“The drop was predictable”: Four B.C. investors share insights on 2022’s venture trends so far
Relentless Venture Fund, Panache Ventures, Vanedge Capital, and Silicon Valley Bank discuss this year's investments, and what will happen next for entrepreneurs.
In late August, the Canadian Venture Capital and Private Equity Association (CVCA) released investment data for the first half of 2022. Canada-wide, the second quarter of 2022 saw $1.65 billion invested across 182 deals, concluding the first half of the year (H1) with $6.2 billion invested across 371 deals in total.
British Columbia took in $807 million over 58 deals in H1 — down from $1.83 billion and 66 deals in the same period last year. The province’s second quarter saw $321 million invested across 31 deals: a 15 percent boost in activity, but a 34 percent drop in dollars invested. The largest investment in B.C. went to Certn, a Victoria-based company that specializes in background checks.
In her ‘Message from the CEO’, CVCA head Kim Furlong wrote of the report, “There’s a lot to unpack with the H1 2022 venture capital data.” We thought that was an understatement, so to help us make sense of the numbers, we reached out to four Vancouver investors to get their observations and insights.
“The drop was predictable,” explained Brenda Irwin, founder and managing partner of Relentless Venture Fund, to Vancouver Tech Journal. VCs are assessed based on the performance of their portfolio, not portfolio additions, she said. “With market uncertainty, institutional investors tend to shift to triage mode and focus on maintaining capital reserves versus new deployment.”
She went on to say that VCs who suffered through the “visceral pain and persistent stomach ache” of the past two recessions (2000 and 2008) “understand that investment behaviour and strategy must change to navigate the months ahead.”
Based on her experience in the industry, she also shared a few predictions. FOMO will be replaced with JOMO (“the Joy of Missing Out”), she bets. She also believes there will be fewer seed deals to come this year, and that there will be less deal competition, as “capital will still flow to great companies, but the terms will emphasize downside protection.”
Still, Irwin expects to see new investment activity from funds that closed in the past 12 months, “as they likely warehoused deals while fundraising and are under pressure to demonstrate ‘activity’ and ability to execute deals.” Against that backdrop, her advice to entrepreneurs right now is: “chase new funds.”
As for her own fund, Irwin said that it has always targeted a portfolio of eight-to-twelve companies at a pace of one-to-two new ones annually. It’s currently at eight. “While we are likely to add one more new investment in 2022 in addition to the two new ones in H1, our remaining cash reserves are for bolstering the current portfolio.”
But of course, Irwin wasn’t the only investor we spoke to. Here’s how principals at Panache Ventures, Vanedge Capital, and Silicon Valley Bank are making sense of the current investing landscape in B.C.