The following blog is from Greg Phipps, our director of investment here at Innovacorp. For the next while, he’ll embark on a new role as an "embedded executive" with one of our portfolio companies, Livelenz Inc., and chronicling his experience here.
With an average deal size for seed-stage technology companies hovering around $2.7 million (US, 2011:WWW.PWCMONEYTREE.COM) – half that figure for Canadian start-ups – entrepreneurs are forced to prioritize and economize when they map out their “use of proceeds” strategy and associated budget for the start-up phase. One of the most significant challenges they face relates to identifying and recruiting key members of the founding management team. Salary expenses typically comprise the majority of burn for start-ups.
Early-stage VC investors play a key role in filling gaps in the team by tapping their networks to identify talent prospects and help recruit on behalf of their investee companies. Frequently, particularly among seed-stage investors, they will roll up their sleeves and play a very active role in working directly with the entrepreneur and start-up team, filling experiential gaps and taking on a proxy role as a team member – be it in a financial, development or operational management capacity. It’s part of the value-add an experienced VC provides to portfolio companies.
At Innovacorp, we pride ourselves as being proactive and supportive partners for our portfolio companies. We’ve embraced and explored a number of different models as we’ve evolved as an organization, all aimed at maximizing our contribution to entrepreneurs and the innovation ecosystem we serve. Our Entrepreneur in Residence (EiR) program, Student Entrepreneur in Residence offering, and incubation facilities, for example, are initiatives that have helped spawn, launch and develop a new generation of successful technology entrepreneurs. GoInstant, the acquisition of which by Salesforce.com was announced last month, was the result of a successful EiR initiative.
Now we’re embarking on something a bit unusual for us. While diving in to help with growth challenges is par for the course in early-stage investing, we’re going a step further to address a need and request of one portfolio company. Starting today, I’m taking a leave from my regular investment and portfolio management role at Innovacorp to “embed” full-time at one of our high-potential portfolio companies. I’ll be filling a gap in its management team that was identified as key to its growth objectives, for which the skills and experience required were hard to find and even more challenging to recruit, especially given the local ecosystem and modest investment kitty.
I’m enthusiastic about the company, the founder team and the sector/market to which the company markets its robust solution. I’m also eager to engage deeply in an operational management role again, after a dozen years in venture capital.
I plan to maintain regular blog posts, with insights and advice that focus on the myriad growth challenges faced by technology start-ups – in real time – from the other side of the fence. Hope you’ll come along for the ride.
Greg Phipps, August 2012