In many ways, James Sun is emblematic of today’s tech entrepreneur: He’s scarily young (21), fluent in business jargon and running a company that’s baffling to anyone older than 30. He arrives one morning at the office of Globalive Capital, an investment firm in Toronto founded by Anthony Lacavera. Sun plops down at the conference table, wearing a hoodie over top of a bright blue T-shirt emblazoned with the name of his company, Revlo. Globalive invested seed capital into Revlo last year, and the startup is raising a follow-on round. Sun is here to give an update to Lacavera and the company’s three other partners.

Illustration: Min Gyo Chung

Illustration: Min Gyo Chung

Revlo requires some explanation: It’s a fan engagement platform for influencers on Twitch. (Don’t worry if that sentence means nothing to you. “The first time I met James, I didn’t even know what he was talking about,” Lacavera says later.) To understand Revlo, you need to first know that gamers now live-stream their play for others to watch. Twitch, owned by Amazon, allows them to do that. Second, the practice is so popular that the best gamers command legions of followers, draw brand sponsorships and earn a plush income. Revlo’s platform helps these gaming influencers retain and engage their fan bases by facilitating things like contests, giveaways and rewards. Revlo is also looking to expand to other streaming services, such as YouTube Gaming.

Even though Sun’s startup is still figuring out how to make money, Globalive’s partners are enthusiastic about its prospects. “I would go crazy on influencer management,” Brice Scheschuk, Globalive Capital’s CEO, tells Sun in the meeting. “Understand those guys. Live in their world.” Lacavera adds, “They’re really your customer.” Sun politely nods along, although one gets the impression he already knows all this.

Revlo is the kind of startup Lacavera wants to back for the long-term, especially now that he’s turning his attention to venture capital investing. He is best known as the founder of wireless carrier Wind Mobile, which was sold last year for $1.6 billion. Flush with cash from the sale, Lacavera has wasted little time in seeking out startups to finance. He wants to eventually put together a $100-million fund that would include cash from outside investors and be capable of writing even bigger cheques. A sizable war chest would allow Globalive to have more influence with portfolio companies and within the venture capital scene in Canada at large. (He’s on track to close the fund by the end of the year.)

MORE LACAVERA: Is This Canada’s Most Tenacious Entrepreneur? »

Lacavera’s goals extend beyond earning a return; he wants to help fix a fundamental problem with the funding landscape today. The recent boom in accelerator and incubator programs, which help young entrepreneurs build or refine business plans in exchange for equity, means ample funding for early-stage ventures. At the other end, funds such as OMERS Ventures and Georgian Partners, two of the country’s most prominent VCs, are capable of investing large amounts of money in more mature companies. OMERS and Insight Venture Partners, for example, led a $100-million investment in Shopify in 2013, which turned heads at the time.

As Lacavera sees it, the problem occurs in the middle. “That’s where we don’t have enough funds,” he says. This phase, sometimes known as the Valley of Death, is part of the reason tech startups have difficulty scaling into world-class behemoths. Entrepreneurs might sell out or be wooed across the border by American VCs. “We’re actually gift-wrapping investment opportunities for these people,” he says. Lacavera’s fund will focus on Series A investments, the term given to the capital raise that follows an initial seed round, and will help bridge the funding gap in Canada by being faster, more flexible and willing to take on bigger risks. But among the first questions he’s asked when approaching potential investors in the fund is, “What makes you think you can do this?”

MORE AMERICAN VCs: Why the Low Loonie Could Be Good News for Canadian Startups » 

One way to pull it off is to be mindful of valuations. At the meeting with Sun, the talk turns to Revlo’s fundraising round. Sun tells the partners how much he’s looking to raise and the valuation he’s seeking. (Canadian Business was permitted to attend a series of Globalive meetings, provided financial information was not disclosed.)

“I would say you have risk on that valuation,” Scheschuk says. Sun gives a quick nod and turns to Lacavera. “That’s too fucking high, man,” Lacavera says.

“I was trying to be more diplomatic,” Scheschuk deadpans. Sun laughs. Rather than trying to press his case, he asks for their thoughts on a more reasonable valuation. The figure Lacavera quotes is a good deal lower than what Sun was seeking. The young entrepreneur doesn’t seem too dejected.

MORE FIGURES: A Back-of-the-Envelope Way to Value a Startup » 

Lacavera isn’t new to investing (Globalive has made more than 75 investments over the past 15 years), but raising this fund would put him in another league. Perhaps that’s what makes him eager to tout his credentials. He thinks his entrepreneurial experience differentiates him from other funds run by individuals who come from finance, rather than an operational backgrounds. He founded Globalive Communications at 23 years old in 1997 and went on to start, grow and exit a number of businesses. Enunciate Conferencing, founded in 2001 with two partners, offered automated teleconferencing services. It sold for $28.3 million in 2006. More recently, Globalive launched an augmented reality firm and then sold it 18 months later to a Los Angeles–based company for an undisclosed amount. Wind, of course, was the biggest of those ventures, growing to eventually employ approximately 1,200 people. Lacavera feels that puts him and his partners in the unique position of being able to advise entrepreneurs and to take on an active role in case business plans go awry. “Not a lot of VCs know how to do that,” he says. “Or they haven’t done it to the same extent we have.”

Lacavera is looking at a different fee model, too. Typically, venture capital firms charge a 2% annual management fee and take 20% of whatever profits are made by the fund. (Private equity firms and hedge fund managers also use the so-called “2 and 20” model.) Lacavera declines to discuss specifics, except to say, “I’m considering something unique that keeps a greater percentage of risk with Globalive, and a greater percentage of the upside.”

But what really could help Lacavera’s fund address the gap in the Canadian market is an emphasis on speed and flexibility. Funds typically have a certain investing mandate; they focus on early-stage mobile gaming companies, for instance. If an opportunity arises that’s slightly outside that mandate, the VC firm’s partners might have to get the approval of their investors before making a move. By that time, the opportunity could be gone. The VC market is also fragmented. While there are a few firms in Canada targeting Series A rounds (as Lacavera plans to), there are usually only one or two names per sector. The result is a startup that’s been turned away by the one Series A fund in its category has few other places to turn in Canada. Lacavera’s mission, on the other hand, is almost absurdly broad: “The fund mandate is we’re going to invest in technology companies,” he says.

  • 1
  • 2
Loading comments, please wait.