Janet Bannister is the founder and managing partner of Toronto-based Staircase Ventures, which invests in early-stage technology companies. She has more than a decade of experience investing in tech and has been recognized by Business Insider as one of North America’s best female investors for the past two years.
She sat down with Canadian Family Offices to talk about what she’s investing in today, how she picks companies and how wealthy investors are pitching in to play advisor to today’s startups.
What’s the approach to investing at Staircase Ventures?
We lead seed stage rounds into Canada’s highest potential business-to-business software companies. We invest across different industries and different types of software, but we are consistent in finding and backing the highest potential opportunities led by the best teams.
What’s in the Staircase Ventures portfolio today?
We have seven companies in our portfolio, five of which we’ve announced and are on our website. The other two should be announced in the next couple of months. The total dollars committed to the fund is $34 million and we will invest in a total of 12 companies.
We have a diversified portfolio, which enables us to diversify our risk. Our target is to get an internal rate of return of well above 20 per cent, and at least a three-times return on capital.
What’s the investment time horizon for the fund?
Venture investing tends to be a long-term game. The life of the fund is 10 years. Investors will start to get returns sooner than 10 years, but 10 years is the target for when we will have exited most of our investments.
How do you decide which ventures to invest in?
We focus purely on business-to-business technology ventures. The reason for this is that consumer-based businesses tend to require a lot of capital to build a large customer base, and it is often difficult for consumer tech companies to achieve strong unit economics, particularly in the early years. We focus on software companies and stay away from hardware, such as chips and robotics, as these tend to be capital-intensive, requiring a lot of money to be invested before revenue is realized. Generally, we like to invest in companies that have a product in market, customer traction and revenue.
How much would you typically invest in one company?
Our initial investment is, on average, about $1.4 million. Half of our $34 million fund will be invested in initial investments, and half will be invested as follow-on into our portfolio. This structure enables us to double-down on our winners.
You have a “Founder Growth Platform” that includes executive CEO coaching, peer groups, health and wellness support, access to a personal financial advisor and a family stipend. Why does Staircase Ventures think it’s important to provide this kind of support?
Providing holistic support for our founders is one of the things that differentiates us. The five elements of our platform are designed to accelerate founders’ growth and development and help them show up their best every day.
Most early-stage investors recognize that the founding team is the most important ingredient for success, but we are unique in providing exceptional focus and energy on optimizing their performance. The approach has resonated extremely well with founders. Founders want to work with Staircase Ventures because they see that we care about their development and well-being.
At the end of the day, achieving the best returns as a venture investor is based on two things: attracting and selecting the best companies, and working with those companies to help them be as successful as possible. Our Founder Growth Platform addresses both things, in a unique and compelling way. The best founders consistently choose to work with us, and our programs optimize their performance.
Who are your investors?
Our investors include institutions, family offices and high-net-worth individuals. Northleaf Capital Partners, which is one of the most respected fund-of-fund investors in Canada, has invested in Staircase Ventures, as has RBC.
More than half of our fund comes from family offices and high-net-worth individuals. It is a great mix of investors who invest for financial returns but often have other objectives, such as co-investment or staying close to the rapidly changing tech landscape.
What are you seeing in the market? I see in your portfolio quite a diverse mix of companies within tech – for example, you’ve got prop tech, logistics software for energy, pharma and digital payments. What are you seeing in terms of areas of opportunity?
Overall, it is a good time to be an early-stage investor, because the valuations are very reasonable. If I compare today versus two years ago, we are seeing companies that are much more capital-efficient, much more focused on getting to profitability, getting to cash-flow positive, and yet still growing quickly.
What do you think is behind this move toward greater capital efficiency?
A few years ago, most venture capital investors only cared about growth and rewarded the fastest-growing companies with additional investment. During COVID, public markets were strong, interest rates were low, and as a result, companies felt they could spend heavily with the hope of revenue coming later.
Today the venture capital markets are tighter, the cost of capital is higher, and companies are much more focused on their costs and are driving to get to profitability sooner. Of course, there are exceptions, with some high-profile AI companies bucking this trend.
How are you finding your investors? Or are they finding you?
We had a very successful fundraise. We started fundraising for our current fund in December 2022, a very tough time to be fundraising. Typically, a fund takes 12 to 18 months to get to a first close; we had a first close in three months. We had a final close four months later and were oversubscribed.
Several of my investors had known me and my work for many years, in some cases decades. I have been a venture investor for over a decade and have an established reputation, network and track record, which helped us have a successful raise.
For your investors who are also founders of their own companies and have retired or sold their businesses, are there opportunities to be involved as an advisor?
Absolutely. Strong financial returns is typically the primary, but not the only, reason that investors choose to invest in Staircase Ventures. We have a very collaborative community of advisors, investors and founders who enjoy spending time together and supporting one another.
We have events throughout the year at which our investors can get to know each other and the founders of our portfolio companies. Many of our investors enjoy being able to get to know and support the next generation of great tech leaders.
In addition, our quarterly reports provide a detailed update on each company; often investors will reach out after reading the report to offer a customer introduction or other support. It is very rewarding for everyone to develop these sorts of relationships.
A common story among Canadian tech companies is they get to a certain size and then they get acquired by an American company, then move to the U.S. How is Staircase Ventures helping to reshape that narrative?
Based on what I have seen, that narrative is changing. Shopify is probably the best example of a recent Canadian tech company that has grown to a significant size, and continues to grow globally, while remaining based in Canada. There are several other examples of Canadian tech companies that are becoming global powerhouses while maintaining their headquarters and most of their team in Canada.
Staircase Ventures invests in the highest potential Canadian tech companies and then works hard to help those businesses to become large, globally impactful companies. In the early days, this means laying the right foundation of a sound strategy, strong team and excellent execution. If we can do this consistently, we will build more great Canadian tech companies.
What’s different today that’s causing this overall shift in the narrative of the Canadian tech company?
Successful tech ecosystems have a network effect; we see this in Silicon Valley, where successful companies create a base of experienced operators, who often go on to help scale other companies, building on their previous experience. In addition, being around successful company builders changes the mindsets of others who aspire to build a company; they believe that they, too, can build an exceptional company.
In Canada, we are starting to see these network effects take hold. Today, the amount of capital invested in venture is up more than tenfold versus 15 years ago. At Staircase Ventures, we are focused on ensuring that our founders have the benefits of these networks.
For instance, we have eight advisors, each of whom have launched and built a tech company valued at over $1 billion. These advisors provide guidance to the leadership teams of our portfolio companies. They also help to raise the expectation of our founders by showing them what is possible and how to get there.
Responses have been lightly edited for clarity and length.
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