Money from a new, $50-million federal program will help local startups gain access to seed capital without needing to go to Silicon Valley, says the managing partner of Kitchener-based Garage Capital.
“That funding aspect is an important ingredient for any early-stage company,” says Mike McCauley. “You need that to have a complete, healthy ecosystem for startups.”
Garage Capital, the only Waterloo Region-based VC firm, is one of seven Canadian VCs that were named on Nov. 5 as successful applicants to the fund, which is part of the $400-million Venture Capital Catalyst Initiative, also known as the VCCI (pronounced “vicky”) program. The money, first announced in the 2017 federal budget, is designed to broaden and strengthen the Canadian VC ecosystem.
The founders of Garage – BufferBox co-founder McCauley and Vidyard co-founders Devon Galloway and Michael Litt – created their fund in 2012 precisely due to their own experience gaining access to capital. BufferBox (which was acquired by Google in 2012) and Vidyard were both funded in the Valley, money that emerged in the wake of their respective participation in the Bay Area’s well-regarded Y Combinator accelerator.
“We all raised our seed rounds of financing from Silicon Valley,” says McCauley. “One of the reasons we started Garage was because we didn’t want every company to have to do that. We wanted to create the early-stage funding models that exist in Silicon Valley. A lot of those early-stage-focused VC funds are started by previous [company] founders, and there wasn’t any of that in Waterloo [Region].
“We feel like this is the best way for us to help build bigger, stronger, better large companies in Canada and help them stay there.”
Garage has backed more than 70 companies to date and was one of the earliest investors in Kitchener’s North Inc., (previously Thalmic Labs). Other companies it has invested in include Clearpath Robotics and Bonfire.
McCauley says that since the announcement of Garage’s successful VCCI application it has seen “a lot of momentum from some of the larger institutional style investors who will also end up backing us.”
A condition of the federal money is that it has to be matched on a 1:1 basis with private money.
Garage’s VCCI application was made last February in part with help from BDC, the Business Development Bank of Canada; BDC maintains an outpost at the Tannery to help early-stage companies find money.
“We have a close relationship with BDC,” said McCauley. “They were helping the government put this program together and they encouraged us to put an application forward, because they felt that what we were doing, especially being from Waterloo [Region], was a pretty unique model for venture [funding] in Canada.”
Ultimately, McCauley says, the funding means Waterloo Region startups will have better access to startup capital.
“On the global scale, Kitchener-Waterloo is a really important [technology] ecosystem and for Canada it’s definitely one of the top places for companies to be created, built and scaled.
“[But] you need to have funding sources.
“If we look at Kitchener-Waterloo specifically we have a lot of key ingredients [for] an amazing place to start a company. We have amazing technical talent. We have amazing facilities for these early-stage founders to be able to go to get mentorship, to meet other founders, to get their companies off the ground.
“We have a ton of companies that are local, that are more mature, that are willing to give back and help these companies as well.”
But, he says, “the piece that I think a lot of people in the community have been focused on” is access to money.
“We see a huge opportunity here. That’s why we’re so excited about what this VCCI funding will allow us to do.”
