One of the few Canadian venture capital firms run by a woman, Toronto’s Two Small Fish Ventures, is looking to take a more prominent role in financing the country’s future technology stars despite a recent sector pullback.
The firm, led by former Wattpad Corp. executive Eva Lau, has raised $24-million so far for its latest fund, double the size of its previous fund, launched in 2019. The goal is to reach $40-million for what she is calling the firm’s third fund, though it is its second proper venture capital fund. Canso Investment Counsel Ltd. and Canadian Imperial Bank of Commerce CM-T have signed on as investors in the new fund.
Two Small Fish (TSF), which started out eight years ago investing between $20,000 and $50,000 per company, will now write initial cheques of between $500,000 and $2-million. It will look to lead deals for the first time and secure board seats with portfolio companies. “We wanted to support founders in a more meaningful way,” Ms. Lau said in an interview. “It’s a great signal to the ecosystem.”
Ms. Lau and husband, Allen Lau, Wattpad’s former chief executive officer, launched TSF in 2014. She became one of Toronto’s most prominent seed investors, backing tech startups on behalf of the couple and two friends. Starting with a grubstake in the low six figures, Two Small Fish backed 22 companies, some of which became breakout stars in Canada. Those include SkipTheDishes Restaurant Services – a 2016 investment that yielded a 10-times return when it was sold 18 months later – Ada Support Inc. and Tealbook Inc. Ms. Lau said she generated a 15-times return from the initial pool of capital, including SkipTheDishes proceeds that were reinvested.
Ms. Lau raised $12-million for her next fund, stopping short of a $15-million goal during the pandemic. She backed 23 companies from that fund, expanding the size of TSF’s first cheque to as high as $500,000. Fifteen of the companies have since raised follow-on financing, and about half of the portfolio companies are led by women or BIPOC entrepreneurs.
That includes Stratum AI, which uses machine learning to help miners more accurately plan operations, and Sheertex Holdings Corp., a maker of “unbreakable” pantyhose built with the same polymer used in bulletproof vests. Ms. Lau was an early Sheertex customer and booster who “saw the potential and could see vision for what we were building before anyone else,” Sheertex chief executive officer and founder Katherine Homuth said in a statement.
Joining Ms. Lau as a partner is Brandon Zhao, the first data scientist at Wattpad, a popular app for writers and readers of amateur fiction that was sold in 2021 to South Korea’s Naver Corp. for US$660-million.
Mr. Lau, who stepped down in May as Wattpad’s CEO, remains a venture partner with TSF. He met Ms. Lau, a Hong Kong native, when they were studying engineering at University of Toronto in the late 1980s. She was an early employee at Delrina, one of Toronto’s few successful software startups in the early 1990s, and the couple later worked for the Brightspark Labs incubator. Ms. Lau played a critical role in Wattpad’s early years, overseeing community and content as it grew into a platform with millions of users.
Despite the stalling technology sector, which has seen young companies slash staff to preserve cash, Ms. Lau dismissed a question about whether it was a good time to double down. “Innovations happen every day. I’ve been through the dot-com bust, the 2008 crisis. I’ve seen it all and I’m not worried at all.”