Janet Bannister exceeds target for first solo fund as other venture capitalists struggle to raise

Sean Silcoff, Globe and Mail Technology Reporter

..

Janet Bannister, one of Canada’s best-known startup financiers, has exceeded the target for her first solo venture capital fund as some counterparts struggle to do the same amid a tech sector slump.

Ms. Bannister’s Staircase Ventures last week completed raising its first fund, bringing in more than $34-million – topping her $30-million goal – adding Northleaf Capital, Vancouver City Savings Credit Union and Intact Financial Corp.’s venture capital arm as investors.

They join earlier backers Royal Bank of Canada and technology entrepreneurs who will also advise Staircase companies including PointClickCare Inc. co-founder Mike Wessinger. Ms. Bannister has already backed three companies, including Biossil Inc., a drug discovery startup led by Anthony Mouchantaf, former director of venture capital with Royal Bank of Canada’s innovation banking unit.

“It’s never easy to raise a fund, particularly a first time fund, but I was confident in my ability to do it,” Ms. Bannister said.

Ms. Bannister’s fundraising success is “pretty rare” for a new firm, said Northleaf managing director Ian Carew. “It’s a testament to the strength of her story that she was able to get this done in such a quick timeline in this fundraising environment.”

Several Canadian venture capitalists say all but the very top performing funds or those in hot areas like artificial intelligence are struggling to hit their targets. Some have cut back their goals.

Part of the problem, they say, is that institutional investors, family offices and wealthy individuals who typically back venture funds are overexposed to the asset class. Their public equities have dropped in value but private portfolios haven’t fallen in step and they haven’t had enough cash returned from earlier investments to redeploy.

Meanwhile, higher interest rates mean investors can earn 6 per cent risk-free, making it harder to entice investors to an asset class that must generate outsized returns to compensate for higher risks.

As a result, said Alison Nankivell, senior vice-president of fund investments with Business Development Bank of Canada, the top funder of Canadian venture capital, investors are sticking to firms they previously backed, cutting allocations and favouring managers that return cash.

Maria Pacella, managing partner with Vancouver-based Pender Ventures, said her firm is struggling to hit the $100-million target for its second fund after reaching a first close of $50-million early this year. “Getting to that target is going to be hard and is not obvious,” she said.

Robert Antoniades, general partner with Toronto’s Information Venture Partners, said “it’s taking longer” to raise his firm’s fourth fund. “We all work hard to get the attention of the limited number” of investors in Canada. “There are fewer active this year than two years ago.”

Ms. Bannister, who oversaw the launch of the Kijiji classified site as an executive with eBay Inc. before becoming a venture capitalist in 2014, struck out on her own in 2022 after leading Montreal-based Real Ventures for two years. Real experienced inner tumult prior to her leadership. Two of three founding partners stepped back and investors grew frustrated, complaining Real spread itself too thinly by backing too many startups and not selling positions to lock in gains. While she fixed issues internally, Real was unsuccessful raising a new fund.

Ms. Bannister’s backers are betting on her vision and reputation as she makes a fresh start. “Janet’s reputation precedes her,” said Justin Smith-Lorenzetti, head of investments with Intact’s venture capital arm. “In some respects she’s maybe the safe bet if we want to deploy in early-stage venture in Canada” given her experience managing funds, working with investors and founders and sourcing deals.

Staircase is one of several new funds going after the same types of early-stage deals Ms. Bannister used to do at Real. But Staircase is also layering on a humane approach, paying for executive and health coaches and financial advisers to its founders and giving them cash to cover family needs. A Staircase investment comes with another unusual perk: founders get a 20-per-cent cut of her investment profits.

One name absent from Staircase’s list of investors is BDC, which backs many first time funds and is expanding efforts to support female entrepreneurs and venture capitalists. Ms. Bannister said while BDC has been “extremely supportive of me personally, Staircase was not a fit for BDC at the time that I was fundraising.”

Ms. Nankivell disagreed that Staircase wasn’t a fit. “It’s important when you’re leaving one platform to make sure you’re showing you’re being additive to the ecosystem” by finding new investors “that are differentiated from where you came from. Then you’re not poaching, not taking capital away from anyone.”

A new BDC program targeted at female venture capitalists was also only available weeks before Ms. Bannister reached her target. Ms. Bannister also said she applied for a $50-million federal funding program for new managers by the deadline last Nov. 30. She still hadn’t heard back by the time she reached her target.