward Island entrepreneurs and startups.

Website: https://www.peislandcapitalpartners.com/

Tidal Venture Partners is a pre-seed to seed + fund focused on the emerging ecosystem of Atlantic Canada. They back small teams with high potential, who have detailed plans for achieving larger, later stage milestones. They are interested in bold ideas backed by action.

Website: https://tidalventurepartners.com/

Cape Breton Capital Group (est 2022) is one of the newest VCs in Atlantic Canada. They invest in early stage startups and support succession planning of businesses in Cape Breton.

Website: http://www.capebretoncapital.com/

LongShot Capital (est 2021) invests in early stage tech companies that are raising rounds of $300k-$1M. They invest with other angels, strategic and VCs, but they do not lead.

Website: http://www.longshotcap.com/

Natural Products Canada (est 2016) is a not for profit focused on Canadian natural product innovations that can replace synthetic products to benefit people, animals and the planet. They provide a one-stop shop for strategic insights, programs and services to anyone looking to participate in Canada’s natural product industry.

Website: http://naturalproductscanada.com/

Additional VCs in Atlantic Canada:

Are there any VCs we missed? Let us know in the comments.

April 24, 2022

CX Trends: Learnings From Analyzing 4,400 Early Stage Companies

Zendesk reviewed 4,400 early-stage companies to see how customer experience (CX) tools, tactics, and strategies at high-growth early-stage companies differed from slower growth startups. This report used 4.6k+ startups, starting in Jan 2014. The data shows that while there is no one-size-fits-all approach, startup companies’ success stories have one thing in common: the ability to provide more holistic support to customers from the beginning.

What Are the Best CX Trends, Tactics, Tools & Strategies Used by The Fastest-Growing Startups?

As the basis of every business is to acquire and retain customers, the customer experience (CX) has become increasingly important. Improving customer retention by 1% can have four times the impact of improving acquisition by 1%. With startups, CX can be make-or-break: the difference between the top 2% and top 1% in terms of performance is often massive and can mean the difference between getting funding or not or achieving a successful exit.

So, what are the best CX trends, tactics, tools, and strategies used by the fastest-growing startups? Here are some ideas to get you started:

Make sure your product or service is delivering on its promise. This may seem obvious, but many startups fail to meet customer expectations. If you’re not delivering on your promise, you will never win the CX battle.
Get feedback early and often. The best way to improve CX is to constantly collect customer feedback and then act on it. This means being open to criticism and always looking for ways to improve.
Build a strong relationship with your customers. The more you understand your customers’ needs and wants, the better position you’ll be in to provide them with an exceptional experience. Building strong relationships will also help you retain customers in the long run.
Be responsive to customer queries and concerns. Customers appreciate it when they can reach out to a real person who will help them with their problems. Make sure you have a system to quickly and efficiently respond to customer queries.

Constantly strive to improve. The best startups are always looking for ways to improve their CX strategies and CX tools. This might mean making minor tweaks on a regular basis or periodically overhauling your entire approach. Either way, always be on the lookout for ways to take your customer experience up a notch.

CX Is Seen as Cost Center, Not A Growth Lever

In a world where buyers have more power than ever before, businesses need to find ways to stand out from the competition. With so many choices, customers have become pickier, and it’s harder to please them. Studies show the Net Promoter Score (NPS) has declined by 34% since 2015.

Even more challenging for businesses is that the Cost of Customer Acquisition (CCA) has increased by 70% since 2015. This means it takes more money and effort to get new customers while, at the same time, product values have decreased, and customer willingness to pay has diminished.

To grow in this climate, businesses need to start seeing customer experience as a growth lever, not a cost center. By focusing on CX trends, early-stage companies can improve customer loyalty, increase customer lifetime value, and ultimately generate more revenue. Excellent customer experience is key to success in today’s market. Businesses need to focus on CX strategies to grow and thrive.

The problem is that many businesses see customer experience as an expense rather than an investment. This is especially true in industries where the average number of competitors has quadrupled or quintupled in the last 10 years. With so much pressure to keep costs down, it’s no wonder that CX strategies budgets are often one of the first places early-stage companies look to cut when they’re trying to save money.

High-growth vs Slower Growth Startups: Key Differences

In recent years, there has been a lot of discussion about the differences between high-growth startup companies and slower growth startup companies. While many factors contribute to a company’s growth rate, one important area that’s often overlooked is customer experience.

High-growth startups tend to be laser-focused on acquiring new customers and growing their business as quickly as possible. As a result, they often sacrifice long-term customer loyalty in favor of short-term gains. In contrast, slower growth startups tend to focus more on retention and building long-term relationships with their customers.

There are a few key strategies that all businesses can use to improve their customer experience, regardless of their growth rate.

It’s important to invest in CX tools and staff them properly, so customers can get the help they need when they need it, and your team will be prepared to handle any issues that may arise. 33% of high-growth startups are more likely to add support in their 1st year, and 20% more likely to add a live chat by year 2.

They should also focus on meeting customers where they are with their CX strategies. This means offering omnichannel support so that customers can reach you through whichever channels they prefer. In fact, 33% of high-growth startups add omnichannel by their second year.

Invest in self-service options like Knowledge Base articles and FAQs. This will help reduce the number of support requests your team has to deal with and free up their time to focus on more complex issues.

Watch the full webinar about CX trends with guest presenter Adam O’Donnell from Zendesk:

April 3, 2022

Cap Tables with Carta: Best Practices for Startup Founders

One of the first steps in forming a startup should undoubtedly be creating your cap table. But cap tables can get complicated quickly. It sounds simple, but without a good one it is far too easy to make bad equity decisions when raising money and hiring which can become costly and difficult to fix.

Whether you’re new to this topic or need a refresher, it’s often best to learn from examples and the people that think about this every day. As investors we have seen hundreds of cap-tables both good and bad – but to layer even more insights we spoke with the folks at Carta in our webinar about the topic. This post will share the learnings.

Here is what we will cover:

What a cap table is and why it’s important for all stages of company building.
How prospective investors will look at your cap table.
Key terms to dive deep on.
Common cap table mistakes and how to avoid them
How to think about managing your cap table and tools available to you.

Structuring Your First Cap Table

A capitalization table is a tool used by startups to show the overall capital structure of their company, manage the ownership stakes of each equity holder, and keep track of every security their company has issued as well as who holds them. In short, the cap table represents your startup’s investable story.

So why should you care? Cap tables are important for many reasons:

They help you raise money on better terms and understand your dilution.
The cap table can help you land and retain key talent.
They communicate what each investor and employee holds from an equity perspective.
Clean cap tables can accelerate your VC financings.
Your cap table will grow and expand in both size and complexity as your company grows.
Lastly, they are a centralized repository – everyone’s source of truth when it comes to equity.

In addition, prospective investors will look at your cap table to answer many questions that will help determine whether they will invest:

What is the ownership percentage of the founders and key employees, and how vested are they?
Are there any founders or key employees who have moved on? What is the story?
How much is left in your option pool? Does it need to be topped up?
What is the turnover within this company? Are there cultural issues?
Who are the other investors in this company, and what do they hold?
Are there any surprising preferences or obligations I can see?

Investors tend to zero in on points 1 and 5.

Key Cap Table Terms Defined

When talking about cap tables, there are a number of terms either your lawyer, investor, or other startup folks will use. Knowing the jargon is helpful in understanding what exactly people are talking about. Let’s take a look at a few terms:

Common stock: Ordinary shares of stock, typically held by founders and employees.

Preferred stock: Shares of stock with special protections including a preference, meaning investors holding them will be paid back first in an acquisition before any common shares receive proceeds. If you ever negotiate a term sheet with an investor, you are likely negotiating the term of the preferred class of stock.

Pre-money valuation: Valuation assigned to the company for purposes of pricing new shares for investors.

Post-money valuation: Pre-money valuation for a financing round, plus the amount of new cash invested in that round. When you think about dilution, you want to know what the post-money ownership of everyone will be. This is the ownership you will have after the investment round.

Price per share: For an investment round, typically the pre-money valuation is divided by the fully diluted cap (# shares) just before that new round. Fully diluted is the key term here. It assumes all outstanding options/warrants, etc. are converted into shares. Therefore the fully diluted share count is likely higher than your current number of shares outstanding (more below).

Stock Plan allocation (option pool): Known as your ESOP, these shares are reserved for issuance to employees under a stock plan.

Fully diluted capitalization: All shares that have been or are reasonably likely to be issued, including, all shares that have been issued and remain outstanding; plus all that could be issued under outstanding options; plus the remaining available option pool.

Common Mistakes in Cap Tables and How To Avoid Them

One of the most common and most avoidable mistakes involving cap tables is not having all your documents in order. It is important to keep data organized and documents on hand. Critical documentation may include any of the following: incorporation documents, stock purchase agreements, stock plan (option pool) documentation, any convertibles you’ve issued (SAFE/KISS), and any relevant board actions (e.g. written consents).

Another common mistake involves poor planning. Take a backward design approach by delving into the critical factors that may affect cap table creation and your goals. Think about the answers to the six questions posed earlier in the article: what are investors looking for here? Share your plan and finalize your understanding of ownership with your co-founders, a well balanced cap table has many benefits. It can help founders be intentional about growth and distributing equity to employees.

As investors, one of the biggest problems we come across is when founders don’t have their cap-tables up to date. As an entrepreneur, you should manage your cap table in an offensive manner. Be ready for the next financing or hire. Don’t manage it in a defensive manner, by cleaning things up upon request. There is nothing worse than having to spend a few hundred or thousand dollars cleaning things up because you didn’t keep the cap table up to date. Mistakes like this can often kill financing deals and render your company “uninvestable”.

Structuring Equity Compensation

Understanding equity compensation is critical to attracting and retaining key talent. Equity compensation plays a critical role in building a company culture that is positive, supportive, equitable, and growth-oriented. Everyone is an owner.

The most common way of providing equity to your employees is through the option pool or ESOP. This pool represents a piece of the company that is reserved for employees. Investors will often ask you to “top up” the ESOP prior to a new financing so that there is enough equity for the key employees you need to hire post-money.

Investor communication and issuances

Certain investors may have information rights as part of their agreements. This means that they will likely ask for periodic updates about your business, including cap table equity details. To ensure clear lines of communication you can:

Set up a cap table sharing if you are using a cap table management software
Make it a habit to send out quarterly or biannual investor updates
- In addition to the cap table, send KPIs, financials, projections of business, etc

When building your cap table, you have to think about how you are going to manage it and the tools that are available to you. There are two main options: you can build your cap table from scratch or use cap table management software.

If you are building it from scratch, you have the benefit of building it to your precise specifications, but it can be difficult to build, collaborate on and maintain (remember, you want to be offensive, not defensive). Cap table software is the easiest way to keep your cap table updated. It does cost money but likely saves on costs in the long run.

For more on this topic, you can watch our webinar with Carta below: