Canadian early-stage venture firm Golden Ventures has raised its fourth fund, a $100 million pool of capital that it will use to invest in between 20 to 25 companies, as well as a $20 million "Opportunities Fund" that it will use to make follow-on investments in standout performers among its portfolio. This is also the 10th anniversary for Golden Ventures, and its latest fund arrives at a time when the Canadian startup ecosystem looks healthier than ever, with a proliferation of angels emerging from past success stories, a number of new funds being announced, and unicorn valuations on significant funding rounds for multiple Canadian startups.
I spoke to Golden Ventures Founder and Managing Partner Matt Golden, and General Partner Ameet Shah about its plans for this fund, and about the Canadian startup and investment landscape in general.
"Over time, we're certainly seeing more and more interest in institutional LPs, more and more interest in the Canadian ecosystem, which I think is a net positive," Golden said. "Whereas before, the Canadian ecosystem was largely funded by Canadian institutions, so I think that's really positive, because you have to sort of be judgedon the world stage. And we're starting to meet that bar as both an ecosystem and as a fund."
Golden said that the game plan with this Fund IV doesn't really change in terms of their investment targets; while Golden initially set out to invest primarily in companies working on software products for mobile devices, it eventually shifted to a strategy of backing North American seed stage, mission-driven founders working on venture-scale opportunities across a range of verticals and categories.
"I would say that over time, our ratio of deals, Canada to U.S., we've increased the number of deals on a ratio basis that we do in Canada versus the U.S., just by virtue of the fact that the Canadian ecosystem is on a terrific, high-velocity trajectory." Golden said. "You've seen it coming, but I think it's really starting to hit its stride now, with lots of founders with 'big swing' vision, and an increasing interest in capital playing in the ecosystem."
Shah added that he also thinks we're trending toward more startups that originate in Canada setting up nodes in different geographies in ways that make most sense for their talent needs, and vice versa.
"Post-COVID, a lot of companies may start here, but with the geographical boundaries just blurring, there's really no reason they can't set up locations in different centers of gravity and take advantage of other ecosystems' competitive advantages," he said. "We had one that recently set up a location in LA, as well as Toronto, capturing some of the value of LA but also leveraging all the talent in Toronto as well. I think you're gonna start seeing more and more of that, where things are moving more toward networks, and not just cities in general."
As for this fund raise, it's one of three recent Canadian early-stage pools of venture capital to also include an "Opportunities Fund," which in each case has been described as a way for the firms to participate in later-stage deals in their star portfolio companies that they wouldn't otherwise be set up to invest in as an early-stage investment organization. Golden Ventures is also introducing another new type of investment to its roster with Fund IV, however.
"There's this concept, we call it 'Angel allocation,' [ … ] it's the idea that we can invest smaller checks, sort of 400-to-500 thousand, into companies where maybe the structure of the opportunity or of the deal may not fit what our core checks would be," Golden explains. "That could be, for example, a case where there's not enough room left in the round, or the valuation is outside of our core range, or maybe we're learning about a completely new space that's highly experimental — but we still have a high degree of conviction in the opportunity, in the people behind that opportunity, and the returns that it could generate."
Funds for those investments will come out of the main Fund IV pool, but the majority will still be targeting those core $20,000-$25,000 larger checks. Overall, though, both Golden and Shah emphasize that the primary goal of the fund at this stage is capitalizing on the growing trend they see of more opportunity emerging in the Canadian ecosystem, and the impact that's having in terms of startups across North America.
"When you talk about who are the the top five to 10 companies in Canada, for a long time, it was really the same group," Shah said. "Now, you've got this new crop of people that have come in and feel like they're still on an upward trajectory, and I think that's just really exciting as well."