Securing Startup Funding in Canada
If you’ve ever been involved in the startup process, chances are you’ve had a discussion about funding. To many, it seems the entire startup journey is characterized by the chase for funds. With global headlines only continuing to sensationalize the amount of money available to entrepreneurs, it’s easy to feel as though funding is some otherworldly, inaccessible thing that creates miracles, destroys hopes and dreams, and feeds into a larger game of economics.
One of the primary concerns of running a business is having money. Without it, there’s only so long a business can survive. With the Montreal ecosystem on the rise, funding has never been more accessible — if you do your homework. Potential startup visas for foreign entrepreneurs, increasing availability of funds from both governmental organizations and angel investors, like Anges Quebec, and increasing confidence in Montreal’s economy means that there’s no need to go far for funding. The journey instead starts with introspection.
It’s one thing to have an idea, and quite another to have a business. An audit of your affairs is in order: what stage is your business at? What kind of business are you running? Do you have a proof of concept? Who are your customers, and if you don’t have any, who will they be?
If you’re still looking at just an idea, you might need to take a step back and plan out how to turn the idea into a business. District 3 offers entrepreneurs programs to guide them through these stages, so they can emerge “beyond the noise,” as Steven Abrams of BDC Capital notes, of the startup scene. Steven argues that raising funds at the seed stage is incredibly difficult, so buckling down and working on the business aspects, such as validating your model to prove its value to the market, is important.
Your best investors are your customers. Once you’ve found your way to a validated business, you’ll find it’s easier to get access to the funding you need to get to where you’d like to be. Spending time on building your business, instead of on fundraising, gives you a stronger position to approach investors, offering them more incentive to sign on. With a strong business aspect, you prove that your idea is worth their money and time, and you gain access to the resources you need to achieve the vision you set out with.
To Stephane Pilette, VP of Investment Support at Anges Québec, the most important consideration is whether or not your idea will sell. He suggests an investor only poses three questions to quickly assess the investment opportunity: will the thing sell, how will you sell it, and do you have the right team to sell it? You need to have the business aspects locked down — your solution, your customers (or potential customers), and your team — to be competitive. From there, questions will find their answers. Your renewed understanding of your idea, and your business, will bring you to answering what kind of funds you’re looking for.
Sales is a great answer, but so is crowdfunding, or friends and family. The game of funding isn’t fixed, and not every company needs to chase a Series A. Funding your business personally, bootstrapping, or going through friends and family retains your control over your company’s operations, but might cost you the experience and insight a veteran investor might bring. Crowdfunding might get you incredible exposure, but it might take a while for you to see results. Angel investors and VCs will often sign on for a percentage of your company — but in turn, you gain their experience, network and resources.
With newfound clarity, you can move to answering more complex questions. Will you, the founder, stay on as CEO once you reach a certain stage? Do you source in Montreal, or do you look to other cities, or even countries? For the latter, Tony Duckett of XiVentures Fund Inc. suggests that looking outside of your city will allow for larger communities, funds and resources. It’s “opening up a bigger universe of potential,” and if it makes sense for your business, it’s definitely on the table.
If you’re not looking to move south of the border, Steven argues that there’s no time like now for securing funding in Canada: investors, talent and interest are moving north, which means staying in the country is an increasingly strong option. Surveyed angel groups made 505 investments of over $162.6 million in 2017, and with rising governmental support for tech (especially AI), emergent unicorns like Shopify, and, of course, a more stable political climate, Canada is taking strides towards providing what its entrepreneurs need.
Though you may not need to change locations, your team might have to shake up. If you’ve got a keen sense of business, and you’re willing to learn from those who are more experienced, you might see value in staying on as CEO. Tony states that for investors, “coach-ability” is key. You want someone in charge who listens, especially when your own money is involved. And as both Steven and Stephane note, there’s no shame in stepping down from the CEO position. It comes down to fit, and by knowing yourself and your business inside and out, you’ll be able to find that fit.
There are plenty of opportunities in Montreal, and around the world, to find the funds you need to build your business. But the most important thing to do before looking for funds is to make sure you have a business. While some startups can get by on just an idea (these are usually those involved in life sciences and biotech), the competitive nature of the funding search means that your best bet is to have as strong of a case as possible.
Through introspection, working with incubators and accelerators, and growing your network, you’ll be able to start thinking about funding as more than just a means to an end. A validated business model might not be requisite to finding the funds you need to realize your vision, but it sure is a good place to start.
