Targeting Local Startup Excellence

Lessons Learned From Real’s Orbit Investment Strategy

Real Ventures
Jul 29 · 12 min read

By Isaac Souweine

Two years ago this month, Real launched Orbit MTL, a $31M early stage fund focused on the Montreal startup ecosystem. Since we closed the fund we’ve been busy, investing about $9M in 61 investments across our direct portfolio, two accelerators, and our student VC fund. In this post, I share details about those investments and the strategies behind them, as well as some of the lessons we’ve learned along the way.

Why Orbit

For Real, Orbit is an opportunity to continue pursuing ecosystem-focused investing, a hallmark of our firm since it was founded, even as our other funds move upstream in the financing chain. As in past Real funds, Orbit combines acceleration, high-volume seed investing, and community collaboration to create unique deal flow and networks of support. What’s new is the level of focus, including: dedicated partners, a separate investment process, and a hyper-targeted mandate. By forming a discrete team that hones in on a single ecosystem, we aim to do even more to catalyze startup activity — creating new platforms, building investment syndicates, and attracting outside capital.

Who we are

Direct investing

As with Real’s larger funds, Orbit prefers to lead or co-lead rounds; so far we’ve played that role about half the time. Leading rounds takes more work — in due diligence, negotiation, and syndicate building. Yet in our view, the payoff is worth it. As lead investor we find we develop stronger relationships with founders while gaining increased influence on terms and round construction. We also believe that leading pushes our investment team to think more independently.

Orbit’s average investment size so far has been ~$220K. Unlike Real’s larger funds, the rounds we join are all syndicated; the highest proportion of any round that we have taken has been 50%. The full range of round size and pricing has been wide, but most rounds have been $1M or less, priced between $3M-$5M pre-money. Investments have been equally split across equity and convertible instruments, mostly SAFEs. Our co-investors include other funds and angels from Quebec, Ontario, and the United States. We’ve also made four investments alongside Real’s main seed fund; these are typically larger seed rounds, such as our co-investment into Breathe Life, a company founded by Ian Jeffery, the first GM of FounderFuel.

Like any regionally-focused fund, Orbit MTL seeks to invest in areas of local excellence. In Montreal, AI projects are at the top of that list, and we’ve made a number of investments on that theme, for example:

  • Omnirobotic makes industrial painting robots guided by machine vision. Founded by Francois Simard and Laurier Roy, both experienced roboticists, we co-invested in Omnirobotic with Element AI, the AI solutions provider seeded and co-founded by Real.
  • Korbit AI is transforming online education using natural language processing. Founded by Iulian Serban, a student of Yoshua Bengio, we backed Korbit alongside strong Bay Area co-investors who shared our interest in investing in Montreal’s AI community.
  • InVivoAI uses machine learning to accelerate drug development in low data environments. The company’s co-founders, Dan Cohen, Therence Bois, Prudencio Tossou and Sebastien Giguere, work at the cross section of AI and computational biology. The company is backed by a strong group of Canadian early-stage investors.
  • Keatext provides AI-powered text analytics for feedback interpretation. Co-founded by Narjes Boufaden, another student of Professor Bengio, and Charles-Olivier Simard, Keatext has been in the Real Ventures family since 2016 when the company completed FounderFuel.

Orbit has also found a number of opportunities to invest in technology generated by Montreal’s world-class universities. Some examples include:

  • Sollum, which builds programmable LEDs for agriculture and beyond. Founded by Francois Moisan, Gabriel Dupras, and Louis Brun, Sollum combines unique IP and technical expertise from ETS with an experienced founder on his fourth startup. The company is supported by a strong contingent of Quebec angels.
  • Spark Microsystems, which builds short wave wireless radios that seek to replace Bluetooth. Founded by Fred Nabki and Dominic Deslandes, Spark leverages their years of research at UQAM and ETS. Orbit led the investment into Spark alongside Real’s main seed fund.

While portfolio themes like AI and deep tech have emerged, Orbit has remained sector and technology agnostic, making investments in SaaS, marketplaces, consumer, real estate, cyber, aerospace, and more.

Accelerator investing

So far, Orbit has made 23 investments through FounderFuel across three cohorts. You can check out all of the pitches here. Applied AI has been a strong theme in each cohort, but we’ve tried a bit of everything, including lots of SaaS, hardware, robotics, tech-enabled services, health tech, and more. We’ve also continued to use the program to develop our own expertise. For example, Sam Haffar’s posts on raising Series A and mine on building fundraising stories were both workshopped in FounderFuel.

Like all of our investment strategies, FounderFuel is designed to create reinvestment opportunities for Real/Orbit. So far we are on track, having doubled down on five companies, including Invivo AI, discussed above, and four others:

In 2019, Orbit MTL also finalized a major strategic investment in Techstars AI. Techstars is a dominant global player in acceleration, with nearly 50 programs running across the globe and one of the world’s strongest startup networks. Investing in a second accelerator was not part of Orbit’s original mandate, but when the opportunity arose to bring a Tier 1 global player to Montreal, we worked with our wonderfully supportive investors to make it happen. Orbit’s investment in Techstars AI deepens our longstanding relationship with Techstars, building off the structure created when Real co-invested in Techstars Toronto,

In late 2018, Techstars AI made its first 10 investments under the leadership of successful entrepreneur Bruno Morency, with Justine Marchand running programming. We are thrilled about the program’s ability to support strong local AI companies like Arctic Fox AI, which uses AI to better diagnose brain illnesses and to bring leading startups to Montreal from around the world, and Green-eye (Israel), which uses machine vision to reduce herbicide usage.

Student VC

We believe that Front Row Ventures will be one of the next great platforms for Canadian founders and investors. Front Row Ontario kicked off this past spring; by 2020 we plan to launch chapters across Canada backed by a pan-Canadian fund.

What we’ve learned about Montreal

1. It’s a great time to be a startup in Montreal

2. Montreal needs more early-stage capital

3. Montreal founders should broaden their fundraising horizons

What we’ve learned about early-stage investing

1. Acceleration won, and now it’s everywhere

At Real, our work on FounderFuel has given us a front row seat to this evolution and we’ve embraced it, partnering with Techstars to create two programs — Techstars Toronto and Techstars AI — that combine the best of Techstars’ scale and networks with our local connections and expertise. Our partnership with Techstars ensures that we are deeply integrated into programs that will be linchpins in our key investment ecosystems. The partnership also inspires our own acceleration work, giving us a chance to learn new techniques and apply best practices from a global leader.

2. Platform thinking is on the rise

  • Diagram has built a platform based on Power Corp’s business networks, strong in-house support teams and access to capital
  • TandemLaunch matches talent to university IP, forming companies that it then connects to a network of corporate funders/buyers
  • Centech’s platform is based on office space, programming, corporate access and a community of deep tech founders

As venture investors, we are happy to see strong platforms generating unique companies that we can invest in. As a platform builder ourselves, the creativity of others pushes us to keep innovating and looking forward.

3. Ownership targets, even at pre-seed

Looking ahead


Believing

Knowledge is the key to building transformative technology.

Real Ventures

Written by

Real is a leading source of capital for game-changing entrepreneurs and a driving force behind emerging tech ecosystems.

Believing

Believing

Knowledge is the key to building transformative technology.

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