8 Mar 2016
Go East Young Startup!
“The journey of a thousand miles begins with one step.”
“千里之行,始於足下”
Laozi c.580 BCE
Building on 19th Century US westward expansion (“Go West Young Man”), much of the current innovation in technology has been West Coast focused, particularly in California’s Silicon Valley, which has for more than 50 years been an intellectual epicentre of the technology world.
Over my long tenure in the vanguard of technology trends, I have witnessed a tectonic shift in this comfortable, yet outdated, world order. Today the best and brightest innovators and entrepreneurs must also look east, especially to China, to fully embrace global reality of the 21st Century.
Many of you might be wondering about the slowing growth rates in China? Like many aspects of China, there are many perplexing contradictions that are beyond the scope of this post. It is certainly true that Chinese infrastructure investments and some manufacturing has been overbuilt. Not so in the technology industry. The difference is that there is a huge gap as the Chinese population increasingly moves to middle class status and the country needs to solve some huge issues (e.g. environmental issues around air quality). As a result, ICT, Green Technology, Life Sciences and other knowledge-based businesses continue to provide huge upside opportunities.
There is no question that China is a complex and difficult market to access. Knowing this, how can Canadian entrepreneurs master the new globalization landscape? Read on …
In 2015, my assistance was requested from an innovative group of investors and social entrepreneurs to pilot a new program, called CAMP (short for China Angel Mentorship Program) aimed at forging new international linkages tied to the momentum of startups. By identifying some of the best Canadian startup entrepreneurs, investing in them and helping them to engage with China, this program has the opportunity to drive a whole new generation of engagement between China and Canada, in the fast moving world of startups, technology and innovation.
CAMP is created and led by Liu Zhishuo (Peter Liu), Wang Tong (Tony Wang), Liu Yingna (Angela Liu), Zhang Yi Chin and Yang Jun (Alan Yang), all very savvy strategists and investors who aspire to “cross-border ecosystem building” between China and Canada. They work in Canada through CCAA (China Canada Angels Alliance) which made 23 investments in 2015 and in China through River Capital which made 50 investments in 2015. Since, as a westerner, you may not know these leaders (pictured below in Beijing), I will provide some background and context.
I was asked to help this core group from CCAA to help find a pivotal group of Canadian mentors, who were able to assist CCAA to shape the CAMP program and ensure that the most qualified cadre of startups were selected to fill the 2015 cohort. Many of us, including Aron Solomon, Peter Evans, Benton Leong, Chris Flood and yours truly were in Beijing to also assist in the work that was much more focused on the Chinese mentor group, many of whom are indicated at this link.
Now let’s turn to the CAMP framework. As a uniquely conceived variant of the classical “startup accelerator”, CAMP involves CCAA, along with the Canadian mentors, selecting the 10 best Canadian startups (initially restricted to Ontario) who are uniquely engaged with:
- an up to $200,000 equity investment
- a detailed orientation session in Canada to build the groundwork for the best China experience
- matchmaking with one or more mentors in China, who are chosen specifically for each company based on market and need.
- an intensive 2 week immersion in Beijing, including many company visits, one-on-one meetings and a demo day in front of top Chinese investors
- an 18 month post Beijing engagement with the chosen mentor to provide targeted assistance while the company grows and expands.
Because this was a first iteration, many companies had no idea of what to expect. Many were a bit sceptical, but being true entrepreneurs, they took the plunge. I can say that each and every startup from the first 2015 cohort of CAMP found the immersive experience in Beijing to be an exhaustingly intensive experience, but one that was profound and life-changing. The level of access to high level networks (“guanxi”) was extraordinary. That, coupled with the strategic insight of the CAMP organizers, and matched mentors, elevated the experience in Beijing.
Based on the inaugural CAMP, the organizers are committed to making the second cohort in 2016 even better. That call for the best startups will open up in the coming weeks. Until then, you might ask: why should you pay attention to CAMP and what sets it apart?
Access and Understanding: First of all, although China is a huge and growing market, it is very difficult for most companies, not the least a young startup, to properly engage with it. It is a complex market, fraught with pitfalls and unknown territory, from language, customs and even different regulation. CAMP provides personal connections (guanxi) through the mentors, and a degree of wisdom not likely to be available anywhere else. No company should consider China without a strong relationship with a trusted guide and mentor.
Canada-China Engagement: I firmly believe that CAMP has the potential to open up very senior intergovernmental engagement between China and Canada, but through the lens of building the new economy via innovative startups. Yet, startups have not historically been a major focus for governments at the national, provincial or regional level. I firmly believe that CAMP has sown the seeds that may increase bi-literal impact.
Huge Market Gaps: The unprecedented growth and transformation of China over the last quarter century has created huge demand and huge needs. Much has been written about that. But, less obvious, is that there are many companies in China looking for unique international opportunities. It is as challenging for them to engage outside China as it is for a Canadian company to understand China.
Growth Hacking: Perhaps the number one reason that startups go to California is to tap into the “growth hacking” expertise, an area in which Silicon Valley continues to be a world-beating innovator. Less well known in the west is that a new generation of Chinese tech firms, particularly in B2C and mobile, has taken growth hacking skills and strategies into hyperdrive. Surprising as it might seem, these may well make Silicon Valley growth vectors look tame by comparison. Every CAMP participant will have a unique opportunity to tap into this expertise.
Whether you are a startup with world-beating ambition or an tech ecosystem leader looking for future opportunities, stay tuned for the launch of the CAMP website, which will be accompanied by a call to find the 10 best startups Canada has to offer.
3 Jan 2022
Adrenaline Fund Pumps a High Energy First Year into Early Stage Investing
2021 marks the first full investment year for Adrenaline Fund which uniquely applies a passive model, fuelled by our startup and angel ecosystem, to early stage investing. Adrenaline Fund was founded in 2020 in cooperation with 2 other sub-funds in the Archangel Network of Funds. Through the vagaries of. the COVID-19 pandemic, 2021. was our first full year of investing fuelled by a remarkable group of Limited Partners who are accredited investors interested in our Purpose.
PURPOSE
The entire team at Archangel Network of Funds, and the Adrenaline Fund, is driven by a core Purpose, developed over years of building and supporting early-stage companies. In a nutshell, we want to directly impact Canada’s economic prosperity into the future by:
In this post, I’ll further explore our unique model, an exceptional team, what we’ve done so far, and propose a future where this impact can grow many times larger than our results to date.
TEAM
The Adrenaline Fund team has unparallelled experience in building companies, mentoring startups and selecting and investing in the next generation of Canada’s tech leaders but at the early stages. In addition to myself, our team includes Benton Leong and Amber French, and is ably complemented by Venture Partner Danielle Graham and the large Archangel Network of Funds team, many of whom are pictured above. Years of strategic business leadership, coupled with some of the most sophisticated selection and investment savvy, are a big part of what makes Adrenaline unique.
MODEL AND WHY IT WORKS
As mentioned, we believe that the Adrenaline Fund model and thesis is unique, at least in Canada, by fusing the power of a passive approach (like an ETF in the public markets) to the early-stage Angel investment ecosystem.
First of all, the investment decision is designed to support the existing Angel ecosystem through a set of rules to govern the investment process. At a high level, the Rules, shared with LPs, stay largely the same but are tuned in response to changes in. the ecosystem. Thus, rather than active decisions, the focus is on tuning the rules and working to ensure that the angel and startup ecosystem remain of high value.
In case some of you think, like a colleague initially did, that such a “blind investment process” is a bit crazy and perhaps akin to wagering on slot machines, nothing could be further from the truth. The secret sauce of Adrenaline is the collective value-add of the ‘qualified lead investors’ who mentor and provide ongoing strategic oversight (e.g. as a board member or board observer).
In fact, research by Brian Smith, Professor of Entrepreneurship and Finance at Wilfrid Laurier University along with global tech investment trends studied by BDC Ventures, shows an almost 25 times multiplier of success for such angel-backed companies. In summary, in generating larger ‘Scale Up’ companies (with valuations reaching US$250M), Canada has a dismal 0.3% track record (or 1 in 300) compared to the 2.5% number for the us (or 1 in 40). Within the Angel ecosystem, specifically GTAN where the study was conducted, an amazing 8% of investee companies reached the $250M threshold. Unpacking the reasons for this incredible out-performance would include factors like: the GTAN selection process, the ongoing value-adds of experienced ‘deal leads’, the strength of the ecosystem support in the Toronto-Waterloo Tech Corridor where GTAN focuses, and syndication with other capable seed/angel stage investment funds.
The bottom line is that, while adding the energy of investment to an existing process that works, Adrenaline Fund is set up for success.
Further, he model is structured to be open and accessible to the greatest number of Accredited Investors by having the aggregate investment staged over 5 equal annual cash instalments (say $250,000 at $50,000 per year). Since the fund is structured to segregate ‘Vintage Years’, and each Vintage aims to invest in 8-10 companies per year, this ensures a diversified portfolio of 40-50 companies at an extremely affordable entry point. The Vintage structure allows new LPs to join once at the beginning of each year, thus growing the maximum amount of each Adrenaline investment and helping startups even more.
Most importantly, the fund attracts investments from individuals who had never been angel investors since it provides deal flow and deal structure for new investors. In other words, we are unlocking new capital to support Canadian innovation.
PORTFOLIO
The portfolio reflects the diversity of innovation in 2021, transcending the software and consumer focus of a decade ago, with more and more patentable intellectual property and deep tech. The 2021 vintage portfolio comprises:
We are excited to welcome the following companies as our first Adrenaline Fund vintage, reflecting the powerful value-adds of the Angel Ecosystem we support:
Amber, Benton and I are pleased with the successful validation of our passive, rules-based model for Adrenaline Fund and are excited for how this will grow in 2022 and beyond.
Feel free to reach out to any of us to learn more and get involved. We’d love to have you on board.