The startup investing scene in Edmonton has evolved over the past three years, but venture capital's purpose is still not as well understood as it could be, says the co-organizer of an event that brought entrepreneurs and investors together during Edmonton Startup Week.
"We wanted to educate, educate, educate, mostly about how venture capital works and that it may not be the right type of capital for every business," Kristina Milke, general partner at Sprout.vc, said of the Founders and Funders event she hosted with Zack Storms, co-founder of Startup TNT, on Oct. 18.
Milke also hoped to dispel the myth that Alberta lacks venture capital. "It simply is a false statement to say that," she said.
Edmonton's startup investor community has come a long way. Milke hosted a similar event in 2019 involving several investors who were based in Calgary. This year, all the investors were based in Edmonton or have significant operations here. Milke said there are two key factors behind the shift.
"There is a growing story in Alberta about the number of unicorns in the making (albeit mostly from Calgary). This has become newsworthy outside of our province and country," she said.
The second factor is an increase in new investors. "I do believe that the folks at Startup TNT have created this amazing opportunity for newbies to get involved at a lower dollar and learn how to invest, and they also provide access to deal flow, which the average person would not necessarily know how to find themselves."
This year's event had four entrepreneurs on a panel, followed by eight investors on another. The necessity of focusing on customers provided some common ground.
"Build a relationship with your customers and delight them," advised James Neufeld, founder and CEO at samdesk. "The only thing that matters is customer money."
Investor Eric Flaim, director of the Innovation Catalyst Grant, agreed with that sentiment. "Until you get into the trenches with your customers, you don't have a real appreciation for where the value exists," he said. "Then you can decide what kind of money is best to go after."
The Founders and Funders event held during Edmonton Startup Week 2022 featured four entrepreneurs and eight investors who discussed raising capital from both perspectives. (Mack Male/Flickr)
If you do seek investment, it's important to understand what investors want out of the deal.
"When you're raising capital, we are your customer," said Andrew Goldner, founding partner at GrowthX. "You need to have some empathy for the work we do."
Mark Benning, general partner at Sprout.vc, concurred. "You really want to know what the investor is looking for," he said. "Get out and network with as many investors as you can."
All the entrepreneurs agreed that relationship-building with investors is critical to raising money, and that takes time.
"If you don't have a network, it is really, really difficult," said Nicole Dong, COO at HonestDoor.
Accelerators can be a great way to build your network, suggested Michael Wilson, co-founder and CEO at DrugBank, especially since there are so many now available to local entrepreneurs.
Nir Katchinskiy, founder and CEO at PulseMedica, added that the importance of relationships goes beyond the initial raise. "When people want to invest in your company, they're really investing in your people," he explained. "That's why relationship-building matters."
But Wilson cautioned against putting too much energy into courting investors, something Neufeld agreed with. "Investors are just a means to an end," he said.
Rounding out the investor panel were Arden Tse, investment manager at Accelerate Fund; Tiffany Linke-Boyko, principal at Flying Fish Partners; Jeff Shon, partner at REDDS Capital; Tim Lynn, co-founder of Startup TNT; and Andrew Browne, head of business development at Thin Air Labs.
Milke said members of the investor community are collaborative and regularly share deal flow, due diligence, and other information with one another. That can pay off even if an entrepreneur hears "no" a lot.
"Even if investors don't write a cheque because a company does not fit their investment thesis, generally the investors are still willing to provide useful feedback and/or referrals if they have any that make sense," she said.
"We all need to be collaborative because we are a small but mighty community."
Correction: An earlier version of this story incorrectly stated that the investors at the 2019 event were from outside Alberta when in fact most were from Calgary.