Driving Investment in Canadian Hardware Startups: What Do VCs Consider?

On November 8, Yuri Navarro, an experienced investor and member of ventureLAB’s HardTech Investor Network, moderated a panel at the 2023 HardTech Summit. The panel, titled "Driving Investment in Canadian Hardware Startups: What Do VCs Consider?", featured three diverse experts from the investment ecosystem: Sabrina Sasaki from Monozukuri Ventures, Jim Laird from Roynat Capital, and Cyrille Brando from Bosch. 

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The panel delved into key aspects of Canadian hardware investment. They highlighted the challenges faced by deep tech founders in securing funding and emphasized the importance of shifting investors' risk appetites for deep tech and hardware startups. Sasaki emphasized the need for founders to build strong relationships with investors and maintain regular communication about their progress. Navarro stressed transparency, recommending consistent updates to keep the company at the forefront of investors' minds. Both emphasized the critical nature of engagement for hardware companies.

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Discussing the Canadian hardware investment landscape, Laird noted that banks typically engage later in the process, focusing on debt financing during the scaling stage. He highlighted the software-centric nature of bank financing in Canada, a reflection of the country's VC evolution and success stories primarily in software.

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“Banks do tend to be followers in the Canadian hardware investment ecosystem. This is unfortunate, as there is really interesting hardware in the portfolio. But just like when you’re raising investment with VCs, to raise investment with banks, you have to start addressing us early on. You need to be able to tell bankers - here I am, here’s what I do, here’s what’s gonna happen and come back 6 months later to show us what happened. You need to build up a track record + a reputation. You can raise as much risk capital as you want, but if you remove the risk, you need to demonstrate that you have a good handle on what happens next” said Jim Laird Director of Risk Management at Scotiabank’s Roynat Capital.

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Brando, who provided an excellent perspective from the corporate side, then provided founders with key recommendations for companies looking to approach corporate investors, highlighting the importance of understanding the corporation you are pitching to, what their needs are and how you can help them.

‍“Do not approach corporate people with the same deck + mindset that you approach a VC. They are totally different people! If you start to explain your company or technology at a very high level, within 30 seconds they will get bored and you will lose them. When you talk to a corporation, you have to move fast and you have to understand that they expect you to be ready to help them. You have to know them and be able to explain your offerings,” said Cyrille Brando, Director of Technology Partnerships and Strategic Business Development at Bosch.

The discussion concluded with the panelists calling for hardware founders to know their audiences and, when pitching to investors, to keep the conversation focused on value to the funder, returns on investment and traction, as well as building a sense of urgency amongst investors. Same with pitching to corporations - why should they partner with the company right now? Is the market there and is the company ready to go? Finally, the role that accelerators like ventureLAB play in helping founders reach their milestones was highlighted, with Sasaski pointing out how much of a difference this kind of support might make, particularly for hardware founders.

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“Being part of an accelerator like ventureLAB can make a difference, particularly with their strong advisors. You need to use this support to adapt your message according to your audience” said Sabrina Sasaki, Principal at Monozukuri Ventures.

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Thank you to our incredible panelists for the insightful discussion! 

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About ventureLAB

ventureLAB is a leading global founder community for hardware technology and enterprise software companies in Canada. ventureLAB’s initiatives focused on raising capital, talent retention, commercializing technology and IP, and customer acquisition have enabled thousands of companies to create over 5,000 jobs and raise more than $340 million in investment capital. At ventureLAB, we grow globally competitive tech titans that build-to-scale in Canada, for global markets.