Investing in Alberta tech: BKR Capital

Konata Lake (00:09): Lise, why does BKR Capital invest in software?

Lise Birikundavyi (00:12): We invest in software technology because not only is there a lot of high growth potential with these types of companies, but there is also quite a bit of market appetite, generally. When you're looking at people or businesses, there's really this trend right now where everybody's looking for this new tool to increase efficiency and investing in software technology for us allows us to see how the business world is shifting.

For example, if we think about the birth of generative AI, there's a real ongoing transformation that's happening right now, and that also allows us to see how the world is operating. There's a lot of opportunities there, even from a financial return perspective and also what's really, really exciting about this space is scale. You know, your dollar goes so much further when you invest in software and for a small fund like ours, it's really, really important.

There's also this opportunity to create more global champions from local companies if you are investing in this space.

Konata Lake (01:19): And Rebecca, what does BKR find is most exciting about the sector in Alberta?

Rebecca Johnson (01:25): There's been a strong growth trend in Alberta over the past five years, which is impressive compared to the fluctuations that we've seen in other markets outside of the province. It's not as big as Ontario or even B.C., but it's trending in the right direction, which is very impressive. Beyond that, there's also this strong collaborative effort between the different funds, government organizations to build the tech ecosystem in Alberta.

This is beyond this supportive tax environment that we have, with low-income tax or even incentives to support people to settle. They're building a lot of organizations to support early-stage companies to grow and to scale. Also, we see a lot of megadeals out of the province, which is a good indicator for the future potential of the industry.

So, there's been consistent increase in the volume and the value of megadeals coming out of Alberta, which is a good indicator, and it gives confidence to VCs about the future of the market in Alberta. So, to wrap it up, the government and different organizations are doing a lot to open up to changes and make the ecosystem—the growth in the market, a sustainable one, creating a good pathway for unicorns and working towards making Alberta the next main tech hub in Canada.

Lise Birikundavyi (02:52): Yes. To add on what Rebecca was saying, you know, the fact of seeing so much movement in the ecosystem is really a leading indicator of what's going to happen in the space and because we are focused on Black-led companies, we have to also be present where our target population is, where our investment universe is.

And if you're looking at the Black population in Canada first, there's definitely a lot of population in Ontario. Then in second place, Québec comes, and then in third place, Alberta. And that's also how we are seeing our pipeline being distributed. So for us, Alberta is definitely one of the main areas we're looking at. And because we're seeing also all of these activities that, you know, are coming from the tech ecosystem, we feel that it's a really exciting time to be there.

Konata Lake (03:51): And Lise, what do you look for in the startups you invest in?

Lise Birikundavyi (03:56): Well, diversity is important. So, our thesis is, first and foremost, making sure that we're closing the gap for Black founders. At least 25% of the management team or the C-suite, the cap table, has to be part of the Black community. And like all VCs, we're looking for strong founders. We invest in early-stage companies. We invest in people first.

We want to partner where we can add value. So, we also look at our own network and have an understanding of how we can benefit the founders. We want to be partners for growth. We're looking at product, high scalability. We want to make sure that the founders have a really, really good understanding of their business model.

That there's a space for growth, both locally and internationally. We are sector-agnostic, but there's a few sectors that we are quite excited about. We love the proptech industry, we've done quite a few investments in the healthtech industry as well. Recently, we've invested in cybersecurity, so it really depends overall how we feel we're best positioned to be a partner with that company so that we can create a champion in the ecosystem that sort of raises the flag for investment in diversity.

Konata Lake (05:23): Rebecca, what are the red flags you watch out for when reviewing a startup for investment?

Rebecca Johnson (05:30): So, solo founders may sometimes be a flag and sometimes within the context of them doing it all. We understand the importance of having a lean team at a very early stage. We understand the constraints of resources that founders face, even at those early stages. But regardless of that, it's important to us and to VCs in general that founders support themselves with, you know, even if it's a handful of advisors or key knowledge experts that would guide them across their journey.

So that's one important one. And then another one would be founders who have a history of creating multiple businesses in a very short period of time. That may send out the wrong signal to VCs that as a founder, you're someone who's excited about starting something new, but you do not have the commitment or the capacity to really build that success story, which is what every VC is looking for.

So, I would highlight those two main ones, but we see common ones like having an overstated addressable market or even having a wrong business model for the kind of service that you are offering. But there are many different things, but I would leave it at this for now.

Konata Lake (07:01): Is there anything unique about BKR Capital that you wish to share?

Lise Birikundavyi (07:05): I think our mission is unique, right? So, the way we're seeing how we are crafting or designing our activities is that we're going after the money that's being left at the table. You know, Canada has a great education system, has a great technology ecosystem as well, but there is a portion of our population that does not benefit from the same amount of support than the rest.

And there is that opportunity for the generation of outsized financial return by going after the gems that our community has to offer, And not just for the Black community, but for the benefits of the Canadian community as a whole. Sometimes there is an underestimation in terms of the purchasing power of minority communities, or even when you're looking at the market size of certain opportunities that exist that some of these communities can see, and we're really happy to be able to be there and focus on that.

Focus on investing in amazing founders from the Black community and being able to showcase to the rest of the market that we're not compromising on financial return by doing that. Currently, we have invested in 11 companies, and I think that the best part of our job is seeing how they evolve and grow and win in their respective markets.

Rebecca Johnson (08:39): I would say that also our double-sided strategy to investment and by diversifying VC industry. So, beyond just investing in underrepresented founders, we also run a nine-month fellowship program for mid-level Black professionals. And our objective is to educate more people from our community with the mindset that by educating them about the VC industry we’re empowering them and, in that process, we're creating a pipeline of future VC professionals, future fund managers who are able to write cheques somewhere down the line. So, in the course of the program, we expose them to events and to our network to help them to create that leverage for them to ease into the industry.