May 3, 2025 • 51 mins
Joel Palathinkal chats with Matt Roberts about his journey from technical roles to venture capital, starting from his Ottawa roots. They discuss how engineers can thrive as investors, the evolution of family offices, and Canada's tech ecosystem. Matt shares advice for new fund managers on differentiation, storytelling, and investment structuring. They explore liquidity strategies, fund management, founder evaluation, and 2023 market trends. The episode also covers investment opportunities in Abu Dhabi, Dubai, and the Middle East, highlighting post-oil investments and the importance of international networks.
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Episode Transcript
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I suppose to give to someone.
(00:01):
Yeah.
I'm I'm twenty five years in to venture now ortwenty years in.
I I probably, noted and, like, look.
I and as I'm starting to fund and a franchisemyself, I think about this daily.
It's a lot of people are sort of our age.
I guess we're I guess we're approaching or atmiddle middle age.
(00:23):
Don't necessarily build up the next generationof their firms as at the outset like we should.
Welcome to The Investor, a podcast where I,Joel Palafinkel, your host, dives deep into the
minds of the world's most influentialinstitutional investors.
In each episode, we sit down with an investorto hear about their journeys and how global
(00:47):
markets are driving capital allocation.
So join us on this journey as we explore theseinsights.
All right.
So we're live here with Matt Roberts at CMDCapital.
Super excited to have him on the show today.
Matt, can you
hear me okay?
I can hear you great, Joel.
Can you hear me?
I can hear you.
(01:08):
Just making sure I got the right mic on.
So I'm good.
So ready to jump into this.
Everybody, we did not dress similar on purpose.
It's just Great minds.
Great minds.
Today is the day for green.
So you've got a little bit of a military green.
I've got a forest green and I've got the littleturquoise green behind me.
(01:33):
That's a great way to kick it off.
It's a great color.
But let's get started, Matt.
Tell us who you are.
Tell us about where you grew up.
I know you're in Toronto.
So talk about your childhood, what your parentsdid, what you thought you would do in your
career, and how you got to where you are.
And I'll probably be interrupting you.
Yeah.
So I'm Matt Roberts.
(01:55):
I'm the cofounder and GP at Command Capital,CMD Capital.
It's a it's my partner and I have I'm here inToronto.
My partner's in Montreal, David.
I grew up in Ottawa, which is the capital ofCanada, so that'll be a little bit, you know,
one of those cities that nobody knows aboutperhaps in in The US, but it's it's actually
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the center of Canada's tech ecosystem, where itwas for quite some time.
You know, the I guess, what was I what was Idoing as a child?
Thinking I was gonna do as a job.
My dad was an electrical engineer.
Okay.
I am.
There you go.
So
I'm an electrical engineer by trade.
Oh, yeah.
Same here.
So cofounder of of semiconductor companies inOttawa.
(02:39):
Mhmm.
Some successful, some sadly not.
And, you know, so I always thought you know, Ithink if my father had been running a corner
store, I would think that the way you the nextthing you do is a corner store.
Mhmm.
Because he was in in, you know, in startups andin early stage companies.
Yeah.
You know, I thought I'd be, like you know, ifyou'd asked me a 10, I thought I was gonna be
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an electrical engineer.
By the time I was hitting 15, was kind ofthinking, I don't know, less interested in the
semiconductor side.
I'd I'd been reverse doing reverse engineeringof semiconductors as a as a sort of a teenager,
a summer job at my dad's company and and a fewothers and realized that wasn't for me.
So I went into software.
And so I I sort of boned up on programming atan early stage, and then I went to work for
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what was Canada's most successful sort ofearliest, like, tech company at the time, which
is a company called Newbridge Networks.
And I was the youngest manager there at about18, 19 years old.
Had about four or 5,000 people and thoughtsoftware and, you know, telecom or something
(03:45):
around that would be the space I go into as anadult.
Mhmm.
And then the guy who founded Newbridge, a guynamed Terry Matthews, exited Newbridge.
He sold it for about, I think, what,$10,000,000,000 Canadian.
Mhmm.
And he had a big family office.
And so he said to me, hey.
Why don't you come work for me at my familyoffice?
(04:06):
And from there, it became, oh, I'm gonna workin investments instead software.
So by trade, I guess, if people ask me what,like, what technical background I have, it's I
usually point at the programming side.
But really, I you know, most of my professionalcareer has been on the capital allocation side
so far.
Sure.
(04:26):
What are some traits that you think form a goodinvestor from being an engineer?
What are some engineering traits that help youbecome an investor?
Well, not a professional engineer like my dadwas.
I've noticed that if if I was gonna sayanything about engineers, it's it's it's
similar why you see good many good venturecolleagues from the law side is that these are
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the only two vocations I know of where theyexplicitly teach logic and and and how you
build a logical conclusion and and then tear itapart piece by piece.
Mhmm.
Engineers are forced to build logical, youknow, answers and and fixes to to problems.
Lawyers are meant to do it at sort of morealong the discussion lines or or thought
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processes, but both lead you to what what arevery healthy conclusions.
That's why, you know, Peter Thiel, for example,is a lawyer by trade.
And he hires lawyers.
He doesn't necessarily respect them, but he buthe So anyways.
And I
think it's because you're seeing you're seeingsomething it's a trait that all engineers have
to have in order to graduate.
Mhmm.
Oddly enough, they don't teach it as much in inComp Sci anymore.
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So I'd I'd ask to take the logic courses thatwere available to engineers as an as a computer
engineer.
But but I think that's why you see, you know,engineers and and lawyers doing, you know,
perhaps intuitively a better job at differentvocations than their core core degrees.
Right?
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I do see parallels because, I mean, as anengineer, you know, if you're an electrical
engineer, there's, like, the concept of logicgates.
Right?
So if this if this, then that and like, if youlook at a typical term sheet or a legal
document, there are triggers that get or leversthat get hit if something else happens.
So I think sometimes that systematic processhelps translating at least terms to founders.
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Then I think also when you're diligencing, ifyou're in the deep tech space like me,
diligencing just hard technology, maybe goingto academics, going through research, trying to
understand the technology very quickly,especially if it's like a new sector, you know,
sometimes a technical background helps.
And you're and you're dealing with peoples thatare of deep, deep backgrounds, and you're
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having to distill that knowledge.
Right?
So, you know, I I you know, I I've alwaysbecause of my dad, I I've always kept abreast
of the semi side, and so it's the you know,which is Sure.
Quasi considered deep tech, I guess.
And, you know, you can see the level of deepthought into the problems and the and the
solutions they're trying to build are orders ofmagnitude better than what you're seeing.
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It's sort of somebody trying to solve a asoftware problem, you know, in a two week
period.
Right?
So we're just right?
So it's a different it's a different game.
And just as a history lesson, you know, I'mwondering the timing of your father being in
the semiconductor space because, I mean,obviously, we all know about the traitorous
eight.
Right?
The group of eight employees who like Shockley.
(07:32):
Some like So was it around that time, or was ita little longer?
So so so Canada so my dad was, is British.
My my my so my my both my parents were from,from South Wales
Yeah.
UK.
My dad was, you know, he was finishing hismaster's degree in in semiconductors and
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microelectronics, in sort of 1968, '60 '9, soquite some time ago.
So the traders sort of had made their move, Ithink, by the time he'd graduated.
Canada decided that it wanted to be a bigplayer in semis in the late sixties, early
seventies, and funded a company here calledMicrosystems International.
Yeah.
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And that was Intel's first internationalpartner.
So my dad was hired by MicrosystemsInternational.
Mhmm.
And Intel was their major partner.
So he he was working with the Intel guys intheir first three to five years.
And those payments from the Canadian thatCanadian firm, which was government backed, was
the reason why Intel first showed their firstprofit ever back in '72, '70 '3.
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So Sure.
It's they were all sort of, I guess, commonvintages.
Maybe those guys were were the the generationright before the sort of the '5 to '10 before
that.
Right?
And this and the seventies was the sort of thetime of the semiconductor boom or the first
semiconductor boom, I guess, if you will.
Yeah.
It was, like, right along there.
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So and my my dad started his first company.
I'm gonna say like not a few years after hisborn, so early eighties.
Mhmm.
Right?
Yeah.
Around there.
Okay.
Got it.
So it was a little after that, it wasdefinitely not fully mainstream, but it was
just kinda slowly coming into the market.
Yeah.
Like, for somebody who grew up in the ecosystemor in in, like, as a as the son of an engineer
like yourself, like, it didn't feel like thiswas the beginning.
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It felt like it would always been going fortwenty or thirty years.
But when you look back from where we are today,it looks like a very early beginnings, early
innings in the tech ecosystem, and it was.
Yeah.
It's just, you know, you sort of get a bettersense of how much, how long it takes and how
much it takes to to really build these thingsand grow these things.
Yeah.
Yeah.
No.
That's great.
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So tell me, you know, what it was like tochange from kind of the technical role to an
investing role and tell me how it was workingfor whatever you're allowed to share in terms
of the family office.
They always say, look, family office is onefamily office, right?
They're
never Yeah.
So, you know, you so it depends on I've notedlike, so I've worked with multiple family
(10:02):
offices over the years, not working fornecessarily, but worked with.
Working with, yeah.
LPS or or other.
And, you know, I thought I understood familyoffices because I'd worked at one for five
years.
I think it depends on who made the money andwhen, and then what the expectations and goals
of that family office are.
So in our particular case, you know, Canada'smost successful technology entrepreneur
(10:26):
Mhmm.
Was Terry Matthews.
I worked for for his office.
Yeah.
Multi billionaire.
Mhmm.
And sold his company for 10,000,000,000, buthe'd sold company before that for over a
billion, you know Yeah.
Earlier.
So he he'd done this multiple times.
And he was still, you know, relatively young.
He was sort of 60 years old when he exitedNewbridge.
So Yeah.
(10:47):
It was not it was not a it was like, I was notdealing with the third or fourth generation.
Mhmm.
I was dealing with the guy who made the moneyand and and knew his ecosystem and his
technology stacks and and knew what he wantedto do.
So he was not, I was not dealing with, like,you know, third son, you know, like, trying to
do something.
I've noticed with other families where they'rethe generation after the founding member of the
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family office that those, they struggle a lot
more Yeah.
To to figure out what they wanna do with thisand how they wanna pay it forward into the next
generation.
Yeah.
And then I've worked with people who are sortof fourth generation after the the wealth
creation, and you can tell that they're veryfar removed from decision making on a on a
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individual deal level.
Right?
So, usually, the guy makes the money.
He's very involved in the decision making.
The second generation is, you know, trying tofind their own path within within the the
structure.
And then the third, fourth generations are youknow, some of them are doctors, and they just
do this, like, part time and they've handed itoff to professional managers to send them a
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dividend check every year.
Right?
So they're not as.
Right?
What are some you know, let's talk about thatfor a second.
You know, how has that evolved over time?
You know, some families now I mean, thefamilies that I know, many of them have a huge
multi asset strategy.
Depending on the size, if they're 2,000,000,000plus, they're not only doing venture, a lot of
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times they're investing in the sectors thatthey know or that they've come out of.
If they come out of manufacturing, they'reinvesting in multi decade durable companies.
It could be a logistics company or a shippingcompany because they came from that industry.
Know, them buying those companies out doing PEand buyout is a common theme, especially for
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families that were entrepreneurial for one ortwo decades.
But they don't only want to just do bio, theywant to, you know, expand their reach and
invest in some venture, maybe explore maybe ahedge fund strategy because there's some
liquidity.
And then we see private debt coming along too,especially in this time where the interest
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rates are kind of high.
So that's kind of what I've been seeing.
I've been seeing a little bit of a multi assetstrategy, but it's dependent on their goals and
also just kind of how big their asset size is,whether it's 2,000,000,000 plus, they're gonna
almost act like a like an institution.
Right?
Yeah.
I I I I'd say it's so I I I raised money in TheUS.
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I raised money in Canada.
I raised money in Europe, and I raised money inThe Middle East.
Mhmm.
I'm in The Gulf States.
You know, I think each individual region, evenbetween Canada and the states, which we you'd
think are very similar.
Yeah.
The maturity of the family office structures inThe US are well ahead of the the rest.
The Canadian ones, I think it's it's it's ait's a function of just the size of Canada and
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the and Mhmm.
The diversity of of all of the populationacross across the nation.
It's a very big it's a very big continent, andit's a very small population.
Right?
So you've got it spread much more thinly.
Yeah.
And and there's there's there's not many.
There are, but there are not many more more,like, two or three generation, you know, family
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offices that are are structured that way.
The ones that are that are, you see them verymuch diversified into multiple assets for for
Yeah.
For yields.
Right?
If you're in The Middle East, they're just nowbeginning to structurally decouple themselves
from predominantly oil based or or resourcebased investment structures.
(14:27):
So they're now they're they're trying to createyield outside of it and outside of them at
least as they come to perhaps a time when whenoil and gas is is less lucrative for them or
when it runs out depending on which countrywe're talking about.
In Europe, it's only now that they're beginningto realize that that the the the the and I'm
(14:49):
speaking predominantly Continental Europe.
The the returns are are just locally, thereturns are just not as good.
And so they're they're well aware of that, andthey're trying to internationalize those.
For better or worse, they've been that's beenmore focused on China, to some extent, and that
that is now coming home to roost to someextent.
When there was very little yield elsewhere,there that China looked like a great game.
(15:14):
But now that China's, you know, persona nongrata in some quarters, it's much more
difficult for them to exit their their theirtheir structures as quickly as they'd like.
So, you know, there's a rethinking, and and andpeople use the word decoupling, but I think
it's more of just, you know, perhaps leaningfurther into the Western, investment structures
(15:35):
than going, going into, you know, Asia andparticularly China.
Mhmm.
And India is, like, the up and coming unknownplace.
Right?
So Yeah.
Like
Tell me a little bit about, you know, just theCanada ecosystem.
So you talked about Ottawa, know there'sToronto.
I know, you know, a handful of LPs on the WestCoast, I guess, near Alberta.
(15:57):
Yeah.
So just tell me about, you know, just educateus about the ecosystem on both coasts and maybe
just kind of the sector focuses as well.
Yeah, so huge B2B SaaS consumer tech ecosystem,but we'll love to kind of unpack that and just
understand the industry sector focus areas andthe activity
Yeah.
It's okay.
For for us.
(16:17):
So so in terms of where capital has beendeployed, you know, Toronto is probably number
one today.
That wasn't the case twenty years ago.
Yeah.
And there's just more deep tech, more labs,more, you know, deep technical experience
coming out of out of Ottawa where the researchlabs for the governments and and Nortel and
(16:39):
those telecom companies was located for a longtime.
Toronto and Montreal, to a lesser extent,Alberta, some of the top the top rated AI
professors and and develop developers in theworld.
So Jeffrey Hinton is out here out of Toronto,and Jeff would be considered the godfather of
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AI in in in the world today.
He's he's the guy who was recently quoted inTime Magazine complaining about, you know,
where AI is going.
And he speaks from a level of authority becausealmost all AI work today references his
original work.
In Montreal, there's an equivalent professorwho's also done, you know, a number that he's
(17:24):
sort of a contemporary of Jeff's.
Mhmm.
So Canada has and Canada graduates the majorityof, you know, tough, like, masters and PhD
level AI guys.
So Jeff Hinton's lab here in Toronto, if youlook at who's graduated and where they've gone,
most of the top AI companies you're seeing inthe world today came out of that lab.
(17:46):
Yeah.
The OpenAI team, about a third of them are allJeff Hinton's, like, team members or former
team members or Mhmm.
Master's students, and PhD students.
They may have gone somewhere else for theirundergraduates, but they all ended up in
Toronto.
Sure.
And so we're seeing seeing Toronto right now asthat sort of big win.
There's there's that in Montreal as well, sortof a a smaller factor of it, obviously, and
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then and then, and then Alberta, as well.
There's sort of things going on there.
Yeah.
So Canada is that.
On in terms of, like, where venture capital isgoing, like, have Cohere up here, which is
Mhmm.
Doing
quite well, it seems, on on not not a deal I'min, but but is sort of the anchor tenant on,
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you know, growing fast in the in the AI LLMspace, the language model space.
Mhmm.
But they're doing it predominantly focused oncorporates.
So building LLM models for internal corporateuse using their data, which allows them to
Mhmm.
You know, not necessarily share their data withwith other AI firms.
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And you and you also have essentially, youknow, when you talk about the capital sources
in Canada, it's a very thin market.
Mhmm.
So for multiple reasons, Canada's like thetraditional LPs you'd find in The States, which
are family offices, pension plans, corporates.
There's just less of them all in in theCanadian ecosystem.
(19:17):
Pensions Yeah.
Invest here.
There's less family offices, and and there'sless corporates by by the factor of what you
know, headquartered here.
So there's less money in the ecosystem as awhole.
So I think, you know, if you look at sort ofpopulation size to to our American
counterparts, it's usually about twelve,thirteen to one.
Mhmm.
(19:37):
But the venture capital dollars is sort of 35to one.
Sure.
So there's just a lot less VC here.
Yeah.
And it's not for lack of quality techno technotech technical teams.
It's I think it's market access.
And Sure.
And to some extent, you know, nobody isfocusing predominantly on the Canadian
ecosystem.
(19:59):
Sure.
And tell me a little more about the goals ofthe family offices and the origin.
It sounds like, you know, you know, I'massuming in Alberta, a lot of them come from
like manufacturing infrastructure, oil, and itsounds like oil,
oil and oil services.
You're not you're not gonna see a lot ofmanufacturing.
The Canada, like, the populations are are like,each province is to some extent a city state.
(20:23):
Yeah.
So Toronto being sort of the center of the ofthe Ontario, the the province here.
Montreal, that of Quebec.
Calgary, that of Alberta.
Vancouver, that of BC.
Mhmm.
And manufacturing predominantly is sort ofanchored in the Ontario Quebec angles, and
that's that's generally the Saint LawrenceSeaway.
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It's a geography thing.
You can float a large boat up to Toronto'sdocks.
You can float a large boat up to Montreal'sdocks.
That's why you don't see it necessarily stuckon our coastal lines like you see with with New
York and and Boston.
Sure.
And and and in the case of Alberta, you know,they're they're they're resource rich in in oil
and gas.
(21:05):
Right?
And so they're the the that that is the anchortenant of their economy right now.
Yeah.
And so, you know, while they have other thingsgoing for them, the lion's share is oil and gas
revenue.
The way they get it out because they don't havesalt on the coast is pipelines, right?
Yeah.
Yeah.
So that's their focus.
(21:25):
So there's a lot of technology around oilpipelines, a lot of technology around oil and
gas extraction and mineral resource extraction.
And there's just a ton of of developing goingon in wireless as well there and and in AI.
And the wireless side comes from the fact thatthey're right next to the Rockies, and it was
(21:46):
very difficult for them to communicate withpeople on in Vancouver because of the
mountains.
So they built a lot of wireless technologycompanies there over the years.
Yeah.
No.
That's great.
And then what are some of their goals?
Are they looking to are they are you seeing agrowing interest for
Yeah.
Well, there's get into the the ups and downs ofthe oil and gas and the and sort of the the the
(22:08):
movement towards, you know, net zero
Clean energy, high energy
Right.
Yeah.
Yeah.
Has has has sort of focused their minds on on,you know, where they're gonna be in twenty,
twenty five years.
Right?
So they're setting the scenes and the and theinvestments for that.
You know, the the government there, theprovince there is doing that, and you see that
(22:28):
trickling into the family offices as well.
Sure.
But they're still they're still also heavilyfocused on on if you if you look at them when I
when I talk to them, they still feel overallocated in the oil and gas Got it.
System.
You know, you'll still you'll still see realestate guys there who are who are not.
But but they're but if their if theirbackgrounds are oil and gas, they're still
(22:51):
heavily, you know, heavily in the resourcessector.
Yeah.
So I I live in New York.
Right?
So Yeah.
We're super you know, we we have climate weekhere.
We're super, you know, green.
We're we're all about, you know, upcycling.
I talked to a a fund manager a couple days ago,and that's essentially their their whole focus.
Now, I were to talk about hydrogen energy andgo out to Texas, I might get a different
(23:14):
response, So how is like Alberta and the oilecosystem responding to kind of the next
generation of energy?
Are they open to it?
Are they open to kind of engaging with moreopportunities to integrate in with clean energy
sources, or are they, like, looking at what?
No.
I think I I think there's there's two ways oflooking at it.
So if you're if you're somebody sitting outsideof Calgary, you'll hear a lot of rhetoric there
(23:37):
that they're not super supportive of all theprograms and systems that are being built.
If you're actually in Alberta, in all fairnessto them, they've done the best job of actually
decarbonizing their existing oil and gasindustry than most of the others in the world.
And and and don't forget, majority of thepetroleum product that's in Alberta comes from
(24:01):
car sands.
So it it requires you to take in sand,essentially steam it, to get the oil out of the
sand so then you can refine.
And that's very carbon intensive job.
Right?
Because you're heating up hot hot water to getthis tar and and and oil and separate it from
(24:21):
from from the land from the sand in front ofme.
And so, you know, there's a lot of work forthem to decarbonize, and they've done probably
the the the most dramatic job of doing thatwhen you look at their numbers over the past,
you know, ten, fifteen years since it became apriority.
Yeah.
They're very open minded to these things.
I think I think they are less, enthused bygovernment regulation over it.
(24:46):
Right?
And so what I think Texas is the same.
I think both of them sort of look at, you know,their central governments as not working with
them, but working against them to some extent.
Mhmm.
And so, you know, sitting in Toronto, like, Ican say, oh, they should do more.
But Yeah.
People but when you look at the numbers,they've actually done quite well in both cases.
But I I know the numbers in Albertaspecifically, so they're very open minded to
(25:10):
it.
Yeah.
And tell me about the tell me a little moreabout like what you would advise new fund
managers to think about as they're thinkingabout building a firm.
And this is not and I'm not talking about justa one time pilot fund.
It's kind of like, you know, thinking about amulti, multi decade career and essentially a
(25:34):
franchise.
Right?
So, like, what
advice do give to someone?
Yeah.
I'm I'm twenty five years in the venture now ortwenty years in.
I would I probably noted like, look.
I and as I'm starting to fund and a franchisemyself, I think about this daily.
Mhmm.
It's a lot of people are sort of our age.
(25:54):
I guess we're I guess we're approaching or atmiddle middle age.
Don't necessarily build up the next generationof their firms as at the outset like we should.
Mhmm.
You start to see that with a lot of firms wherethere's this seeming gap between the GPs who
are approaching their late fifties, and thenthey suddenly get religion on next generation,
(26:16):
and they hire people in their early thirties.
And it's just too large a gap between those twogroups Mhmm.
To to impart the knowledge as colleagues ratherthan, you know, the mentorship, like, as, like,
teachers.
Mhmm.
So you see this problem where firms seem tofall apart.
Multigen like, there's no multigenerationalfirms where they haven't been hiring somebody
(26:37):
who's ten years younger than them Mhmm.
To come in at an earlier stage.
Yeah.
And beef if you look at Sequoia, you look atKleiner, you look at others, they've all been
very good about very quickly within fund two orthree lining up the next level of GPs that
they'll be bringing in and sharing and sharingthose economics or making those economics less
(26:58):
painful to endure at the earlier stage of theircareers.
So to to build a brand loyalty.
And you can see it with Sequoia.
They've just been much, much more thoughtfulabout making sure that those younger, you know,
potential GPs, can can, you know, essentiallybuy into the firm as they go for further.
(27:23):
Got it.
Yeah, that's helpful.
And then, you know, let's talk about just anedge.
Right?
We we have so many fund managers out there inthe world.
Yeah.
There's so many climate funds.
There's so many fintech funds.
There's so many b to b SaaS funds.
There's so many AI funds, right?
So how do you make yourself different than allthe others?
(27:45):
What have you learned in terms of storytellingto kind of engage people?
Because I feel like with everything,storytelling is the important
thing.
It's like I agree.
Like
when it comes to fundraising, everything.
Well, the stories need to be true, or at leastpass, pass, some level of due diligence.
So that's that's probably something we shouldwe should mention at the outset.
I hear a lot of stories that I know are nottrue.
(28:07):
So, you know, just just a funny anecdote tosorry to interrupt you, but you know the movie,
Catch Me If You Can?
Yeah.
Yeah.
So none of that actually really happened.
Like, I actually saw the story about the realperson, and, there was a guy that just kinda
was delusional.
And he just told all these crazy stories abouthow he faked being a doctor, faked being a
(28:28):
lawyer, and none of that really happened.
But he ended up starting creating he started tocreate seminars, and people just loved the
story, but the problem was it never happened.
But he still got, like, a Hollywood movie.
So I later Like, you know, there there's twoways to look at that.
There's the none of it really happens.
Should we draw any lessons from it?
Or, actually, should we draw the lesson thatthe whole movie had anyways, which is Yeah.
(28:51):
You can't trust anybody unless you verify theirstuff.
Mhmm.
Sure.
The the movie was about, hey.
You can't trust this guy because everybody sortof, like, will just naturally take it on spec.
Right?
Sure.
And then we find out that movie's fake too.
Like, isn't that, like, the best the bestlesson from that movie?
Right?
You know, I found that LPs, particularlyinstitutional LPs, have difficulty checking and
(29:19):
figuring out whether or not what they'rehearing from the GP is in fact the story as as
it should be told.
It can be it can be a story that's plausible.
Sure.
But not necessarily the story that is thetruth.
Yeah.
There
are will say too, there are some institutionalsize families that hire private investigators.
(29:39):
You know?
And
and you'll you'll you'll find that.
There there are there are firms scatteredacross North America and Europe that sole job
is to do the due diligence on.
Sometimes they catch they catch something.
Very often, it feels like they don't.
But, you know, I think I think if you'replanning on continuing to at some point, it's
(30:03):
it it comes out.
I guess it's one of those awkward moments whereit comes out, and I've seen this happen to LP
LPs suddenly realizing that they've gotten intobed with somebody with a reputation or or a
background they would rather have not have.
Mhmm.
And it kills it kills funds.
Yeah.
And it and it kills and it kills people'scareers.
(30:24):
So, you know, what do you do?
And and I think from the outset, it's radicalradical transparency about what you're what
you're really about and what what has has notgone wrong in your in your careers and in your
investment cycles pre previous to what you'redoing now.
You know, if you're if you're trying to sellyourself, obviously, you're gonna tell them the
best story going forward, but there has to be alevel of vulnerability and frankness that that
(30:49):
you continue to do.
Otherwise, you're gonna find yourself one day,you know, feeling as though you've misled
somebody into the into the relationship Yeah.
Which is not you you know, if you if you'recomfortable in what you the reasons why you've
done things in your life, and you're not,gaslighting people, you should be fine.
Right.
You know, for for me, like, the the sales pitchto entrepreneurs is pretty simple.
(31:12):
Every deal I do raises two subsequent rounds.
Mhmm.
I I I'm I'm not interested in a quick exit.
My goal is to set companies up at at the clevel for their series a and series b raise,
and that's usually when I start exiting theboard.
Mhmm.
So after the series b, you you'll rarely findme still on the board.
Sure.
(31:32):
And, you know, because that's where my valueadd ends.
Mhmm.
And, you know, I exit companies in the periodsafter that.
The for the LPs, it's you know, I'm bringing aninstitutional level of, like, oversight to seed
base deals.
I lead or colead all my deals.
(31:53):
Yeah.
So I'm usually anywhere between 35 to 50% ofthe round in the seed.
Mhmm.
And I and I build structure, and and it's notnecessarily.
You see a lot of sort of $250,000 safe checksgoing in and, you know, call us when your your
next round happens kind of attitude.
Mhmm.
That's I'm a more convictional investor.
(32:15):
Yeah.
Or, you know, I'll do six to eight deals in ourfund, and our fund will do 20 odd deals,
amongst the three of us, but we're very, veryfocused on bringing value add to management
taking that first customer and making 30 or 50out of them.
Right?
So that's So when I've seen the moreconcentrated high conviction portfolio
(32:39):
construction strategies, I've also seen apretty high amount of follow on as well.
You guys, do you agree with that too?
Yeah.
Well, sort of like history has taught me bothviews like the ones where
I'm saying like 45 to 50%.
Yeah.
We we have 40 35 to fifth of we I think we'vewe've modeled up to 50% as our our top line on
(33:01):
it.
We've we've had two or three sort of views onit.
Yeah.
But the goal you know, really, if you haveconviction at the early stage, you're trying to
get your ownership there.
Your your follow on is merely to showconviction to the the follow on investors that
your time with them has been like, you know,you have views that this is the one that you
wanna continue to run with.
(33:21):
Mhmm.
So you're show you're showing conviction, tothe other investors who are coming into the
series a Yeah.
And recognizing that your money's at play thereas well.
So that gives them a level.
We're we're we'll be tapped out, I would think,90% of the time by the time series b shows
shows up.
Sure.
And and, you know, if anything in the last fiveyears has taught me anything, that it's always
(33:46):
healthy to take a secondary where you can.
Right?
So Yeah.
You know, and I I kinda knew that before, but II think that got reinforced over the last four
or five years.
Sure.
You're just taking taking your your initialdeposit in the company off off the table.
So for the audience, just to clarify, you saytaking the secondary, you mean selling some of
(34:08):
the secondary shares and offering that as wellto some of the LPs to get into pro rata rights
as well.
So our goal our our intent is that Mhmm.
For our institutional players and our and ourcorporates that where it makes sense that at
series b, we'll be offering up the the eithereither our pro rata opportunity we can trade it
(34:30):
into an SVB SVB, like, into a into a, like,special purpose vehicle.
Yeah.
Or we would we would secondary some of ourshares either to the incoming investors or to
our colleagues who continue to wanna goforward.
Yeah.
The idea is to sell between 2550% of ourownership Yep.
If we can.
(34:50):
When I can
offer some liquidity back and
Yeah.
Like, offering healthy liquidity and lettingsome ride, and not at the same time,
necessarily doing that to the detriment offundraise that's going on.
Like, if if there isn't that if the temperatureis not to get that done Mhmm.
In that in that round, then, you know, we'reI'm not gonna be jumping up and down to sell
shares.
The goal would be to, you know, if it makessense for dilutive purposes to to find some
(35:17):
secondary, we'd be we'd be willing to raise ourhands.
Right?
Also, so there's not a tax impact.
You know, many LPs prefer to just recycle.
That way they can just kinda recycle it backinto Yeah.
That's the next month.
Yeah.
But, you know, depending on where you are infund cycle, you'll have that recycling might
not necessarily even hit the the as yetinvested capital.
(35:40):
Yeah.
Right?
So you're you're really trying to just get themback to one to one so that everything else is
gravy.
And there are depending on who your LPs are.
Yeah.
Some are more focused on tax issues thanothers.
Right?
Like Sure.
You know, depending on how how or how theystructure the investment into your firm or or
others.
In Canada, there are mechanisms to to reducethe tax rates Yeah.
(36:04):
For for for those if you wish.
But, you know, you have to be cognizant of thefact that, like, you know, you can't I I can't
run a fund thinking about every tax implicationfor every type of investor I have.
Sure.
Just doesn't doesn't work.
Yeah.
Absolutely.
I mean,
I I think one of the one goal to have possiblyis, you know I mean, for everybody is
(36:25):
definitely getting into DPI at some point.
You're just kinda really thinking through whenthat when that could happen.
You know?
Yeah.
Driving DPI like, it's a much easierconversation, every quarter with your LPs if
there's a DPI, you know, at year three or fouris beginning to trend in a in a positive
direction.
Yeah.
You know, obviously, your your biggest winnersare not coming due in year three and four.
(36:48):
Oh, sure.
Yeah.
They're usually the ones that just exitedfaster than you thought they would.
Right?
Yeah.
No, absolutely.
For the emerging managers, I think they benefitfrom your insights on just how do you source
amazing founders?
What are kind of the platforms in your machinethat help you source great founders?
(37:10):
Is it you know, do you have your own community?
Do you partner with other fund managers?
All of the above.
And then and then the second question to thatis, what is your filter?
What is your process to kind of see if somebodyis a good fit?
I know some of it's qualitative, some of it'squantitative.
Yeah.
But maybe if you can unpack both of thosethings, that'd be helpful.
Can we so finding entrepreneurs for us is notdifficult.
(37:33):
Mhmm.
The community is pretty, pretty small inCanada.
And and our and I should probably mention ourfund is, you know, perhaps 80% Canadian
focused.
Mhmm.
But there are lots of great, you know, on the aAI front for us, there are lots of great, you
know, you know, programs around the like, allthe universities, and we're Mhmm.
(37:54):
We're plugged into all of them.
Yeah.
I'm I'm an adviser to three.
I think David has has me beat by by one or two.
So he's Sure.
He's he's there, you know, like, let more oftenthan quarterly, probably every month or so.
Yeah.
So we see a lot of great talent coming outthere.
We we also have you know, like, I've been as Isaid, David and I both been VCs at separate
(38:16):
firms for twenty years, so we both havenetworks that, you know, transcend our time
together.
Mhmm.
So we've got return founders or the staff ofcompanies we invested in previously.
Yeah.
You know?
So that that just allows us to get access tothem that much earlier.
You know, how we gate it quantitatively, youknow, is is people we wanna work with.
(38:40):
And, you know, and, like, generally speaking,people when they hear the pitch about us
building a system, taking a taking a big chunkof the money to put put into their fund, that
that self selects a lot of entrepreneurs in orout.
Like, some people don't want me sitting ontheir board Sure.
Giving them advice or give or practicalexperiences that I've had working with others
(39:04):
to to share with them.
They they would prefer to do it without that.
And if they do, that's great.
They probably they weren't a fit for us.
Like, I'm not gonna wedge myself into theirbusinesses to try and give them advice when
they don't want it.
Sure.
And that's and and and every failure I've beena part of has been founders that I think chafed
under having a board or having professionalinvestors, you know, to answer to quarterly or
(39:30):
or more often than that.
Yeah.
And so, you know, those are just not people whoare wanting to work on this pro or this this
this problem together the same way I need towork.
Well, answered this question a little earliertoo because I think what you mentioned too is
what you offer is kind of a structure.
Yeah.
And I think that the process and infrastructureand just best practices is definitely needed
(39:52):
for anything.
Right?
So I mean Yeah.
Like to think so, but not everybody believesthat.
Like, there's a there, you know, there are themajority of of seed funds today are are
focusing on doing a lot much larger amount ofchecks than I.
Yeah.
With with you know, our fund is targeting50,000,000 Mhmm.
(40:13):
You know, US.
You know, that sort of you can do the back ofthe envelope map for when I say sort of
anywhere between twenty and twenty five deals.
You can sort of figure out and, you know, notall of them are gonna get follow on, so you can
sort of figure out how that's gonna work.
Sure.
But if you're a $50,000,000 fund and you'vedone 30 deals, I don't think you have the
wherewithal or the capacity to manage thosedeals as directly as I'm talking about.
(40:38):
Oh, yeah.
There just isn't the bandwidth to do that.
Yeah.
And and so that leads some founders to thinkthat, you know, that is the mechanism they'd
rather go to.
Right?
Somebody gives them a check, has a network thatthey can call into once in a while, and that
that's about it.
That's fine.
Sure.
Like, that that's for each for each founder,there's a different way of doing things.
Like, you know, no there's no one there was ifthis was, a like, an easy plan, then go for it.
(40:59):
But But for a lot but I I found, you know, mycareer just I wanna see the sort of what I
would call the check without necessarily, youknow, providing advice or getting involved.
It doesn't go very well for me.
Yeah.
So so along with the along with the structureand the support that you provide, what else
categorizes being someone who you wanna workwith?
(41:22):
Like what else are kind of some of the maybethings that you feel or kind of the vibe that
has been the common thread across
your a big fan of them negotiating me hard.
Okay.
Cool.
The the harder the founder negotiates my termsheet, you know, not necessarily unreasonably,
but, like, reasonably.
The the better I feel about them because, youknow, don't forget in the next rounds, they're
(41:43):
gonna be negotiating against somebody else forme because I'll be an owner by then.
Yeah.
So I want I wanna I wanna founder that, a,knows how to sell, like, sell to me.
Oh, sure.
And b, knows how to, like, negotiate with mewithout losing me during the process.
Right?
Yeah.
And so I'm you know, I I don't put a term sheeton the table without the intent of actually
that's the term sheet I really would like.
(42:03):
But if they can move me off that Sure.
I or convince me why there's question marksabout what they think it is, but structure, you
know, value, and and total investment size,whatever.
It's just very interesting for me to see howthey feel the levers of their business are
working in the context of a capital raise.
Right?
Mhmm.
And then there's then there's also, when I Iyou know, with the network that we have here,
(42:29):
if I bring them talent Mhmm.
How well they do at convincing that talent tojoin them at an earlier stage.
Very often, we meet founders probably a fewsteps before where where we would be able to
invest.
Yeah.
And they, you know, they ask for help, andwe're happy to help.
But what kind of help can I give you other thancapital when we're not ready to give capital?
(42:50):
It's usually network.
Right?
And Sure.
How they how how that network interacts withthem and how well it goes gives me a very good
sense of, you know, whether or not this isgonna work for us if we were to make an
investment later.
So it's very insightful to see if they're ifthey can sell, you know, talent as well as
they've sold, you know, capital.
Yeah.
(43:10):
It's not it's not as though we're we're thetalented ones.
Mhmm.
No.
And so what's super important, I mean, justgetting the right people, being able to poach
people.
Right?
I mean, good people usually don't getrecruited.
They get poached from, their competitorideally.
Right?
So I think if you if you can kinda tell peopleyour vision successfully and have those people
come aboard, think it's one of the mostimportant.
(43:31):
I mean, look, I agree.
I mean, sales is the most important skill.
I've mentioned this hundreds of times.
I mean, it's important for everything, right?
Even if you're in college and you just want toget a job, I mean, that job offer is a sale.
Right?
I mean,
so And I and I think that's where founders,particularly the engineers we're going back to
earlier, that's where engineers fail the mostis translating their technical skills into a
(43:53):
sales skill.
Mhmm.
That usually takes some good learning, andcoaching and, and feedback.
And I don't know if you can do that in avacuum.
Yeah.
Right?
What are some of the biggest learnings that youwould take away from q one or or maybe even
from last year?
From last year.
(44:13):
Yeah.
You know, silliness was alive and well in ourecosystem.
Like, I kinda felt that the sort of the02/2002, like, moment was gonna teach a lot of
the newer generation of GPs.
You saw the you saw everybody sort of pause fora moment and Yeah.
Reflect.
I'm not sure if we if we saw the reflectionsactually be absorbed by the majority of the
(44:37):
market.
There's a lot of there's a lot of what I wouldcall high value companies that low with low
revenue multiples, and they're looking forexits or or and they've raised huge amounts of
capital, but I just don't see how they deploythat, you know Mhmm.
Productively in the short term.
So there is there is still silliness going onin our market in in 2023 and into perhaps 2024
(45:00):
as well.
It seems to be slowing.
I I'm not sure if the the you're seeing it downsouth as much, but up here, the market has
like, the market outside of AI slowedsignificantly.
Yeah.
But still within AI, you're seeing thesilliness going on and sort of it's kind of a
tale of two cities going on.
Sure.
I mean, I'm seeing you know, I'm in New York.
(45:22):
Right?
So I'm seeing an increase in activity, which iskind of exciting.
I'm seeing an increase in LP engagement.
So I see people coming back in.
Obviously, the summer is around the corner.
So usually New York, everyone is in theHamptons and away for the summer.
So I would say people that are trying to raisemoney, whether it's fund managers or founders,
(45:45):
expect a little bit of a low probably over thesummer.
And then I think there's like one last sprintfrom like maybe August till November.
Yeah.
Know, the deployment seems to be downsignificantly on the Canadian side of the
agenda.
And and, you know, internationally, that'slike, if the the domestic capital usually
leaves the the foreign capital coming in, youdon't see them in the first in the first
(46:08):
rounds.
You see them in the second or third courtcloses.
And we're just not seeing a lot of their a lotof local capital being deployed right now
still.
Yeah.
You hear about it, but you don't see it.
So I'm not sure if if that will lead to furtherissues down, you know, down the quarters.
Sure.
But it's what I've noticed that on my US side,yeah, we're getting a lot more interest there.
(46:32):
And Yeah.
That which is great, but harder to tocrystallize when you don't have those earlier
closes
Oh, yeah.
In the Canadian market.
Absolutely.
And I would say too, I saw an interesting postthe other day, I think it was one of the GPs at
Harlem Capital.
They were just talking about locations.
So the locations that they're hearing a lotmore, I believe it was New York, San Francisco,
(46:56):
Miami and Dubai.
Those are like the four locations where I thinka few months ago people were talking about
Austin, like kind of the tertiary cities.
Yeah.
So it's interesting to hear Dubai.
I was there I was there.
I spent a month there.
I was in Abu Dhabi, but, you know, right nextto Dubai, for about four weeks back in January.
(47:17):
Yeah.
I I actually had dinner with the GP, like,about, like, two weeks ago.
Yeah.
And the next day, they were flying out to AbuDhabi.
They're meeting some kind of shake or somethinglike that.
So tell tell me a little bit about you know, Iknow we got, like, three minutes left, but any
top level insights from Abu Dhabi and whypeople are talking about that, or what what
prompted you to go there?
So my my wife was my wife's the founder, andshe she had some she had some investors out
(47:40):
there.
Mhmm.
And so I we and we have a young child, so wedecided to make a trip out of it for Oh, sure.
Four weeks so that, you know, her one week tripwasn't sort of in and out.
And I and I and a lot of Canadian expats or orlocals who came to Canada for their for their
master's and PhD degrees.
So there's a lot of Canadian to connectivetissue into the Abu Dhabi, Dubai markets,
(48:04):
particularly the sovereign wealth funds Yeah.
But also in the tech community there.
And so it was it just made sense for me to gothere and and I've I've been I was there six
months earlier as well.
I go every six months.
So Okay.
Well, we have a we have a a visa for for AbuDhabi.
(48:24):
But the but, you know, what have I learned?
They're feeling like that they've got some,some issues with the local market.
So they're they're they're there's a lot ofactivity there, but it's a it's focused on
making activity happen there.
Yeah.
So if if you're if you're like me, like a GP inCanada, you're trying to get money or in The
(48:46):
US, I think you'll find it more difficult totry and get that money and to go back to The US
with that capital.
Mhmm.
If you're if you're talking about working withthem on their local community and ecosystem
issues and wanting to build the ecosystemthere, they're much more receptive to it.
And it takes time.
Like, you can't go there, raise around and comehome.
(49:08):
And if you're coming from a brand that's wellknown, but if you're like me building a brand
from scratch, you're gonna have to, like,continue to put in FaceTime and relationship
building there.
There's there's a term there called WhatsApp,which is, like, short for WhatsApp.
Yeah.
And your what's your what size your cred.
Like, how's your how's your network ability?
(49:28):
Who do you know?
How can I check up on you to make sure you'recredible?
It's a very international network.
Sure.
So if you've done a master's degree or you havea a university education from a certain place,
really should dig into that to see who's thereto help you
Yeah.
To to to integrate yourself into thatecosystem, and you'll have to go back and forth
multiple times to build those relationships.
(49:50):
But they're not deploying capital out.
Mhmm.
Except at the very high levels, like Yeah.
850, 2 hundred 50 million dollar checks, whichis not my world.
They're much more focused on how can you comeand help us build something that's gonna be
here post oil and gas world.
Yeah.
That's what they're focusing on right now.
And you see it and Saudi is is now doing it ata much higher, like, rate.
(50:13):
Yeah.
And and it's just, you know, it's it's an orderof magnitude, like, larger.
Sure.
So that that's also beginning to to make itselffelt there locally.
Great.
Well, hey, Matt.
This was amazing.
I mean, the time flew by.
I really had a lot of fun.
Yeah.
Pleasure to have We covered a lot, so enjoyhanging out and, you know, give me a ring when
you're in New York.
Yeah.
I'll come to Toronto.
(50:33):
Yeah.
I could do that too.
One of my buddies from Toronto is coming in,this week, so I'm I'm doing it after him at
some point.
Maybe I know.
Who is it?
He's he's a psychiatrist, so maybe
he'll hopefully, he I might need to know him.
Yeah.
In this business.
Yeah.
Different different sector, but old old buddyfrom college.
Yeah, for sure.
You should definitely come up though.
(50:54):
I will.
I'll be up there.
Got we know Matt from Ripple and a couple ofthe buddies out there.
We'll definitely do something.
Cool, man.
Well, thank you so much.
Catch up soon.
My pleasure.
Thank you, Joel.
All right.
I suppose to give to someone.
(00:01):
Yeah.
I'm I'm twenty five years in to venture now ortwenty years in.
I I probably, noted and, like, look.
I and as I'm starting to fund and a franchisemyself, I think about this daily.
It's a lot of people are sort of our age.
I guess we're I guess we're approaching or atmiddle middle age.
(00:23):
Don't necessarily build up the next generationof their firms as at the outset like we should.
Welcome to The Investor, a podcast where I,Joel Palafinkel, your host, dives deep into the
minds of the world's most influentialinstitutional investors.
In each episode, we sit down with an investorto hear about their journeys and how global
(00:47):
markets are driving capital allocation.
So join us on this journey as we explore theseinsights.
All right.
So we're live here with Matt Roberts at CMDCapital.
Super excited to have him on the show today.
Matt, can you
hear me okay?
I can hear you great, Joel.
Can you hear me?
I can hear you.
(01:08):
Just making sure I got the right mic on.
So I'm good.
So ready to jump into this.
Everybody, we did not dress similar on purpose.
It's just Great minds.
Great minds.
Today is the day for green.
So you've got a little bit of a military green.
I've got a forest green and I've got the littleturquoise green behind me.
(01:33):
That's a great way to kick it off.
It's a great color.
But let's get started, Matt.
Tell us who you are.
Tell us about where you grew up.
I know you're in Toronto.
So talk about your childhood, what your parentsdid, what you thought you would do in your
career, and how you got to where you are.
And I'll probably be interrupting you.
Yeah.
So I'm Matt Roberts.
(01:55):
I'm the cofounder and GP at Command Capital,CMD Capital.
It's a it's my partner and I have I'm here inToronto.
My partner's in Montreal, David.
I grew up in Ottawa, which is the capital ofCanada, so that'll be a little bit, you know,
one of those cities that nobody knows aboutperhaps in in The US, but it's it's actually
(02:17):
the center of Canada's tech ecosystem, where itwas for quite some time.
You know, the I guess, what was I what was Idoing as a child?
Thinking I was gonna do as a job.
My dad was an electrical engineer.
Okay.
I am.
There you go.
So
I'm an electrical engineer by trade.
Oh, yeah.
Same here.
So cofounder of of semiconductor companies inOttawa.
(02:39):
Mhmm.
Some successful, some sadly not.
And, you know, so I always thought you know, Ithink if my father had been running a corner
store, I would think that the way you the nextthing you do is a corner store.
Mhmm.
Because he was in in, you know, in startups andin early stage companies.
Yeah.
You know, I thought I'd be, like you know, ifyou'd asked me a 10, I thought I was gonna be
(03:01):
an electrical engineer.
By the time I was hitting 15, was kind ofthinking, I don't know, less interested in the
semiconductor side.
I'd I'd been reverse doing reverse engineeringof semiconductors as a as a sort of a teenager,
a summer job at my dad's company and and a fewothers and realized that wasn't for me.
So I went into software.
And so I I sort of boned up on programming atan early stage, and then I went to work for
(03:25):
what was Canada's most successful sort ofearliest, like, tech company at the time, which
is a company called Newbridge Networks.
And I was the youngest manager there at about18, 19 years old.
Had about four or 5,000 people and thoughtsoftware and, you know, telecom or something
(03:45):
around that would be the space I go into as anadult.
Mhmm.
And then the guy who founded Newbridge, a guynamed Terry Matthews, exited Newbridge.
He sold it for about, I think, what,$10,000,000,000 Canadian.
Mhmm.
And he had a big family office.
And so he said to me, hey.
Why don't you come work for me at my familyoffice?
(04:06):
And from there, it became, oh, I'm gonna workin investments instead software.
So by trade, I guess, if people ask me what,like, what technical background I have, it's I
usually point at the programming side.
But really, I you know, most of my professionalcareer has been on the capital allocation side
so far.
Sure.
(04:26):
What are some traits that you think form a goodinvestor from being an engineer?
What are some engineering traits that help youbecome an investor?
Well, not a professional engineer like my dadwas.
I've noticed that if if I was gonna sayanything about engineers, it's it's it's
similar why you see good many good venturecolleagues from the law side is that these are
(04:52):
the only two vocations I know of where theyexplicitly teach logic and and and how you
build a logical conclusion and and then tear itapart piece by piece.
Mhmm.
Engineers are forced to build logical, youknow, answers and and fixes to to problems.
Lawyers are meant to do it at sort of morealong the discussion lines or or thought
(05:15):
processes, but both lead you to what what arevery healthy conclusions.
That's why, you know, Peter Thiel, for example,is a lawyer by trade.
And he hires lawyers.
He doesn't necessarily respect them, but he buthe So anyways.
And I
think it's because you're seeing you're seeingsomething it's a trait that all engineers have
to have in order to graduate.
Mhmm.
Oddly enough, they don't teach it as much in inComp Sci anymore.
(05:39):
So I'd I'd ask to take the logic courses thatwere available to engineers as an as a computer
engineer.
But but I think that's why you see, you know,engineers and and lawyers doing, you know,
perhaps intuitively a better job at differentvocations than their core core degrees.
Right?
(05:59):
I do see parallels because, I mean, as anengineer, you know, if you're an electrical
engineer, there's, like, the concept of logicgates.
Right?
So if this if this, then that and like, if youlook at a typical term sheet or a legal
document, there are triggers that get or leversthat get hit if something else happens.
So I think sometimes that systematic processhelps translating at least terms to founders.
(06:23):
Then I think also when you're diligencing, ifyou're in the deep tech space like me,
diligencing just hard technology, maybe goingto academics, going through research, trying to
understand the technology very quickly,especially if it's like a new sector, you know,
sometimes a technical background helps.
And you're and you're dealing with peoples thatare of deep, deep backgrounds, and you're
(06:45):
having to distill that knowledge.
Right?
So, you know, I I you know, I I've alwaysbecause of my dad, I I've always kept abreast
of the semi side, and so it's the you know,which is Sure.
Quasi considered deep tech, I guess.
And, you know, you can see the level of deepthought into the problems and the and the
solutions they're trying to build are orders ofmagnitude better than what you're seeing.
(07:10):
It's sort of somebody trying to solve a asoftware problem, you know, in a two week
period.
Right?
So we're just right?
So it's a different it's a different game.
And just as a history lesson, you know, I'mwondering the timing of your father being in
the semiconductor space because, I mean,obviously, we all know about the traitorous
eight.
Right?
The group of eight employees who like Shockley.
(07:32):
Some like So was it around that time, or was ita little longer?
So so so Canada so my dad was, is British.
My my my so my my both my parents were from,from South Wales
Yeah.
UK.
My dad was, you know, he was finishing hismaster's degree in in semiconductors and
(07:53):
microelectronics, in sort of 1968, '60 '9, soquite some time ago.
So the traders sort of had made their move, Ithink, by the time he'd graduated.
Canada decided that it wanted to be a bigplayer in semis in the late sixties, early
seventies, and funded a company here calledMicrosystems International.
Yeah.
(08:13):
And that was Intel's first internationalpartner.
So my dad was hired by MicrosystemsInternational.
Mhmm.
And Intel was their major partner.
So he he was working with the Intel guys intheir first three to five years.
And those payments from the Canadian thatCanadian firm, which was government backed, was
the reason why Intel first showed their firstprofit ever back in '72, '70 '3.
(08:36):
So Sure.
It's they were all sort of, I guess, commonvintages.
Maybe those guys were were the the generationright before the sort of the '5 to '10 before
that.
Right?
And this and the seventies was the sort of thetime of the semiconductor boom or the first
semiconductor boom, I guess, if you will.
Yeah.
It was, like, right along there.
(08:57):
So and my my dad started his first company.
I'm gonna say like not a few years after hisborn, so early eighties.
Mhmm.
Right?
Yeah.
Around there.
Okay.
Got it.
So it was a little after that, it wasdefinitely not fully mainstream, but it was
just kinda slowly coming into the market.
Yeah.
Like, for somebody who grew up in the ecosystemor in in, like, as a as the son of an engineer
like yourself, like, it didn't feel like thiswas the beginning.
(09:19):
It felt like it would always been going fortwenty or thirty years.
But when you look back from where we are today,it looks like a very early beginnings, early
innings in the tech ecosystem, and it was.
Yeah.
It's just, you know, you sort of get a bettersense of how much, how long it takes and how
much it takes to to really build these thingsand grow these things.
Yeah.
Yeah.
No.
That's great.
(09:39):
So tell me, you know, what it was like tochange from kind of the technical role to an
investing role and tell me how it was workingfor whatever you're allowed to share in terms
of the family office.
They always say, look, family office is onefamily office, right?
They're
never Yeah.
So, you know, you so it depends on I've notedlike, so I've worked with multiple family
(10:02):
offices over the years, not working fornecessarily, but worked with.
Working with, yeah.
LPS or or other.
And, you know, I thought I understood familyoffices because I'd worked at one for five
years.
I think it depends on who made the money andwhen, and then what the expectations and goals
of that family office are.
So in our particular case, you know, Canada'smost successful technology entrepreneur
(10:26):
Mhmm.
Was Terry Matthews.
I worked for for his office.
Yeah.
Multi billionaire.
Mhmm.
And sold his company for 10,000,000,000, buthe'd sold company before that for over a
billion, you know Yeah.
Earlier.
So he he'd done this multiple times.
And he was still, you know, relatively young.
He was sort of 60 years old when he exitedNewbridge.
So Yeah.
(10:47):
It was not it was not a it was like, I was notdealing with the third or fourth generation.
Mhmm.
I was dealing with the guy who made the moneyand and and knew his ecosystem and his
technology stacks and and knew what he wantedto do.
So he was not, I was not dealing with, like,you know, third son, you know, like, trying to
do something.
I've noticed with other families where they'rethe generation after the founding member of the
(11:13):
family office that those, they struggle a lot
more Yeah.
To to figure out what they wanna do with thisand how they wanna pay it forward into the next
generation.
Yeah.
And then I've worked with people who are sortof fourth generation after the the wealth
creation, and you can tell that they're veryfar removed from decision making on a on a
(11:33):
individual deal level.
Right?
So, usually, the guy makes the money.
He's very involved in the decision making.
The second generation is, you know, trying tofind their own path within within the the
structure.
And then the third, fourth generations are youknow, some of them are doctors, and they just
do this, like, part time and they've handed itoff to professional managers to send them a
(11:53):
dividend check every year.
Right?
So they're not as.
Right?
What are some you know, let's talk about thatfor a second.
You know, how has that evolved over time?
You know, some families now I mean, thefamilies that I know, many of them have a huge
multi asset strategy.
Depending on the size, if they're 2,000,000,000plus, they're not only doing venture, a lot of
(12:17):
times they're investing in the sectors thatthey know or that they've come out of.
If they come out of manufacturing, they'reinvesting in multi decade durable companies.
It could be a logistics company or a shippingcompany because they came from that industry.
Know, them buying those companies out doing PEand buyout is a common theme, especially for
(12:38):
families that were entrepreneurial for one ortwo decades.
But they don't only want to just do bio, theywant to, you know, expand their reach and
invest in some venture, maybe explore maybe ahedge fund strategy because there's some
liquidity.
And then we see private debt coming along too,especially in this time where the interest
(12:59):
rates are kind of high.
So that's kind of what I've been seeing.
I've been seeing a little bit of a multi assetstrategy, but it's dependent on their goals and
also just kind of how big their asset size is,whether it's 2,000,000,000 plus, they're gonna
almost act like a like an institution.
Right?
Yeah.
I I I I'd say it's so I I I raised money in TheUS.
(13:21):
I raised money in Canada.
I raised money in Europe, and I raised money inThe Middle East.
Mhmm.
I'm in The Gulf States.
You know, I think each individual region, evenbetween Canada and the states, which we you'd
think are very similar.
Yeah.
The maturity of the family office structures inThe US are well ahead of the the rest.
The Canadian ones, I think it's it's it's ait's a function of just the size of Canada and
(13:46):
the and Mhmm.
The diversity of of all of the populationacross across the nation.
It's a very big it's a very big continent, andit's a very small population.
Right?
So you've got it spread much more thinly.
Yeah.
And and there's there's there's not many.
There are, but there are not many more more,like, two or three generation, you know, family
(14:06):
offices that are are structured that way.
The ones that are that are, you see them verymuch diversified into multiple assets for for
Yeah.
For yields.
Right?
If you're in The Middle East, they're just nowbeginning to structurally decouple themselves
from predominantly oil based or or resourcebased investment structures.
(14:27):
So they're now they're they're trying to createyield outside of it and outside of them at
least as they come to perhaps a time when whenoil and gas is is less lucrative for them or
when it runs out depending on which countrywe're talking about.
In Europe, it's only now that they're beginningto realize that that the the the the and I'm
(14:49):
speaking predominantly Continental Europe.
The the returns are are just locally, thereturns are just not as good.
And so they're they're well aware of that, andthey're trying to internationalize those.
For better or worse, they've been that's beenmore focused on China, to some extent, and that
that is now coming home to roost to someextent.
When there was very little yield elsewhere,there that China looked like a great game.
(15:14):
But now that China's, you know, persona nongrata in some quarters, it's much more
difficult for them to exit their their theirtheir structures as quickly as they'd like.
So, you know, there's a rethinking, and and andpeople use the word decoupling, but I think
it's more of just, you know, perhaps leaningfurther into the Western, investment structures
(15:35):
than going, going into, you know, Asia andparticularly China.
Mhmm.
And India is, like, the up and coming unknownplace.
Right?
So Yeah.
Like
Tell me a little bit about, you know, just theCanada ecosystem.
So you talked about Ottawa, know there'sToronto.
I know, you know, a handful of LPs on the WestCoast, I guess, near Alberta.
(15:57):
Yeah.
So just tell me about, you know, just educateus about the ecosystem on both coasts and maybe
just kind of the sector focuses as well.
Yeah, so huge B2B SaaS consumer tech ecosystem,but we'll love to kind of unpack that and just
understand the industry sector focus areas andthe activity
Yeah.
It's okay.
For for us.
(16:17):
So so in terms of where capital has beendeployed, you know, Toronto is probably number
one today.
That wasn't the case twenty years ago.
Yeah.
And there's just more deep tech, more labs,more, you know, deep technical experience
coming out of out of Ottawa where the researchlabs for the governments and and Nortel and
(16:39):
those telecom companies was located for a longtime.
Toronto and Montreal, to a lesser extent,Alberta, some of the top the top rated AI
professors and and develop developers in theworld.
So Jeffrey Hinton is out here out of Toronto,and Jeff would be considered the godfather of
(17:02):
AI in in in the world today.
He's he's the guy who was recently quoted inTime Magazine complaining about, you know,
where AI is going.
And he speaks from a level of authority becausealmost all AI work today references his
original work.
In Montreal, there's an equivalent professorwho's also done, you know, a number that he's
(17:24):
sort of a contemporary of Jeff's.
Mhmm.
So Canada has and Canada graduates the majorityof, you know, tough, like, masters and PhD
level AI guys.
So Jeff Hinton's lab here in Toronto, if youlook at who's graduated and where they've gone,
most of the top AI companies you're seeing inthe world today came out of that lab.
(17:46):
Yeah.
The OpenAI team, about a third of them are allJeff Hinton's, like, team members or former
team members or Mhmm.
Master's students, and PhD students.
They may have gone somewhere else for theirundergraduates, but they all ended up in
Toronto.
Sure.
And so we're seeing seeing Toronto right now asthat sort of big win.
There's there's that in Montreal as well, sortof a a smaller factor of it, obviously, and
(18:10):
then and then, and then Alberta, as well.
There's sort of things going on there.
Yeah.
So Canada is that.
On in terms of, like, where venture capital isgoing, like, have Cohere up here, which is
Mhmm.
Doing
quite well, it seems, on on not not a deal I'min, but but is sort of the anchor tenant on,
(18:30):
you know, growing fast in the in the AI LLMspace, the language model space.
Mhmm.
But they're doing it predominantly focused oncorporates.
So building LLM models for internal corporateuse using their data, which allows them to
Mhmm.
You know, not necessarily share their data withwith other AI firms.
(18:55):
And you and you also have essentially, youknow, when you talk about the capital sources
in Canada, it's a very thin market.
Mhmm.
So for multiple reasons, Canada's like thetraditional LPs you'd find in The States, which
are family offices, pension plans, corporates.
There's just less of them all in in theCanadian ecosystem.
(19:17):
Pensions Yeah.
Invest here.
There's less family offices, and and there'sless corporates by by the factor of what you
know, headquartered here.
So there's less money in the ecosystem as awhole.
So I think, you know, if you look at sort ofpopulation size to to our American
counterparts, it's usually about twelve,thirteen to one.
Mhmm.
(19:37):
But the venture capital dollars is sort of 35to one.
Sure.
So there's just a lot less VC here.
Yeah.
And it's not for lack of quality techno technotech technical teams.
It's I think it's market access.
And Sure.
And to some extent, you know, nobody isfocusing predominantly on the Canadian
ecosystem.
(19:59):
Sure.
And tell me a little more about the goals ofthe family offices and the origin.
It sounds like, you know, you know, I'massuming in Alberta, a lot of them come from
like manufacturing infrastructure, oil, and itsounds like oil,
oil and oil services.
You're not you're not gonna see a lot ofmanufacturing.
The Canada, like, the populations are are like,each province is to some extent a city state.
(20:23):
Yeah.
So Toronto being sort of the center of the ofthe Ontario, the the province here.
Montreal, that of Quebec.
Calgary, that of Alberta.
Vancouver, that of BC.
Mhmm.
And manufacturing predominantly is sort ofanchored in the Ontario Quebec angles, and
that's that's generally the Saint LawrenceSeaway.
(20:45):
It's a geography thing.
You can float a large boat up to Toronto'sdocks.
You can float a large boat up to Montreal'sdocks.
That's why you don't see it necessarily stuckon our coastal lines like you see with with New
York and and Boston.
Sure.
And and and in the case of Alberta, you know,they're they're they're resource rich in in oil
and gas.
(21:05):
Right?
And so they're the the that that is the anchortenant of their economy right now.
Yeah.
And so, you know, while they have other thingsgoing for them, the lion's share is oil and gas
revenue.
The way they get it out because they don't havesalt on the coast is pipelines, right?
Yeah.
Yeah.
So that's their focus.
(21:25):
So there's a lot of technology around oilpipelines, a lot of technology around oil and
gas extraction and mineral resource extraction.
And there's just a ton of of developing goingon in wireless as well there and and in AI.
And the wireless side comes from the fact thatthey're right next to the Rockies, and it was
(21:46):
very difficult for them to communicate withpeople on in Vancouver because of the
mountains.
So they built a lot of wireless technologycompanies there over the years.
Yeah.
No.
That's great.
And then what are some of their goals?
Are they looking to are they are you seeing agrowing interest for
Yeah.
Well, there's get into the the ups and downs ofthe oil and gas and the and sort of the the the
(22:08):
movement towards, you know, net zero
Clean energy, high energy
Right.
Yeah.
Yeah.
Has has has sort of focused their minds on on,you know, where they're gonna be in twenty,
twenty five years.
Right?
So they're setting the scenes and the and theinvestments for that.
You know, the the government there, theprovince there is doing that, and you see that
(22:28):
trickling into the family offices as well.
Sure.
But they're still they're still also heavilyfocused on on if you if you look at them when I
when I talk to them, they still feel overallocated in the oil and gas Got it.
System.
You know, you'll still you'll still see realestate guys there who are who are not.
But but they're but if their if theirbackgrounds are oil and gas, they're still
(22:51):
heavily, you know, heavily in the resourcessector.
Yeah.
So I I live in New York.
Right?
So Yeah.
We're super you know, we we have climate weekhere.
We're super, you know, green.
We're we're all about, you know, upcycling.
I talked to a a fund manager a couple days ago,and that's essentially their their whole focus.
Now, I were to talk about hydrogen energy andgo out to Texas, I might get a different
(23:14):
response, So how is like Alberta and the oilecosystem responding to kind of the next
generation of energy?
Are they open to it?
Are they open to kind of engaging with moreopportunities to integrate in with clean energy
sources, or are they, like, looking at what?
No.
I think I I think there's there's two ways oflooking at it.
So if you're if you're somebody sitting outsideof Calgary, you'll hear a lot of rhetoric there
(23:37):
that they're not super supportive of all theprograms and systems that are being built.
If you're actually in Alberta, in all fairnessto them, they've done the best job of actually
decarbonizing their existing oil and gasindustry than most of the others in the world.
And and and don't forget, majority of thepetroleum product that's in Alberta comes from
(24:01):
car sands.
So it it requires you to take in sand,essentially steam it, to get the oil out of the
sand so then you can refine.
And that's very carbon intensive job.
Right?
Because you're heating up hot hot water to getthis tar and and and oil and separate it from
(24:21):
from from the land from the sand in front ofme.
And so, you know, there's a lot of work forthem to decarbonize, and they've done probably
the the the most dramatic job of doing thatwhen you look at their numbers over the past,
you know, ten, fifteen years since it became apriority.
Yeah.
They're very open minded to these things.
I think I think they are less, enthused bygovernment regulation over it.
(24:46):
Right?
And so what I think Texas is the same.
I think both of them sort of look at, you know,their central governments as not working with
them, but working against them to some extent.
Mhmm.
And so, you know, sitting in Toronto, like, Ican say, oh, they should do more.
But Yeah.
People but when you look at the numbers,they've actually done quite well in both cases.
But I I know the numbers in Albertaspecifically, so they're very open minded to
(25:10):
it.
Yeah.
And tell me about the tell me a little moreabout like what you would advise new fund
managers to think about as they're thinkingabout building a firm.
And this is not and I'm not talking about justa one time pilot fund.
It's kind of like, you know, thinking about amulti, multi decade career and essentially a
(25:34):
franchise.
Right?
So, like, what
advice do give to someone?
Yeah.
I'm I'm twenty five years in the venture now ortwenty years in.
I would I probably noted like, look.
I and as I'm starting to fund and a franchisemyself, I think about this daily.
Mhmm.
It's a lot of people are sort of our age.
(25:54):
I guess we're I guess we're approaching or atmiddle middle age.
Don't necessarily build up the next generationof their firms as at the outset like we should.
Mhmm.
You start to see that with a lot of firms wherethere's this seeming gap between the GPs who
are approaching their late fifties, and thenthey suddenly get religion on next generation,
(26:16):
and they hire people in their early thirties.
And it's just too large a gap between those twogroups Mhmm.
To to impart the knowledge as colleagues ratherthan, you know, the mentorship, like, as, like,
teachers.
Mhmm.
So you see this problem where firms seem tofall apart.
Multigen like, there's no multigenerationalfirms where they haven't been hiring somebody
(26:37):
who's ten years younger than them Mhmm.
To come in at an earlier stage.
Yeah.
And beef if you look at Sequoia, you look atKleiner, you look at others, they've all been
very good about very quickly within fund two orthree lining up the next level of GPs that
they'll be bringing in and sharing and sharingthose economics or making those economics less
(26:58):
painful to endure at the earlier stage of theircareers.
So to to build a brand loyalty.
And you can see it with Sequoia.
They've just been much, much more thoughtfulabout making sure that those younger, you know,
potential GPs, can can, you know, essentiallybuy into the firm as they go for further.
(27:23):
Got it.
Yeah, that's helpful.
And then, you know, let's talk about just anedge.
Right?
We we have so many fund managers out there inthe world.
Yeah.
There's so many climate funds.
There's so many fintech funds.
There's so many b to b SaaS funds.
There's so many AI funds, right?
So how do you make yourself different than allthe others?
(27:45):
What have you learned in terms of storytellingto kind of engage people?
Because I feel like with everything,storytelling is the important
thing.
It's like I agree.
Like
when it comes to fundraising, everything.
Well, the stories need to be true, or at leastpass, pass, some level of due diligence.
So that's that's probably something we shouldwe should mention at the outset.
I hear a lot of stories that I know are nottrue.
(28:07):
So, you know, just just a funny anecdote tosorry to interrupt you, but you know the movie,
Catch Me If You Can?
Yeah.
Yeah.
So none of that actually really happened.
Like, I actually saw the story about the realperson, and, there was a guy that just kinda
was delusional.
And he just told all these crazy stories abouthow he faked being a doctor, faked being a
(28:28):
lawyer, and none of that really happened.
But he ended up starting creating he started tocreate seminars, and people just loved the
story, but the problem was it never happened.
But he still got, like, a Hollywood movie.
So I later Like, you know, there there's twoways to look at that.
There's the none of it really happens.
Should we draw any lessons from it?
Or, actually, should we draw the lesson thatthe whole movie had anyways, which is Yeah.
(28:51):
You can't trust anybody unless you verify theirstuff.
Mhmm.
Sure.
The the movie was about, hey.
You can't trust this guy because everybody sortof, like, will just naturally take it on spec.
Right?
Sure.
And then we find out that movie's fake too.
Like, isn't that, like, the best the bestlesson from that movie?
Right?
You know, I found that LPs, particularlyinstitutional LPs, have difficulty checking and
(29:19):
figuring out whether or not what they'rehearing from the GP is in fact the story as as
it should be told.
It can be it can be a story that's plausible.
Sure.
But not necessarily the story that is thetruth.
Yeah.
There
are will say too, there are some institutionalsize families that hire private investigators.
(29:39):
You know?
And
and you'll you'll you'll find that.
There there are there are firms scatteredacross North America and Europe that sole job
is to do the due diligence on.
Sometimes they catch they catch something.
Very often, it feels like they don't.
But, you know, I think I think if you'replanning on continuing to at some point, it's
(30:03):
it it comes out.
I guess it's one of those awkward moments whereit comes out, and I've seen this happen to LP
LPs suddenly realizing that they've gotten intobed with somebody with a reputation or or a
background they would rather have not have.
Mhmm.
And it kills it kills funds.
Yeah.
And it and it kills and it kills people'scareers.
(30:24):
So, you know, what do you do?
And and I think from the outset, it's radicalradical transparency about what you're what
you're really about and what what has has notgone wrong in your in your careers and in your
investment cycles pre previous to what you'redoing now.
You know, if you're if you're trying to sellyourself, obviously, you're gonna tell them the
best story going forward, but there has to be alevel of vulnerability and frankness that that
(30:49):
you continue to do.
Otherwise, you're gonna find yourself one day,you know, feeling as though you've misled
somebody into the into the relationship Yeah.
Which is not you you know, if you if you'recomfortable in what you the reasons why you've
done things in your life, and you're not,gaslighting people, you should be fine.
Right.
You know, for for me, like, the the sales pitchto entrepreneurs is pretty simple.
(31:12):
Every deal I do raises two subsequent rounds.
Mhmm.
I I I'm I'm not interested in a quick exit.
My goal is to set companies up at at the clevel for their series a and series b raise,
and that's usually when I start exiting theboard.
Mhmm.
So after the series b, you you'll rarely findme still on the board.
Sure.
(31:32):
And, you know, because that's where my valueadd ends.
Mhmm.
And, you know, I exit companies in the periodsafter that.
The for the LPs, it's you know, I'm bringing aninstitutional level of, like, oversight to seed
base deals.
I lead or colead all my deals.
(31:53):
Yeah.
So I'm usually anywhere between 35 to 50% ofthe round in the seed.
Mhmm.
And I and I build structure, and and it's notnecessarily.
You see a lot of sort of $250,000 safe checksgoing in and, you know, call us when your your
next round happens kind of attitude.
Mhmm.
That's I'm a more convictional investor.
(32:15):
Yeah.
Or, you know, I'll do six to eight deals in ourfund, and our fund will do 20 odd deals,
amongst the three of us, but we're very, veryfocused on bringing value add to management
taking that first customer and making 30 or 50out of them.
Right?
So that's So when I've seen the moreconcentrated high conviction portfolio
(32:39):
construction strategies, I've also seen apretty high amount of follow on as well.
You guys, do you agree with that too?
Yeah.
Well, sort of like history has taught me bothviews like the ones where
I'm saying like 45 to 50%.
Yeah.
We we have 40 35 to fifth of we I think we'vewe've modeled up to 50% as our our top line on
(33:01):
it.
We've we've had two or three sort of views onit.
Yeah.
But the goal you know, really, if you haveconviction at the early stage, you're trying to
get your ownership there.
Your your follow on is merely to showconviction to the the follow on investors that
your time with them has been like, you know,you have views that this is the one that you
wanna continue to run with.
(33:21):
Mhmm.
So you're show you're showing conviction, tothe other investors who are coming into the
series a Yeah.
And recognizing that your money's at play thereas well.
So that gives them a level.
We're we're we'll be tapped out, I would think,90% of the time by the time series b shows
shows up.
Sure.
And and, you know, if anything in the last fiveyears has taught me anything, that it's always
(33:46):
healthy to take a secondary where you can.
Right?
So Yeah.
You know, and I I kinda knew that before, but II think that got reinforced over the last four
or five years.
Sure.
You're just taking taking your your initialdeposit in the company off off the table.
So for the audience, just to clarify, you saytaking the secondary, you mean selling some of
(34:08):
the secondary shares and offering that as wellto some of the LPs to get into pro rata rights
as well.
So our goal our our intent is that Mhmm.
For our institutional players and our and ourcorporates that where it makes sense that at
series b, we'll be offering up the the eithereither our pro rata opportunity we can trade it
(34:30):
into an SVB SVB, like, into a into a, like,special purpose vehicle.
Yeah.
Or we would we would secondary some of ourshares either to the incoming investors or to
our colleagues who continue to wanna goforward.
Yeah.
The idea is to sell between 2550% of ourownership Yep.
If we can.
(34:50):
When I can
offer some liquidity back and
Yeah.
Like, offering healthy liquidity and lettingsome ride, and not at the same time,
necessarily doing that to the detriment offundraise that's going on.
Like, if if there isn't that if the temperatureis not to get that done Mhmm.
In that in that round, then, you know, we'reI'm not gonna be jumping up and down to sell
shares.
The goal would be to, you know, if it makessense for dilutive purposes to to find some
(35:17):
secondary, we'd be we'd be willing to raise ourhands.
Right?
Also, so there's not a tax impact.
You know, many LPs prefer to just recycle.
That way they can just kinda recycle it backinto Yeah.
That's the next month.
Yeah.
But, you know, depending on where you are infund cycle, you'll have that recycling might
not necessarily even hit the the as yetinvested capital.
(35:40):
Yeah.
Right?
So you're you're really trying to just get themback to one to one so that everything else is
gravy.
And there are depending on who your LPs are.
Yeah.
Some are more focused on tax issues thanothers.
Right?
Like Sure.
You know, depending on how how or how theystructure the investment into your firm or or
others.
In Canada, there are mechanisms to to reducethe tax rates Yeah.
(36:04):
For for for those if you wish.
But, you know, you have to be cognizant of thefact that, like, you know, you can't I I can't
run a fund thinking about every tax implicationfor every type of investor I have.
Sure.
Just doesn't doesn't work.
Yeah.
Absolutely.
I mean,
I I think one of the one goal to have possiblyis, you know I mean, for everybody is
(36:25):
definitely getting into DPI at some point.
You're just kinda really thinking through whenthat when that could happen.
You know?
Yeah.
Driving DPI like, it's a much easierconversation, every quarter with your LPs if
there's a DPI, you know, at year three or fouris beginning to trend in a in a positive
direction.
Yeah.
You know, obviously, your your biggest winnersare not coming due in year three and four.
(36:48):
Oh, sure.
Yeah.
They're usually the ones that just exitedfaster than you thought they would.
Right?
Yeah.
No, absolutely.
For the emerging managers, I think they benefitfrom your insights on just how do you source
amazing founders?
What are kind of the platforms in your machinethat help you source great founders?
(37:10):
Is it you know, do you have your own community?
Do you partner with other fund managers?
All of the above.
And then and then the second question to thatis, what is your filter?
What is your process to kind of see if somebodyis a good fit?
I know some of it's qualitative, some of it'squantitative.
Yeah.
But maybe if you can unpack both of thosethings, that'd be helpful.
Can we so finding entrepreneurs for us is notdifficult.
(37:33):
Mhmm.
The community is pretty, pretty small inCanada.
And and our and I should probably mention ourfund is, you know, perhaps 80% Canadian
focused.
Mhmm.
But there are lots of great, you know, on the aAI front for us, there are lots of great, you
know, you know, programs around the like, allthe universities, and we're Mhmm.
(37:54):
We're plugged into all of them.
Yeah.
I'm I'm an adviser to three.
I think David has has me beat by by one or two.
So he's Sure.
He's he's there, you know, like, let more oftenthan quarterly, probably every month or so.
Yeah.
So we see a lot of great talent coming outthere.
We we also have you know, like, I've been as Isaid, David and I both been VCs at separate
(38:16):
firms for twenty years, so we both havenetworks that, you know, transcend our time
together.
Mhmm.
So we've got return founders or the staff ofcompanies we invested in previously.
Yeah.
You know?
So that that just allows us to get access tothem that much earlier.
You know, how we gate it quantitatively, youknow, is is people we wanna work with.
(38:40):
And, you know, and, like, generally speaking,people when they hear the pitch about us
building a system, taking a taking a big chunkof the money to put put into their fund, that
that self selects a lot of entrepreneurs in orout.
Like, some people don't want me sitting ontheir board Sure.
Giving them advice or give or practicalexperiences that I've had working with others
(39:04):
to to share with them.
They they would prefer to do it without that.
And if they do, that's great.
They probably they weren't a fit for us.
Like, I'm not gonna wedge myself into theirbusinesses to try and give them advice when
they don't want it.
Sure.
And that's and and and every failure I've beena part of has been founders that I think chafed
under having a board or having professionalinvestors, you know, to answer to quarterly or
(39:30):
or more often than that.
Yeah.
And so, you know, those are just not people whoare wanting to work on this pro or this this
this problem together the same way I need towork.
Well, answered this question a little earliertoo because I think what you mentioned too is
what you offer is kind of a structure.
Yeah.
And I think that the process and infrastructureand just best practices is definitely needed
(39:52):
for anything.
Right?
So I mean Yeah.
Like to think so, but not everybody believesthat.
Like, there's a there, you know, there are themajority of of seed funds today are are
focusing on doing a lot much larger amount ofchecks than I.
Yeah.
With with you know, our fund is targeting50,000,000 Mhmm.
(40:13):
You know, US.
You know, that sort of you can do the back ofthe envelope map for when I say sort of
anywhere between twenty and twenty five deals.
You can sort of figure out and, you know, notall of them are gonna get follow on, so you can
sort of figure out how that's gonna work.
Sure.
But if you're a $50,000,000 fund and you'vedone 30 deals, I don't think you have the
wherewithal or the capacity to manage thosedeals as directly as I'm talking about.
(40:38):
Oh, yeah.
There just isn't the bandwidth to do that.
Yeah.
And and so that leads some founders to thinkthat, you know, that is the mechanism they'd
rather go to.
Right?
Somebody gives them a check, has a network thatthey can call into once in a while, and that
that's about it.
That's fine.
Sure.
Like, that that's for each for each founder,there's a different way of doing things.
Like, you know, no there's no one there was ifthis was, a like, an easy plan, then go for it.
(40:59):
But But for a lot but I I found, you know, mycareer just I wanna see the sort of what I
would call the check without necessarily, youknow, providing advice or getting involved.
It doesn't go very well for me.
Yeah.
So so along with the along with the structureand the support that you provide, what else
categorizes being someone who you wanna workwith?
(41:22):
Like what else are kind of some of the maybethings that you feel or kind of the vibe that
has been the common thread across
your a big fan of them negotiating me hard.
Okay.
Cool.
The the harder the founder negotiates my termsheet, you know, not necessarily unreasonably,
but, like, reasonably.
The the better I feel about them because, youknow, don't forget in the next rounds, they're
(41:43):
gonna be negotiating against somebody else forme because I'll be an owner by then.
Yeah.
So I want I wanna I wanna founder that, a,knows how to sell, like, sell to me.
Oh, sure.
And b, knows how to, like, negotiate with mewithout losing me during the process.
Right?
Yeah.
And so I'm you know, I I don't put a term sheeton the table without the intent of actually
that's the term sheet I really would like.
(42:03):
But if they can move me off that Sure.
I or convince me why there's question marksabout what they think it is, but structure, you
know, value, and and total investment size,whatever.
It's just very interesting for me to see howthey feel the levers of their business are
working in the context of a capital raise.
Right?
Mhmm.
And then there's then there's also, when I Iyou know, with the network that we have here,
(42:29):
if I bring them talent Mhmm.
How well they do at convincing that talent tojoin them at an earlier stage.
Very often, we meet founders probably a fewsteps before where where we would be able to
invest.
Yeah.
And they, you know, they ask for help, andwe're happy to help.
But what kind of help can I give you other thancapital when we're not ready to give capital?
(42:50):
It's usually network.
Right?
And Sure.
How they how how that network interacts withthem and how well it goes gives me a very good
sense of, you know, whether or not this isgonna work for us if we were to make an
investment later.
So it's very insightful to see if they're ifthey can sell, you know, talent as well as
they've sold, you know, capital.
Yeah.
(43:10):
It's not it's not as though we're we're thetalented ones.
Mhmm.
No.
And so what's super important, I mean, justgetting the right people, being able to poach
people.
Right?
I mean, good people usually don't getrecruited.
They get poached from, their competitorideally.
Right?
So I think if you if you can kinda tell peopleyour vision successfully and have those people
come aboard, think it's one of the mostimportant.
(43:31):
I mean, look, I agree.
I mean, sales is the most important skill.
I've mentioned this hundreds of times.
I mean, it's important for everything, right?
Even if you're in college and you just want toget a job, I mean, that job offer is a sale.
Right?
I mean,
so And I and I think that's where founders,particularly the engineers we're going back to
earlier, that's where engineers fail the mostis translating their technical skills into a
(43:53):
sales skill.
Mhmm.
That usually takes some good learning, andcoaching and, and feedback.
And I don't know if you can do that in avacuum.
Yeah.
Right?
What are some of the biggest learnings that youwould take away from q one or or maybe even
from last year?
From last year.
(44:13):
Yeah.
You know, silliness was alive and well in ourecosystem.
Like, I kinda felt that the sort of the02/2002, like, moment was gonna teach a lot of
the newer generation of GPs.
You saw the you saw everybody sort of pause fora moment and Yeah.
Reflect.
I'm not sure if we if we saw the reflectionsactually be absorbed by the majority of the
(44:37):
market.
There's a lot of there's a lot of what I wouldcall high value companies that low with low
revenue multiples, and they're looking forexits or or and they've raised huge amounts of
capital, but I just don't see how they deploythat, you know Mhmm.
Productively in the short term.
So there is there is still silliness going onin our market in in 2023 and into perhaps 2024
(45:00):
as well.
It seems to be slowing.
I I'm not sure if the the you're seeing it downsouth as much, but up here, the market has
like, the market outside of AI slowedsignificantly.
Yeah.
But still within AI, you're seeing thesilliness going on and sort of it's kind of a
tale of two cities going on.
Sure.
I mean, I'm seeing you know, I'm in New York.
(45:22):
Right?
So I'm seeing an increase in activity, which iskind of exciting.
I'm seeing an increase in LP engagement.
So I see people coming back in.
Obviously, the summer is around the corner.
So usually New York, everyone is in theHamptons and away for the summer.
So I would say people that are trying to raisemoney, whether it's fund managers or founders,
(45:45):
expect a little bit of a low probably over thesummer.
And then I think there's like one last sprintfrom like maybe August till November.
Yeah.
Know, the deployment seems to be downsignificantly on the Canadian side of the
agenda.
And and, you know, internationally, that'slike, if the the domestic capital usually
leaves the the foreign capital coming in, youdon't see them in the first in the first
(46:08):
rounds.
You see them in the second or third courtcloses.
And we're just not seeing a lot of their a lotof local capital being deployed right now
still.
Yeah.
You hear about it, but you don't see it.
So I'm not sure if if that will lead to furtherissues down, you know, down the quarters.
Sure.
But it's what I've noticed that on my US side,yeah, we're getting a lot more interest there.
(46:32):
And Yeah.
That which is great, but harder to tocrystallize when you don't have those earlier
closes
Oh, yeah.
In the Canadian market.
Absolutely.
And I would say too, I saw an interesting postthe other day, I think it was one of the GPs at
Harlem Capital.
They were just talking about locations.
So the locations that they're hearing a lotmore, I believe it was New York, San Francisco,
(46:56):
Miami and Dubai.
Those are like the four locations where I thinka few months ago people were talking about
Austin, like kind of the tertiary cities.
Yeah.
So it's interesting to hear Dubai.
I was there I was there.
I spent a month there.
I was in Abu Dhabi, but, you know, right nextto Dubai, for about four weeks back in January.
(47:17):
Yeah.
I I actually had dinner with the GP, like,about, like, two weeks ago.
Yeah.
And the next day, they were flying out to AbuDhabi.
They're meeting some kind of shake or somethinglike that.
So tell tell me a little bit about you know, Iknow we got, like, three minutes left, but any
top level insights from Abu Dhabi and whypeople are talking about that, or what what
prompted you to go there?
So my my wife was my wife's the founder, andshe she had some she had some investors out
(47:40):
there.
Mhmm.
And so I we and we have a young child, so wedecided to make a trip out of it for Oh, sure.
Four weeks so that, you know, her one week tripwasn't sort of in and out.
And I and I and a lot of Canadian expats or orlocals who came to Canada for their for their
master's and PhD degrees.
So there's a lot of Canadian to connectivetissue into the Abu Dhabi, Dubai markets,
(48:04):
particularly the sovereign wealth funds Yeah.
But also in the tech community there.
And so it was it just made sense for me to gothere and and I've I've been I was there six
months earlier as well.
I go every six months.
So Okay.
Well, we have a we have a a visa for for AbuDhabi.
(48:24):
But the but, you know, what have I learned?
They're feeling like that they've got some,some issues with the local market.
So they're they're they're there's a lot ofactivity there, but it's a it's focused on
making activity happen there.
Yeah.
So if if you're if you're like me, like a GP inCanada, you're trying to get money or in The
(48:46):
US, I think you'll find it more difficult totry and get that money and to go back to The US
with that capital.
Mhmm.
If you're if you're talking about working withthem on their local community and ecosystem
issues and wanting to build the ecosystemthere, they're much more receptive to it.
And it takes time.
Like, you can't go there, raise around and comehome.
(49:08):
And if you're coming from a brand that's wellknown, but if you're like me building a brand
from scratch, you're gonna have to, like,continue to put in FaceTime and relationship
building there.
There's there's a term there called WhatsApp,which is, like, short for WhatsApp.
Yeah.
And your what's your what size your cred.
Like, how's your how's your network ability?
(49:28):
Who do you know?
How can I check up on you to make sure you'recredible?
It's a very international network.
Sure.
So if you've done a master's degree or you havea a university education from a certain place,
really should dig into that to see who's thereto help you
Yeah.
To to to integrate yourself into thatecosystem, and you'll have to go back and forth
multiple times to build those relationships.
(49:50):
But they're not deploying capital out.
Mhmm.
Except at the very high levels, like Yeah.
850, 2 hundred 50 million dollar checks, whichis not my world.
They're much more focused on how can you comeand help us build something that's gonna be
here post oil and gas world.
Yeah.
That's what they're focusing on right now.
And you see it and Saudi is is now doing it ata much higher, like, rate.
(50:13):
Yeah.
And and it's just, you know, it's it's an orderof magnitude, like, larger.
Sure.
So that that's also beginning to to make itselffelt there locally.
Great.
Well, hey, Matt.
This was amazing.
I mean, the time flew by.
I really had a lot of fun.
Yeah.
Pleasure to have We covered a lot, so enjoyhanging out and, you know, give me a ring when
you're in New York.
Yeah.
I'll come to Toronto.
(50:33):
Yeah.
I could do that too.
One of my buddies from Toronto is coming in,this week, so I'm I'm doing it after him at
some point.
Maybe I know.
Who is it?
He's he's a psychiatrist, so maybe
he'll hopefully, he I might need to know him.
Yeah.
In this business.
Yeah.
Different different sector, but old old buddyfrom college.
Yeah, for sure.
You should definitely come up though.
(50:54):
I will.
I'll be up there.
Got we know Matt from Ripple and a couple ofthe buddies out there.
We'll definitely do something.
Cool, man.
Well, thank you so much.
Catch up soon.
My pleasure.
Thank you, Joel.
All right.
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