Strategy Session is a feature for Crunchbase News where we ask venture capital firms five questions about their investment strategies.
StandUp Ventures, a Canadian venture capital firm focused on seed-stage investments in high-growth technology ventures, was created by Managing Partner Michelle McBane to support female-founded companies in the B2B software and digital health spaces.
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To date, the Toronto firm operates in a relatively smaller market, but has raised $21 million for its first fund and has put that money to work in 14 companies.
It is also two years ahead of similar funds in the U.S. when it comes to female representation: Across its companies, 81 percent have a female CEO and 46 percent of all leadership is female. By contrast, only 13 percent of startups in Canada have a female CEO, according to McBane.
McBane spoke to me about working with seed-stage companies and how Toronto is becoming a hub for female entrepreneurs. The following was edited for length and clarity.
How does StandUp Ventures approach making investments?
McBane: I’ve been a long-time venture capitalist and working on seed for over 20 years. We are pretty thoughtful investors when working with a portfolio. We like to see traction, but not a fully baked concept. Our approach is getting from seed to Series A: Ensuring the company has the runway to hit the next milestones and is not constantly fundraising. We always say you need access to capital, talent and customers, so we bring these pieces of the puzzle to the table. We are high-conviction investors doing a small concentrated number while getting diversification.
Investing in the seed stage is typically a bet on the founder. What makes investing in the seed stage unique?
McBane: You have to love working with people to invest in that stage. We observed that founders are solving a problem they know well. We’ve found that better when working with female founders. They are living and breathing the problem and bringing in a team around it. We aren’t interested in college pedigree, but in folks who understand the problem and are solving it. Founders also get so much feedback from mentors, so we look to see how they assimilate that.
How do you like working with founders?
McBane: It is about being with them through the highs and lows. Some of the founders will say our team has the ability to stay constant through the highs and lows. We want to celebrate the highs and be beside you with the lows. Investing is a roller coaster — one of my former co-founders said that. We’ve tried to bring around folks who are comfortable in making decisions. Our goal is to portionally have 12 to 18 months on cash, and we are proud to say we have that. We also have no write-offs or write downs and all of our companies have gone to raise major Series A rounds. Someone told me once that means you have barely taken a risk, but we invested when they didn’t have a product.
What contributed to Toronto becoming a hot spot for female entrepreneurship?
McBane: We invest across Canada, but a big chunk is in Toronto and Waterloo. I see these founders support each other in a way you don’t see in other cohorts. They create, support and highlight these women as role models for the next generation. They aren’t all with a technical background, but are amazing leaders with business insights who build teams around them.
Toronto is great — all of the major corporations are — so we are seeing women executives and all executives rallying around them. Being in an area with a big tech sector, there are a lot of role models and support, as well as clients and customers putting money where their mouths are in investing.
What do you think is the solution to more diverse representation in leadership roles and board positions?
McBane: I believe you have to intervene at the top, as well as in more early-stage. If you have more intervention at those stages, it will bubble through. Like often hires like; even at the board level. There was a study about wealth creation, done by Carta two years ago, that showed how little women own on the cap table. We measure, track and talk about our founders’ successes. We had one great founder trying to find key talent and had more than 200 people reaching out to her on LinkedIn. Things are evolving, and women are sharing their stories.
Illustration: Dom Guzman
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