SPOTLIGHT SPEAKER SERIES: FEATURING MICHAEL HYATT

April 28, 2017
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The Inaugural Spotlight Speaker Series

Espresso Capital was excited to host the first Spotlight Speaker Series with Razor Suleman featuring Michael Hyatt, co-founder of BlueCat. The event brought together some of Toronto’s most prominent technology founders and entrepreneurs at the BrightLane office earlier this week. With Hyatt in the hot seat, the event took a deep dive into the mind of the entrepreneur to uncover real truths and lessons.

“We need to have founders talk and be united, and be honest about how difficult the startup journey is.” – Razor Suleman, founder of Achievers and Espresso Capital board member.

The Hot Seat

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Michael Hyatt is a Toronto tech entrepreneur and CBC business commentator on the Dragon’s Den spin-off, Next Gen Den. Along with his brother, Richard Hyatt, Michael has completed two successful exits as majority owner. Most recently, Michael and his brother sold BlueCat Networks to an American private equity firm for $400 million. Michael discussed his opinion on venture capital financing and his choice to fire himself from his own company.

“You want to do the right things for your staff. Maybe the right thing to do is fire yourself. I want to find people who are better than me to replace me.” – Michael Hyatt

Michael’s advice for entrepreneurs? Diet, sleep, and exercise. The path of an entrepreneur is not easy, so it is important to look after both physical and mental health.

Tweetable Takeaways

THANK YOU

Thank you to our community partners BetaKit, BrightLane, Spotlight Awards, and The Upside Foundation. Check out our blog on how Espresso Capital’s Alkarim Jivraj is giving back through The Upside Foundation.

See you next time!

Please join us for the next Spotlight Speaker Series on May 24th at the OneEleven building. Keep an eye out, as we will be releasing the speaker information and link to register soon.

 

Author: Jessica Ng, Analyst

THE UPSIDE FOUNDATION WELCOMES NEW PARTNER, ESPRESSO CAPITAL

The Upside Foundation of Canada is excited to announce a partnership with Espresso Capital. Espresso Capital provides founder friendly capital to technology companies across Canada. Since its inception in 2009, Espresso has funded over $170 million in startup lines of credit and growth capital to over 225 companies.

Espresso is committed to giving back to the community. Alkarim Jivraj, President and CEO of Espresso Capital, has donated 1% of his Espresso holdings to the Upside Foundation.

“Canada is a great place for startups. We benefit from world-class education and health care, not to mention generous taxpayer funded assistance to support technology development and commercialization. I think we have an obligation to give back. Upside offers a unique model to give back using shares. Think of it as entrepreneurial social responsibility” said Alkarim.

As part of the partnership, Espresso will work with the Upside Foundation to increase awareness and support of the Upside Foundation 150X150: Turn Equity Into Charity campaign. Upside is aiming to increase their membership to 150 companies by the end of the year, in celebration of Canada’s 150th birthday. Espresso joins HubbaWealthsimpleWattpad, and over 86 other companies in this challenge.

“We are very excited to add Espresso Capital to the network of companies supporting the Upside Foundation,”, says Rob Antoniades, Co-Founder and General Partner at Information Venture Partners and Co-Founder and Chairperson of the Upside Foundation. “And are pleased to welcome Alkarim Jivraj, Espresso’s visionary CEO, to the Foundation’s Board of Directors, and thank him for his personal commitment to share the upside from his ownership of Espresso shares.”

About The Upside Foundation

The Upside Foundation is a registered charity that provides an innovative philanthropy platform to enable Canadian startups and high-growth companies to give back by donating equity – “Sharing the Upside”. Companies pledge warrants or stock options, which are then converted into cash and donated to the selected registered Canadian charity after a liquidity event (I.e. IPO, acquisition).

For more information, please email info@upsidefoundation.ca or check out the website at www.upsidefoundation.ca.

THE TROUGHS AND TRIUMPHS OF STARTUPS


April 10, 2017

The Espresso Capital team had a great time at Troughs and Triumphs last week, hosted by Influitive. Mark Organ, Influitive founder and CEO, began the evening event attributing part of his success to meeting and listening to “experienced practitioners and leaders.” The panel consisted of some of Toronto’s top SaaS executives, including Steve Woods, Ashira Gobrin, and Razor Suleman. Together they discussed the “troughs and triumphs” of their journeys and how they would do things differently if they were to do it again.

Lessons learned from the panelist:

Steve Woods is the founder and CTO at Nudge Software, based in Toronto. An engineer by training, Steve became the Group Vice President of Software Development at Oracle before joining Nudge. Steve advised the crowd that there is a “certain point where there is no return, and that is where you want to reach.”

“Embrace darkness and fear; refuse to stop moving forward.” – Steve Woods

Ashira Gobrin is SVP of people and Culture at Wave HQ, a software for small businesses to track and handle money. Ashira discussed the importance of human capital, and incorporating trust and transparency in the workplace in order to foster good morale. She also shared some ways to balance work and home life, hers being sacrifice and compromise.

“Customers can often articulate what the problem is; the smartest are those that listen.” – Ashira Gobrin

Razor Suleman founded Achievers, a cloud-based platform which helps align company and employee values through employee recognition. Razor shared his incredible journey, explaining how “startup life is all about perspective”. A piece of advice he shared with the founders in the room was to engage in debt-financing, and strike the healthy balance between equity and debt.

“Know your three priorities for the day. Find a way to cut the noise and focus on the signals.” – Razor Suleman

Tweetable takeaways:

We would like to thank Influitive for hosting a great event which brought the Toronto tech community together for an evening of insightful conversations.

WOMEN IN TECH WEEK 2017

The technology industry is growing fast, and the demand for this knowledge continues to rise. Reshma Saujani, Founder and CEO of Girls Who Code, stressed that “computer science and computing skills are a critical path to success in today’s economic landscape.” However, female representation in the technology sector is at staggering low numbers.

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As of 2015, women make up only 12% of practicing licensed engineers and 8% of software developers. The percentage of women pursuing computer science degrees dropped from 37% in 1984 to 18% today. Although women make up approximately half of the Canadian workforce, the Information and Communications Technology Council (ICTC) found women hold only a quarter of the communication and information technology jobs, and just 5% of leadership positions in technology.

“Women remain dramatically underrepresented in technology fields. They’re missing out on opportunities and the world is missing out on their ideas,” according to Facebook COO Sheryl Sandberg at the Governor’s’ Summit in San Francisco earlier this year. It is important to provide women with the opportunities to learn and explore careers in tech, through education, events, and mentorship. WinTech’s Women In Tech week starts on February 27th. Through a series of events and activities, WinTech aims to recognize women tech leaders and empower others in the industry.

Women in Tech with Espresso Capital 

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In light of Women In Tech week, Espresso Capital has reflected upon our own clients and would like to recognize and thank our women founders and leaders. Earlier this month, past Espresso client HomeStars, a platform which connects homeowners with service providers, was acquired by HomeAdvisors, an IAC company. HomeStars was founded in 2006 by Nancy Peterson to help homeowners make the best hiring decisions in regards to home improvement. The acquisition of HomeStars strengthens HomeAdvisor’s North American presence in the home service digital marketplace. HomeStars will join one of the largest marketplaces in this industry, and further transform how homeowners connect with home service providers. We are very excited for Nancy and look forward to see what is to come.

Women founded or co-founded companies represent almost 10% of total companies funded by Espresso Capital, a number we would like to see grow materially this year, and in the future.

Find an event near you

Toronto

Monday: Diversity in Tech and Design

Tuesday: Is Web Dev The Right Career For You?

Women in Tech Toronto: Networking and Panel Discussion

Wednesday: Analytics and Data Visualization

Women in Tech Book Club Meetup

Social Media: The Future of Women in Tech

Thursday: Resume and LinkedIn Building

March 6th: SheEO Summit

Vancouver

Monday: Breakfast Kickoff: Bringing Out The Big Guns

Tuesday: Incubating The Next Techstars

Women, Wine, & Tech @ IQmetrix

Wednesday: Taking Charge of Tech: Tech Summit

Thursday: Women in Tech Awards Soiree

Friday: VANTEC Women’s Pitch Night

Saturday: Catch the Bug

Sunday: IDance: Women in Tech Girl Power Cardio

 

For more information about each event or events in Regina, Winnipeg, Kelowna, Denver, and Boston, visit http://womenintechweek.ca/.

 

Author: Jessica Ng, Financial Analyst

WHY IS CORPORATE CANADA SO AFRAID OF STARTUPS?

January 7, 2016

As Canada’s startup ecosystem has gained more momentum, one of the most puzzling issues is why there is so little corporate venture capital.

As much as Canadian startups need more capital, the absence of corporate players is strange, particularly given there’s so much momentum in the U.S.

You would think large companies such as Canadian Tire, Tim Horton’s, Loblaws, Sobeys and Shoppers Drug Mart would be looking to invest in innovative startups to jump-start growth and establish stronger digital footholds.

Unfortunately, this isn’t happening. Instead, Canadian companies are watching from the sidelines. At best, they are dipping their toes in the water by creating low-risk partnerships and opening offices in startup hubs. But if you’re looking for corporations actively investing in startups, you’re out of luck.

So why the absence of corporate VC activity?

Is it a lack of expertise or sophistication? Are there bigger financial priorities? Are they still licking their wounds from the 1990s when corporate VC portfolios didn’t perform well?

It may be all of the above but my take is that Canadian corporations have to get back into the VC business.

The biggest reason is they need to pro-actively and aggressively address disruption in their business models.

In a growing number of sectors, startups are changing the rules of engagement. The old ways of doing business are being destroyed. New players are outmaneuvering large companies by doing business differently or better. Look at what Wealthsimple, for example, is doing in the financial management industry by lowering fees within a margin-happy landscape.

If Canadian corporations aren’t actively involved in supporting startups, they risk having their business models weakened or, even worse, they will be marginalized competitively. It’s not a matter of whether Canadian corporations should invest in startups, it’s about how much, how many, and how aggressively.

The big issue facing Canadian corporations is how they get into the VC game. Do they allocate capital into an established VC fund? Do they invest directly and, if so, how would this activity be operated and structured?

There are a variety of options, but perhaps the easiest is simply a public declaration by a large, established player that it wants to invest in innovative startups. This would unearth a flurry of interest from startups looking for capital, and, as important strategic partners. For companies, the biggest challenge would be sifting through the different opportunities to identify potential investment candidates.

This approach is a win-win proposition: It will give corporations an excellent way to see what’s happening within the startup ecosystem and, as important, to establish connections within the startup ecosystem. As much as startups can benefit from new sources of capital, there are also benefits for corporations looking to be more agile, innovative and forward-thinking.

If Canada’s startup ecosystem is going to thrive, there have to be multiple players at the table. It requires entrepreneurs, incubators, accelerators, VCs, universities, and government (albeit in a supportive role) and large companies. This is how a healthy and vibrant ecosystem will be created that delivers benefits to everyone.

Given the exciting things happening with startups, it makes no sense for Canadian companies to be sitting on the sidelines. My suggestion is that they jump into the game now. Forget about a slow, no-risk approach that involves partnerships or alliances. Instead, let’s see some capital poured into startups that are aligned with a large company’s strategic vision and the challenges being encountered as new technologies disrupt their businesses and industries.

This new course will take courage, a leap of faith and new ways of doing business, but it has become a competitive necessity.

A final thought: In a world of low interest rates, Nicolas Colin argues that venture capital investments are a low-risk, high reward proposition.

Note: This article was originally published at markevans.ca

#SAASNORTH: THE SOCIAL BUZZ

December 1, 2016

Espresso Capital was very excited to be a sponsor for this year’s first SAASNorth Conference presented by L-Spark & CUBE Media in our nation’s capital of Ottawa. Over the past two days, there was a long list of “SAAS-y” speakers sharing their knowledge and expertise. To sum up the great insights, we have collected our highlights from the event. Looking forward to seeing you all back for next year!


ESPRESSO ROAST: MEET JYOTIN HANDA, ESPRESSO CAPITAL’S DIRECTOR OF FINANCE


November 4, 2016
Meet Jyotin Handa

We’re pleased to welcome Jyotin Handa to the Espresso Capital team as our new Director of Finance. Jyotin joins us from Maple Leaf Foods where he was a member of the company’s corporate finance and investor relations group. Prior to Maple Leaf, Jyotin worked with Ernst & Young where he led audit engagements for public and private companies.

We recently sat down over a cup o’ joe to get to know Jyotin better and hear what he hopes to do in his new role.

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Tell us about your experience before Espresso Capital.

I began my career in Ernst & Young’s Assurance practice. At E&Y I had the opportunity to build my foundational finance experience advising and working closely with, small and medium-sized companies in a variety of sectors like technology, food and beverage, and real estate.

I transitioned into the consumer products space by moving to Maple Leaf Foods where I held a unique finance/investor relations hybrid role. When I joined, the company was emerging from a long and significant transformation that resulted in a number of structural changes to the business. This gave me a rare opportunity to work at the epicenter of a leaner and refocused growth company. I was part of a broad set of “outside the box” projects that blended finance, investor relations, and strategic communications.

Why did you decide to join Espresso Capital?

It’s an exciting time in Canada’s booming tech sector! I wanted to join Espresso because they are well positioned in the market with a unique value proposition, and a strong track record and reputation of having real and meaningful impacts on their clients.

Espresso is still in its early stages, and there is a lot of upside and growth potential for the company.

What are your goals and short term priorities?

My highest priority is to soak in as much as I can about our current clients successes, needs, and challenges. I am focused on analyzing the operating environments and business models of the tech ecosystem and hope to leverage my “big company” finance background and training to help build on and support Espresso’s growth model.

What was your inspiration to pursue a career in finance?

At a very early age I excelled in math and problem solving, so it was a natural step to pursue a business degree in school. I know it sounds very cliché, but I gravitated towards the chartered accountant designation in school after seeing the evidence of all the doors the designation would open for me.

What do you predict will be the “next big thing” in technology?

It’s hard to ignore how close we are to the commercialization of driverless cars and automated drone deliveries. I can’t go a day without reading about the progress and investments being made by companies like Uber, Apple, Google, GM, etc. in this space.

In the case of driverless cars, there is significant upside in safety (fewer car accidents from careless/distracted driving) and efficiency (i.e. productive commutes, reduced need for parking).

In the case of drones, the experiments are encouraging not only for consumer applications and convenience, but also for emergency or relief applications, such as delivery of supplies to remote/dangerous areas, or surveying/relief in areas hit by natural disasters.

What is your caffeinated beverage of choice?

This is really boring, but my beverage of choice is black coffee. I start each morning with a fresh cup made from my French press (I’m trying my best to stay clear of coffee pods).

SR&ED VS. DIRECT INVESTING DEBATE: IT’S TIME TO SPEAK UP


November 1, 2016

The Federal Government’s Advisory Council for Economic Growth has now issued its first set of recommendations to spur broad economic growth, including recommendations relating to increasing institutional investment in infrastructure, attracting foreign direct investment and enhancing our system of economic immigration.

Importantly for stakeholders in the Canadian technology sector, the Council will next turn its attention to innovation, including a review of the SR&ED program.

We wrote a blog post referencing recent press critical of the SR&ED program and advocating for direct investment. This attack appears to be part of a lobbying effort to shift government funding from a highly democratic SR&ED program (indirect investment) to a highly selective private venture capital program (direct investment). What stands out about the conversation is that it is one-sided. Small businesses who are the unsung heroes of technology commercialization in Canada have been silent on the sidelines. It is time for you to speak up!

CRA provides very little segmented data on the SR&ED program, so we’ve used exit activity as a proxy for R&D commercialization. CB Insights recently reported that Canada ranks fourth globally in terms of number of exits (behind only the US, UK and India). This impressive ranking is due in part to the success of Canadian private small businesses in commercializing R&D. Additionally, more than two-thirds of these exits have no institutional backing (i.e. venture capital), according to CB Insights. The argument that direct investment is better for Canada’s innovation economy rings hollow.

The critics of the SR&ED program focus on Canada’s global R&D rankings and generalize that the SR&ED program is ineffective. While generalizations make for good headlines, they make poor inputs for policy decisions. What these critics fail to mention is that SR&ED is comprised of two parts, approximately $1.2 billion in cash refunds to CCPCs (effectively small businesses), which as shown above, is highly effective and approximately $2.3 billion in credits against taxes payable to public and larger private corporations.

When looking at SR&ED, the more meaningful conversation is whether the public and larger private companies that receive the biggest portion of the SR&ED expenditures should continue to receive this subsidy when they, unlike small business, have access to alternative R&D funding sources.

If the debate was two-sided, supporters of the SR&ED program would highlight that 95% of small businesses are not suitable for the high stakes venture capital investment model; that this subset of the technology sector is responsible for the vast majority of the sector’s employment; and by diverting funding away from small businesses, overall R&D activity in Canada will decline dramatically, as direct venture capital will focus on supporting a small number of later stage companies with expansion capital. Shifting funding from SR&ED to a direct private investment model will not only limit the capacity of small businesses to invest in innovation but will make Canada less innovative in general.

Direct private investment is by nature focused on investing in a limited number of companies promising outsized returns. Direct public investment (i.e. grants) on the other hand is vulnerable to the vagaries of bureaucratic decision making on what does and does not deserve R&D investment. Whereas SR&ED is democratic. Any company performing eligible R&D activity based on objective criteria earns the tax credit.

We think private SMBs, and particularly small non-venture-backed companies are underrepresented in the Government’s consultations and their perspective is missing in the public SR&ED vs. direct investment debate. Founders, CEOs, board members and advisors to private businesses need to speak up, and share with the Government and its Advisory Council firsthand evidence of the SR&ED program’s effectiveness in fostering R&D, commercializing technology, creating jobs and making this segment of the Canadian economy world class.

Your Voice Counts!

Download our template letter and send an email to Minister Bains, your local MP. Include us in your correspondence by copying ajivraj@archive.espressocapital.com.

KEY CONVERSATIONS ABOUT CANADA’S INNOVATION STRATEGY

Innovation Strategy Canada

In June, the Canadian government announced its vision to build a more innovative Canada, and in July the Minister of Innovation, Science and Economic Development,Navdeep Bains, provided some additional insight into Canada’s Innovation strategy in an interview with The Globe and Mail. This post highlights our perspectives on some of the key topics that promise to play an important role in shaping these consultations and the future of the Canadian technology sector.

The SR&ED Effectiveness Debate

There has been quite a bit of press recently on the SR&ED program, including some general criticisms of its effectiveness. Many commentators group the estimated $1.3 billion in refunds received by CCPCs (effectively SMBs) with the estimated $2.2 billion in tax credits to larger corporations, and point to Canada’s global R&D productivity rankings in making the case against SR&ED. While generalizations make for good headlines, they don’t make for good policy. It is important to set the record straight as these misinformed criticisms could have a long-lasting adverse impact on government policy.

The fact is that Canada’s technology SMBs outperform their global counterparts. If you look at exits as a proxy for commercialization success, Canada ranks fourth globally in exit activity (according to CB Insights), trailing only the United States, United Kingdom, and India (which has forty times our population). Interestingly, Canada ranks ahead of larger global economies, including China, Germany, and France. Given the SR&ED program’s critical role in funding SMB R&D, the evidence shows that this segment is clearly punching well above Canada’s global economic weight class.

Direct (Grants, VCAP) vs. Indirect (SR&ED) Investment Debate

The detractors of the SR&ED program suggest the Federal Government should shift funding from indirect to direct investment, effectively pitting SR&ED against a future VCAP.  We believe such an outcome would represent a setback for the technology ecosystem as a whole.  By some estimates, non-venture-backed companies probably represent 95% of all technology companies, and if we extrapolate CB Insights’ global exits data to Canada, this group is responsible for generating two-thirds of all exit activity.  In addition, non-venture-backed companies play a critical role in driving innovation in our economy, provide critical mass to the industry, and help foster the experienced talent pool from which venture-backed companies emerge.

Indirect investment is also highly democratic and market driven.  Tax credit refunds can be earned by any company performing R&D work that meets objective eligibility criteria.  In contrast, direct investment is by definition a more selective and therefore subjective process, be it by granting agencies or VCAP-backed venture capital funds.  We believe Canada needs another VCAP (more on that below), but the VCAP is not a substitute for the SR&ED program.  VCAP-backed funds follow the classical venture capital model of investing in a select few companies with “home run” or $1 billion exit potential, which most VCs would tell you would represent less than 5% of all Canadian technology companies.

Canadian technology companies, both venture-backed and non-venture-backed, are underfunded relative to their US counterparts, making the SR&ED program a critical funding source for both.  A growing and thriving technology ecosystem is key to Canada’s long-term prosperity, and SR&ED has proven effective in helping Canadian technology SMBs become world class.  Of course, there is scope for improvement on how the SR&ED program is administered.  However, direct vs. indirect funding is the wrong debate.  Experience tells us that SMBs are key to driving innovation.  If we truly want to improve Canada’s global innovation ranking, we should examine shifting SR&ED incentives from large public and private corporations, which should be able to access capital for R&D through more traditional sources, to the next generation of companies that will grow to become our future technology leaders.

Expanding the Venture Capital Action Plan (VCAP) Mandate

The VCAP attracted $900 million from Canadian institutional investors and family offices into the technology ecosystem, due in part to the attractive investment framework developed by the Federal Government.  We believe a second VACP program should help accelerate interest in this asset class among Canadian institutional investors who have lagged behind their US counterparts in venture investing.  A second VCAP is needed to help fund scale-up stage companies to make the necessary investments to play on the global stage.  However, limiting the program’s mandate to late stage equity investing (as some proponents would have it) or to equity investing generally unduly limits its impact to a small subset of the broader technology ecosystem.

To foster a healthy and sustainable technology sector we need to support more than just the small number of companies that have unicorn potential and therefore the ability to attract traditional venture equity.  Such an approach ignores the other 95% of companies, many of which have enormous potential, but due to their market focus, business model, or other reasons cannot attract traditional venture capital.

We believe that if the Government wishes to maximize the impact of a future VCAP program across the technology sector, its mandate needs to include venture debt.

Venture debt plays a critical role in supporting technology companies that don’t fit the venture capital mold, providing capital that bridges the risk continuum between bank financing and shareholder equity.  This large segment of the technology sector, which employs the majority of workers and which is also the most underfunded, deserves the Government’s support in making capital more affordable and more broadly available.

Your Voice Counts!

These are important issues with the potential to have broad and long-lasting impact. Whether you agree or disagree with our perspective, I urge you to speak up and make your voice known, so as to ensure the Government adopts a balanced and effective policy to foster innovation here in Canada. Please share your perspectives in the comments below or contact us to see how you can get involved.

Download our template letter and send an email to Minister Bains, your local MP. Include us in your correspondence by copying ajivraj@archive.espressocapital.com.

About the author: Alkarim Jivraj, CEO

In a finance career spanning 20 years, Alkarim has helped raise over $1 billion for more than 100 early stage and growing technology companies and has made over 50 direct investments. Before joining Espresso, he was the Founder and Managing Partner of Intrepid Business Acceleration Fund. Alkarim started his finance career at Yorkton Securities, a boutique investment banking firm, eventually leading its information technology investment banking practice and co-managing two investment funds. Alkarim sits on the Board of SCI Marketview.

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