One of Canada’s top-performing venture capital firms has raised two funds after making a killing on its early bets in the cryptocurrency space.
Vancouver-based seed investment firm Version One Ventures LLC announced Monday it had closed its fourth main fund, raising US$70-million, a substantial increase from its C$57-million third fund raised in 2018.
The firm, co-led by founding partner Boris Wertz and Silicon Valley-based general partner Angela Tran, also concurrently raised a second “opportunities” fund, a special-purpose US$30-million pool geared to invest in a handful of its top-performing investments in later-stage funding rounds beyond the scope of its core funds. It made five investments out of its first, US$25-million opportunities fund last year.
Version One had a strong run in the past year as the crypto market roared back and the tech sector took off, fuelled by an accelerated shift to online communications and commerce during the pandemic. Four of its investments reached “unicorn” status – valuations of US$1-billion – including blockchain-based NFT collectibles company Dapper Labs and decentralized finance startup Uniswap Labs, plus Toronto chatbot company Ada Support and e-commerce delivery software provider Shippo.
The firm was one of the few big Canadian winners in the April initial public offering by cryptocurrency exchange Coinbase Global Inc. After investing US$2-million in two private financings in 2017 and 2018 out of its $35-million second fund, Version One ended up with a Coinbase stake valued at 1.7 times the entire fund when it sold or distributed its shares to investors this spring.
The past year was the firm’s busiest for new investments “and our most successful year in pure returns,” Mr. Wertz said. “Obviously the big wave we had last year helped us.”
Version One remains one of Canada’s most admired VC firms. “Boris and Angela are world-class seed investors; it was a no-brainer for us to partner with them,” said Anthony Mouchantaf, director of venture capital with Royal Bank of Canada’s technology and innovation banking group, the only new institutional investor to back the two heavily subscribed new funds.
“They have built a really impressive franchise, they have been super successful, and founders trust and want to work with them.”
Version One’s first three funds, which typically invest in startups in their “preseed” or “seed rounds,” have averaged annualized returns net of fees of well over 30 per cent on paper, placing them among the top ranks of all venture funds. Mr. Wertz said seven of its 73 investments have generated “fund maker” returns, meaning they have created value equal to or greater than the entire size of the fund’s capital.
Both partners were entrepreneurs before becoming venture capitalists: Ms. Tran co-founded Insight Data Science, and Mr. Wertz built an online marketplace for used and out-of-print books before selling it to Victoria-based AbeBooks.com. He became chief operating officer of AbeBooks.com, which sold to Amazon.com Inc. in 2008. He started making angel investments and raised Version One’s first, $18.7-million fund in 2012. He hired Ms. Tran as an associate in 2013 and promoted her to full partner in 2017.
Mr. Wertz credited the firm’s success to investing in emerging, novel areas where the opportunity hasn’t been fully fleshed out. Getting into crypto four years ago was a typical move: “This was a completely crazy idea, a new technology and nobody could imagine where it was going. But it was interesting. Whenever something new is coming up – and even better, where there are haters and new user behaviour people can’t wrap their heads around – it becomes interesting. Nobody could have forecast how it would evolve … when we know how the movie is going to play out it’s probably not an interesting enough investment.”
Like some venture capital firms, Version One publishes its “anti-portfolio” – investment opportunities it passed over that become huge successes. That list includes Instacart, Wealthsimple Inc. and Shopify Inc . And Mr. Wertz said Version One generally avoids investing in e-commerce companies, after some early disappointments, gaming, hardware and robotics firms, as well as “me-too” companies that try to replicate a successful idea from one geography in another.
“We always want to be in the original, not the copycat,” he said.
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