The 7 Questions Interview Series: Angels and Venture Capitalists

The 7 Question Interview Series is an investigative content series where I seek out key leaders in a specific industry and/or subject matter expertise area and ask them 7 key questions that “enquiring minds want to know”. There is a twist however to these questions. I provide the interviewee with a hypothesis for each question to help frame and set context for their answer. This specific series of interviews is ideal for startup founders.

Series Objective

The objective of this series is to establish direct connections with VCs and Angel Investors across the globe and ask them the same set of 7 questions regarding investing in technology startups. I’d also like to know what their appetite is for investing in Canadian startups and why they do or don’t.

Interview with Managing Partner Simon Chong from Georgian Partners

Here’s my eleventh interview with Simong Chong, Co-founder and Managing partner at Georgian Partners located in Toronto, Canada. Georgian partners recently announced an investment by Cisco in Georgian Partners Growth Fund II, LP (“Fund II). Georgian Partners invests in expansion-stage software companies.

When would it be appropriate for a startup to seek investment from you?

Our primary focus is on growth-stage enterprise software companies, typically with $500,000 or more in monthly recurring revenues or $6M+ on an annualized basis. That said we are able to invest earlier if we see predictability in the model and strong growth.

We are also happy to talk to earlier stage companies who are doing interesting things in terms of Applied Analytics, the convergence of Cloud-based business solutions, Big Data, and broad Information Rights. So we frequently meet with earlier stage companies and establish a relationship that might lead to a future investment.

What’s more important: the idea, the team or both?

Our starting point with a new company is to first understand the solution, what drove them to build the business (so yes, the idea) and to really understand the problem being solved. We do that by having our team really dig in and understand the product / solution, the opportunities around analytics, the underlying technology being used, the data being collected, the information rights a company has for using that data and what is coming next, so the roadmap.

Through doing all of that we get a great understanding of the business and the depth of talent in the team.

So yes the team is critical, but we like to get there through an understanding of the product / solution. We want to invest in teams that we think can execute well and scale but in order to do so they need a great product and really deep market understanding.

What are you looking for in a startup team? What does a winning team look like?

That’s a tough question. I think an ability to lead, passion for the business and intellectual horsepower are what are really key. That is because experience itself (or lack of it) isn’t necessarily a good predictor of future performance. After all, the Shopify leadership team didn’t have a whole lot of experience in building a software company when they started, but they shown great leadership, passion and they have a very intelligent and analytical approach to running the business.

All that said, if I had to pick one role in the leadership team where we like to see a bit of grey hair it would be the CFO!

What are you looking for in an idea? What does a winning idea look like?

What gets us excited are teams who have shown they can build a product business, really understand their market and are now looking for ways to differentiate through the application of analytics to create insights that exploit unique data.

Of course we have a return model we work to but rather than getting hung up on trying to swing for the fences we are looking for growing businesses that have or we believe can create additional value through Applied Analytics.

Does a startup really have only one shot?

No, I don’t believe so, at least not at our stage of investment. Certainly if a company has been trying raise capital for a long time that can lead to some questions, we like to make up our own minds.

Can you describe your due diligence and investment process? What’s important for a startup to know about it?

We typically start with some sort of introductory call to figure out if there is a fit in terms of the company and ourselves, stage etc. From that point if we go into a formal preliminary due diligence process we typically start with looking at the solution (including current analytic capabilities and future potential), technology, competition and market, marketing, sales and finance.

In our experience working alongside co-invest partners and from feedback we get from companies, our focus on the solution and analytics is a welcome change from the approach of many investors. Our experience and passion is software and that tends to come through when working with us.

From there we will decide whether we can issue a term sheet or not, and if that is accepted then we move into detailed due diligence.

In your view, is Canada a fertile ground for tech startups? If so why and in what ways is Canada unique and competitive in this regard? Are you investing in Canadian startups? If so, why? If not, how come?

We are certainly investing in Canadian companies, not because they are Canadian but because we see great companies here. We are also investing in the USA. We don’t have any particular industry focus; rather we look across North America to find companies doing interesting things with Applied Analytics.

As for whether or not Canada is any more unique than other locations? Probably not, but we can be very competitive and build great companies like Shopify, Top Hat, Hootsuite, FreshBooks, Desire2Learn, Vision Critical, Silanis and many others.

We would also argue that while financial incentives are helpful, the reason that companies like Cisco are coming to Canada to invest in the sector is primarily based on the great companies they see coming through. It’s the talent, ideas and the execution of those to create great businesses that is gaining attention.

About Simon Chong

Simon Chong is a Managing Partner at Georgian Partners, which he co-founded in 2008.

Having spent his career in marketing, sales management, and operations, Simon applies his strong operating background to the companies in which Georgian Partners invests. He is focused on designing and building optimal go-to-market models for Cloud and SaaS-based companies.

Prior to Georgian Partners, Simon was Worldwide Director of Sales, Information Solutions within the IBM Software Group, via the acquisition of DWL Inc., in 2005. In this role, Simon tripled DWL software revenue–and doubled overall revenue–in the first year and became responsible for the revenue of four acquired enterprise software companies.

At DWL, Simon was the Senior Vice President, Worldwide Sales and Marketing, where he was responsible for global field operations and achieving revenue leadership in the Master Data Management (MDM) space.

Simon holds an MBA from Henley Management School in the United Kingdom.

Current investments: FreshBooks, Dealfind, Terapeak, Razorsight, ScribbleLive and Vision Critical.

Social Outposts: LinkedIn | Twitter

Chris HerbertChris Herbert is the founder of Mi6. Mi6 is a B2B (Business to Business) marketing and business development agency dedicated to helping companies build their brands and develop commercial relationships. He is the founder of ProductCamp Toronto and the Hi-tech community Silicon Halton. He tweets under the handle @B2Bspecialist.