One of Canada’s oldest venture capital firms is eyeing real estate and medical technology investments as it prepares to launch its latest $125-million startup fund.
Whitecap Venture Partners, which has been investing in Canada’s startup scene since 1993, sees the two fields as ripe for disruption, given that a lot of processes have only barely started to embrace technology.
“There’s nothing better than investing in technology in a space where the incumbents that you are trying to displace are pen and paper,” says Whitecap partner Shayn Diamond.
“The stakeholders in the real estate industry haven’t opened their eyes to what technology implemented in their processes can really do. No pun intended, but it’s a real bricks and mortar business, and technology is an afterthought.”
But Diamond said that’s changing, with digital systems making their way into just about every aspect of the industry, especially in business-to-business services, rather than customer-facing technology.
The key, Diamond says, is finding “white space” companies who are building something new.
Whitecap prides itself on being one of Canada’s oldest venture capital firms, something that gives them more experience and a longer view of tech startups. Diamond said they’ve seen the real estate technology sector change a lot in the past few years.
“We’ve seen a lot of real estate tech companies and we’ve seen a lot of great founders working on those companies, but what we found was the time just hasn’t been right over the last couple years to invest in them,” Diamond said.
“As their businesses evolve, technology can be implemented throughout the entire value-chain process. I mean, we’ve seen companies starting at the excavation point, literally at the point when the bulldozer hits the ground, and companies that run rent management platforms for property managers.”
This will be the fourth venture capital fund for Whitecap, which started as the venture capital arm of Whitecastle Investments Ltd, the family investment firm started by Cadillac Fairview founder Eph Diamond. Whitecap’s first two funds consisted of family money, so the pace of investment and maturity was slower.
In 2015, the firm’s third fund was opened up to other private investors, and with that money now invested in startups, Whitecap is going for a fourth.
Partner Russell Samuels said their investing strategy focuses on startups pursuing “white space” business opportunities — where there’s a gap in the market, or a disruptive technology, so the company isn’t up against a cadre of incumbent competitors.
Generally speaking, our companies would be sourcing 90 per cent plus of their revenue from the U.S. market, so it’s very important to have a global mindset…
Russell Samuels, Whitecap partner
Similar to real estate, Samuels said a lot of those opportunities are present in health technology, Whitecap partner Russell Samuels said; the maturity of internet platforms, smartphones and cloud-based services allow for an opportunity to apply technology to those paper-based sectors that have so far resisted change.
Samuels said Ontario is in an interesting position on medical tech, because the Toronto teaching hospitals can make for a good incubator, but Whitecap is really only interested in companies that can succeed south of the border.
Some of that is the different structure of the American health-care system, but mostly Samuels said it’s just a much bigger market.
“Our companies — and in particular this is important for medtech businesses, we focus on companies that are going to build their business focused on the U.S. market,” he said.
“Generally speaking, our companies would be sourcing 90 per cent plus of their revenue from the U.S. market, so it’s very important to have a global mindset, in particular for medtech.”
Looking back across the past few decades since Whitecap Venture Partners was founded, managing partner Carey Diamond said the most dramatic change he’s seen is just a lot more competition — many more startups, and more venture capital money available, too.
“The fact that there’s more capital available in the last five or 10 years, that prompts people to start companies, knowing that there is a capital base to help them grow,” he said.
“In relation to the United States, certainly in relation to Silicon Valley, we’re not as mature…. But I think we’re catching up very quickly, and I think we’re headed in the right direction on many, many fronts.”