VC Profile: Whitecap Venture Partners – Operating on Principles Instead of a Playbook

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A lot of VCs will market how good they are at something specific or how talented their partnership is. Whitecap Venture Partners takes a slightly different approach, instead asking founders what they need and then using their networks and skills to get it done. Speaking with SAAS NORTH, Russell Samuels, a Partner at Whitecap, explained the firm’s unique approach to investing in startups.

Key takeaways:
  • The best way to grow your business isn’t to find experts first, it’s to identify what you need and ask for it.
  • Whitecap looks for transparency from founders, particularly on business metrics.
  • The Canadian tech ecosystem has developed substantially over the last five years. While the financing market is tightening, there is still more capital and talent than ever before in Canada.

Most venture capitalists market themselves by talking about the specific skills they can leverage to help you as a founder. Whitecap Venture Partners takes a different approach, working from core principles instead of a standard playbook. Speaking with SAAS NORTH, Russell Samuels, a Partner at Whitecap, shared the organization’s founding story and the key principles it uses to help founders grow.

A brief history of Whitecap

Whitecap Venture Partners began as the family office of the Diamond family, whose grandfather, Eeph Diamond, was the founder of Cadillac Fairview. The first two funds invested in telecom and networking companies in the 1990s and early 2000s, netting returns as companies IPO’d or were acquired.

From the beginning, the Whitecap team wanted to be highly involved in the companies they invested in. This led to the firm’s first rule-of-thumb-turned-principle: all investments would be done within a 2.5 hour flight from Toronto. This allowed the Whitecap team - who always took a board seat in portfolio companies - to easily fly out and back in a day and spend substantial time with the founders.

Russell said that the fund became an institutionally backed venture fund for Fund III, which launched in 2015. Now Whitecap is investing out of Fund V, a $140 million fund that is being invested across Canada, officially extending Whitecap’s 2.5 hour flight rule given the realities of remote work.

“With the rise of remote work, we saw an opportunity to invest across Canada,” said Russell.

Principles over playbook

While the firm now invests nationally, what hasn’t changed is Whitecap’s commitment to spending a lot of time with founders. This remains the foundation of their principles-approach to investing, which leads to the other principles that the fund operates by:

Industry and stage flexibility: Whitecap focuses on Series A B2B SaaS and MedTech, broadly defined. Not only are cheque sizes flexible ($3M to $10M) and written to many types of SaaS or MedTech companies, but the fund is also investing in 5-10 early stage seed companies from Fund V ($250k to $500k cheques).

“We primarily focus on Series A because we think that is where the biggest opportunity is and our fund size is geared well for this segment,” said Russell. “However, we think Seed investments are a way to build relationships with founders ahead of their Series A and we selectively do Series B rounds, such as our investment in Partnerstack in 2021.”

Trust comes first: Whenever the Whitecap team is considering an investment, they first want to build mutual trust with the founder / founding team. For Russell, one example is a founder being transparent about their metrics as a show of trust.

On the founder side, Russell and the Whitecap team try to lead by example, not only being transparent about their process and giving access to portfolio company CEOs, but also showing how they can help with whatever the founder needs. Russell shared one example of the time they helped a company source an independent board member. Not only did Whitecap’s network get access to the former CFO of the third-largest global player in their industry, but they helped the founder build a business case that got him to join their board despite only having 15 people.

Taking the lead: Whitecap aims to be a lead investor, meaning it will take chances on companies long before some other venture capitalists.

“Our focus is on fewer investments, but going deeper and being more involved in strategic decision making of the business,” said Russell. “That inherently leads to a lead-investor mentality.”

Speed is a kindness: The Whitecap investment process is simple and fast.

Russell said that every founder will meet with one partner first. If that partner is a “yes,” the founder will meet the entire partnership team within a week or two. After that, Russell said they put a term sheet in front of founders within a week and conduct due diligence within 4-6 weeks. The team is also very up front about terms, valuations, and deal structures well in advance of making an offer.

“If you aren’t in the same ballpark on basic things like valuation, the rest of the process won’t work,” said Russell. “You need to be aligned.”

Founders are in the driver’s seat: The final principle of Whitecap’s operations is not to push their expertise onto a founder, but to help the founder figure out their biggest pain point and then work together to solve it. The board member example was one way they helped, despite not being executive recruiters themselves.

Another example Russell shared is when they helped a founder who was considering a pivot from B2C into B2B. They not only offered research assistance to build a business case, but they offered downline support when it came to the difficult and painful switch in business models (in the end, the company 10x’ed its revenue in three years from the pivot).

“We don’t approach it as ‘We’re experts’ but more ‘We want to build a relationship with the founder and learn their views on how we can help’,” said Russell.

A flywheel beginning to spin

As the tech media can easily attest, more capital has been flowing into the Canadian tech ecosystem than ever before. Even with the recent pullback in markets, great companies are getting financed. That makes it interesting for Russell and the Whitecap team because they have been around for a while, are unafraid to lead, and are bullish on their approach to investing because of previous successful exits such as Real Matters and Clearwater, among others.

And instead of looking at more capital and more investors as competition, Russell is excited to see the whole ecosystem growing.

“Even as we head into a more difficult part of the cycle, the core of the flywheel in Canada is really starting to spin.” said Russell

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