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Talking Startups with BDC’s Robert Simon

BDCAnyone tracking investments in Canadian startups will not be surprised to see the Business Development Bank of Canada (aka BDC) as a participant. The Crown Corporation is a key player in the seed and series A landscape, and its efforts were bolstered earlier this year when it raised an additional $150-million.

Some of BDC’s investments this year include Vancouver-based LemonStand and Montreal-based Ooomf, as well as investments in FounderFuel ($6-million) and Extreme Startups

I had a chance recently to talk with Robert Simon, senior managing partner with BDC’s IT Venture Fund.

Who is BDC?

BDC does a whole lot of different things. We’re the largest venture firm in Canada with $1-billion in capital through direct investing and fund-to-fund. The IT arm is focused on the early side – we are doing seed and series A. We are allocating 80% of initial investments to seed and early stage.

Is BDC a government agency?

We are a Crown Corp., and we’re both a direct investor and, importantly, a fund to fun investor. We are an investor in at least half of the other Canadian venture funds. We do both roles because we see and hear from entrepreneurs that there is a lack of capital, and we are happy to syndicate with other partners to provide that capital.

How is BDC funded?

We receive a capital allocation. We closed on new fund in the first half of this year worth $150 million that will last about four years. It was important because there has been a lack of capital in Canada for early stage investment. We are looking to fill this gap with other early stage and venture partners

How do you define “seed”?

Seed is a startup with product prototype and a little bit of revenue. Series A is a company with a product in the market and little bit more revenue. Late seed is $200,000 to $500,000 to $600,000, whiles series A is $1-million to $2-million. One of the things important to us is follow-on investing through subsequent rounds.

How do you assess your startups?

They have to be world-class caliber companies. These companies are originating in Canada but they compete on a global stage. They not only have to be the best in Canada but worldwide. We are looking for investments that can compete globally and be large companies. We are looking for the next RIM, Nortel or even Facebook made in Canada.

Our sourcing channels come from direct investing. We also have strategic initiatives group, which is a supporter of many accelerators across the country – GrowLab, several in Toronto (MaRS, Extreme Labs and FounderFuel). Separate from that, even angels will want to invest with us because we are willing to do early-stage investing with them.

How important are teams?

We like technical management teams and technical founders. Technology changes so quickly, it helps to have a technical founder. They don’t need to code themselves but it’s helpful for them be aware of the tools and what they can do.

What’s your take on the startup landscape?

It is a lot better than five or six or seven years ago. It is a dramatic improvement for two reasons. One, entrepreneurs are taking the effort to find out what it takes to be world caliber and they are thinking beyond Canada. They are coming down to the U.S. to meet with customers, partners and getting better acclimated to the pace. Life is good in Canada but if you really want to be a world-caliber company, it is a pretty strenuous treadmill to get on.

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