April Fools: We are funded! StartupNorth takes a $3.2 million series A financing

Well, the time has arrived. We can finally take the covers off of what we have been working on and give you an idea of where we plan to go with StartupNorth.

Today we are announcing that we have taken an initial round of financing to expand StartupNorth, launch new startup focused projects and to further expand our blog-related publishing business. Most of you are aware of our first addition to the SUN network: wirelessnorth.ca

Our new CEO and former Microsoft employee David Crow sums it up best:

“Running a startup community has been very lucrative for StartupNorth (now known as SUN, INC) in the last year and we feel that we have been leaving a lot of money and opportunity on the table. In order to maximize the potential and reach of our media properties and to enable further growth in to other markets, we have decided to take this round of funding. To further accelerate this expansion, we have acquired several blog networks, including a Canadian one, and we will be announcing that formally quite soon”

In a sense, this is eating our own dogfood. We encourage startups to take as much money as they can early on in order to grow as rapidly as possible, which will bring with it a solid business plan. By expanding rapidly and letting the business plan emerge, we believe we can show fellow Canadian entrepreneurs how to do it, and our new VCs, Apprentice Partners from London, UK and placements from two Canadian pension funds, have helped us make this decision.

Jonas and I would like to thank all of you for your support in the last year. Without you guys, we couldn’t have done this.

Everyone welcome David aboard. And remember: with all this money, we’ll be hiring soon!

iNovia launches a new fund – Seed and early stage venture capital

iNovia is announcing their new fund today. The new fund, which comes in at $107million is focused on Seed and Early Stage deals in the information technology, life sciences and cleantech sectors.

iNovia, who most recently participated in the funding of StandOutJobs, has been engaging the startup community pretty directly lately and are usually visible at events like StartupCamp, blitzweekend and others. iNovia promotes itself as “Entrepreneurial Capital”. By they mean that they come from diverse and relevant backgrounds. Instead of being full of ex-banker, iNovia tends more towards entrepreneurs and people with experience working with startups.

With its recent additions, the iNovia Capital management team now comprises a diverse group of professionals, all of whom have operational or financial backgrounds, coupled with strong technical and business expertise. iNovia has also established a network of Venture Partners and Entrepreneurs in Residence, who provide industry insight and expertise, along with access to a large network of collaborators.

“Entrepreneurial Capital” can mean something else as well, and I think iNovia just might deliver. My definition of “Entrepreneurial Capital” is an Angel or VC who is just as hungry and hustles just as much as any startup. From coast to coast we hear complaints about poor dealflow for VCs and that this hurts their business. This may be true to an extent, but it is about to get a lot worse for those VCs who don’t show that same Entrepreneurial Spirit. Firms like iNovia, Montreal Startup, EVP and others are all going to be scooping up more and more of the best deals at very early stages simply because they will be engaged closely with the very communities that are giving birth to these startups.

Technology Venture Capital is a startup business in Canada. It is young, the players are largely inexperienced and the market is small but emerging. This is a good thing. If you are a VC with money to spend, you can still win. There is a massive community forming that is almost exclusively to your benefit and that community is working harder than ever before now.

We will be watching iNovia closely to see if they live up to all my hype.

Angel financing – Term sheets (part 1)

A term sheet is used to outline the main terms under which investors make an investment in your company. It is usually introduced part way through the due diligence process. A typical sequence of events (assuming this is your company’s first outside financing round) would be:

You make your investment pitch to a group of angels
Interested angels form a due diligence team and start due diligence activities
At some point in the due diligence process, if angels reach a comfort level in the investment opportunity, they will introduce a term sheet to start the dialog on the conditions under which they will invest
Due diligence investigation into the company will continue in parallel with discussions on the term sheet
Once both activities reach a satisfactory conclusion, the legal paperwork will be drawn up for the investment, the papers will be signed, and the funds will be transfered

An important thing to understand about a term sheet is that it is not necessarily a binding document. Meaning just because the investors and the company have reached agreement on the term sheet (which outlines how much money will be invested and under what terms), investors are not bound to following through with the investment. The main point of a term sheet is to ensure both sides are comfortable with the terms under which the investment will occur. As discussed above, this is usually introduced part way through the due diligence process – when investors have a comfort level in the investment but before they have completed the full due diligence process. Investors will want to get a term sheet on the table so they can ensure both sides are comfortable with the terms of the investment. i.e. there is no point to spending the time to finish a full and detailed due diligence investigation, only to find out at the end that the investors/company cannot agree on the investment terms. So just because you have a term sheet from potential investors, don?t consider the investment a done deal.

Although the term sheet is not necessarily binding, if the investment proceeds to closing it will be used by lawyers to incorporate the terms of the deal into the closing documents, shareholders agreement, etc. So it is important to ensure you understand and are comfortable with the contents of the term sheet before you indicate acceptance of it to the investors. You should get legal advice on the term sheet as it will most likely contain conditions on board makeup, management oversight, voting rights, etc. These conditions will be incorporated into your company’s shareholder agreement so will impact all current shareholders of the company. Depending on how your current shareholder’s agreement is written and how many shareholder’s you have, you may need a majority of your current shareholder’s to approve any new changes to the shareholder’s agreement to accommodate the new investors. Part of good investor relations is to ensure your current shareholder’s are aware of your financing activities and are on-side with the implications of new investors and how it will impact them.

In my next article I will talk about some of the common terms usually found in a term sheet. To view an organized index of all angel financing articles as well as sees a roadmap of future articles, click here. If you have any comments or suggestions for future articles feel free to contact me: craig at mapleleafangels.com