Janie: You have been at Cycle Capital Management for over a year. Last time we saw each other was at The Upside Foundation event at the Tiger of Sweden boutique where guests were treated to munchies and scotch – which I still don’t think is typically Swedish, but was fun nevertheless! At the time you were getting ready to depart from IAF at MaRS to join Cycle Capital.
You have such a diverse range of industry backgrounds – tech, ag-biotech, cleantech, life sciences, manufacturing, to name just a few. So you have seen how VCs work with companies across a wide range of industries and from within different firms. What are some roles that you think VCs do well versus not as well?
Shirley: Because of my background I have seen a lot of venture backed companies. I’ve seen and had some great successes and I have seen and had disappointments. From those experiences I can tell you there are good VCs and there are bad VCs. A good VC will work hard to make the company successful by knowing what they as a VC do well and what they don’t do well. A bad VC mixes those things up.
For me that means recognizing I am not running the Company. My job is to do my best to make sure that the people that are running the company have the highest possibility of success. That may mean I work our network to find customers, suppliers, facilitate introductions or get the company positioned for its next round of financing because that’s what I can do that my company needs help with.
With early stage companies, it’s about having a mindset of building a company with the entrepreneur not simply investing in them. It also means applying outsider discipline to the company. Encouraging open communication and transparency are very important to the investee relationships I nurture. After all, I have investors I need to report to as well.
Janie: So then entrepreneurs should be very selective when seeking a VC investor. Given the common complaints about lack of funding in Canada, can entrepreneurs really turn down funding?
Shirley: An entrepreneur needs to do as much due diligence on the VC as the VC is doing on the entrepreneur. This is going to be a long term relationship and it has to work so make sure the chemistry is there and that what you want your VC to bring to the table they have the capacity to provide. You may wonder how to do this due diligence but given that every fund I know publishes its investments on its website it shouldn’t be too hard for a CEO to call another CEO to assess what the VC is like. Do they provide value? How do they behave during the rough periods (which will inevitably happen)?
Janie: So what would a VC do if they felt the investment had potential but it was not an area in which they could add a lot of value?
Shirley: Well as I said before a good VC knows what they do well and what they don’t do well. There really isn’t much point in investing in a company in which you don’t think you can add value. Better to focus your efforts on opportunities where you can have an impact and you can help the company earn excess returns. So a good VC will introduce such a company to someone they know who may in fact be able to provide that value. In the end everyone wins. The Company gets a lead, an investor gets to see qualified deal flow and the good VC reinforces the notion of being a valued partner in the VC network to both investors and entrepreneurs.
Janie: I’m sure you have lots of advice to give entrepreneurs, but if you had to select the top 1-2 topics, what are they?
Shirley: Stay focused. I know that’s hard but I get a great deal more confidence in an investment if I feel the entrepreneur knows their space, knows how to win in that space and knows what it’s going to take to get from A to B. You can’t do that well if you are changing direction every quarter. The other suggestion I would have is to surround yourself with people who are better at doing things than you are. A big realization that one of my early entrepreneurs had was that his business would never scale if he didn’t bring in other very strong team members. He had to increase the bench strength in order to bring out the best in himself and take the company to the next level.
Janie: We should take that to heart at Upside! After all, we are a startup our self. Shirley, we are really appreciative for your support. At IAF you helped to get The Upside Foundation inserted in the term sheets and now you have joined our Advisory Board, which really just makes your support more official. You have been a strong fan since the beginning.
Shirley: Happy to help support The Upside Foundation. I feel it’s an inspiring way emerging tech companies to connect with their communities in a way that can be meaningful without creating financing barriers or huge overhead costs.
About The Upside Foundation:
The Upside Foundation of Canada is a Canadian not-for profit Foundation (charitable number 84528 3241 RR0001). It was founded by a committed team of entrepreneurs, investors, business owners and professionals, all connected in some way to the Canadian start-up community. For more information about, or to contact The Upside Foundation, please visit www.upsidefoundation.ca.
About Cycle Capital Management:
A pioneer among Canadian venture capital funds focused on the clean-tech sector, Cycle Capital invests in companies developing and commercializing clean technologies and striving to reduce greenhouse gas emissions, optimizing resource use, and improving process efficiency throughout a product’s life cycle. With assets under management of $230 million, Cycle Capital invests in Quebec and northeastern North America. Cycle Capital is composed of experienced investment professionals, strategic advisors, and industrial partners with in-depth knowledge of the sector. Cycle Capital has a special relationship with its strategic partners, notably Brookfield Renewable Energy, Rio Tinto Alcan, Cascades, Master Group, Lonza, Gaz Métro, Systemex Énergies, Aluminerie Alouette, and Hydro-Québec.