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Michelle McBane, Managing Director at StandUp Ventures, on May 17, 2019.Christopher Katsarov/The Globe and Mail

A Toronto venture-capital firm focused on backing Canadian startups led by women has surpassed the goal for its second fund after making a string of promising investments.

StandUp Ventures, led by venture-capital veteran Michelle McBane, has exceeded its original fundraising goal of $30-million for the seed-stage fund. Ms. McBane has now stretched the goal to $35-million. She raised $21.5-million for StandUp’s first fund from 2017 to 2019 after spinning out of Toronto startup-support organization MaRS Discovery District where she was senior investment director of the MaRS investment accelerator fund.

Ms. McBane launched StandUp in 2017 in an environment when women venture capitalists were scarce, women-led startups struggled to raise money, and women made up a small share of investors in emerging tech companies. Things have barely moved overall since then; funding for women-led startups actually fell to 2.3 per cent in 2020 from 2.8 per cent a year earlier, according to Crunchbase.

At the same time, data have shown that startup management teams with at least one woman founder tended to perform better or grow faster than those with all-male teams and were better able to attract top female talent and recognize opportunities in markets underappreciated by all-male founding teams.

Ms. McBane wasn’t just setting out to improve society, but doing what the best venture capitalists try to do: investing in underappreciated or overlooked opportunities – in StandUp’s case, founders subject to the innate gender biases in the overall venture-capital market – that could deliver outsized returns.

StandUp Ventures, investor in women-led businesses, raises $18-million

“This isn’t a social-impact fund,” Ms. McBane said, referring to funds that invest with goals other than maximizing investment returns. “This is showing that venture-capital rates of return could be achieved by investing in leadership teams that look a bit different than they have in the past. We’re a returns-based investor. There’s so much wealth being created here, we’re making sure there are also women at the table benefiting from that.”

Ms. McBane said that when she started, “people were poking at me, saying, ‘you’ll never have enough deal flow,’ or ‘it’s a meritocracy, that’s how venture money should be allocated.’ I was like, ‘No, that’s the problem.’ “ In early funding rounds by startups, “there’s a massive bias, you invest in who you know and what looks like you. I think we’ve proven there’s deal flow and a lot of it.”

She managed to raise backing from several Canadian institutions, who have all returned for Fund II. Those include Canadian Imperial Bank of Commerce, Royal Bank of Canada, Northleaf Venture Catalyst Fund, Teralys Capital, Vancity, BDC Capital and Export Development Canada.

StandUp, which invests in enterprise software and digital health companies with at least one woman in a chief-level position who is a significant shareholder, has backed some of Canada’s highest-profile women entrepreneurs. The list includes renowned University of Toronto biomaterials scientist Molly Shoichet’s AmacaThera, which is developing an injectable gel for medical applications.

StandUp has also backed Arteria AI, led by Deloitte LLP’s former global AI practice head Shelby Austin, which sells software for reviewing, drafting and negotiating contracts.

Although it’s still early to gauge her track record, Ms. McBane pointed out that none of the 15 companies she has backed had failed or been written down in value, which is rare for an investor in early-stage companies. Of the nine companies funded by StandUp more than 14 months ago, all have raised subsequent funding at higher valuations, including construction software provider Bridgit Inc., online product-sampling company Sampler App Inc. and procurement software platform maker Tealbook Inc.

Ms. McBane “is all in” as an investor, said Tealbook chief executive officer Stephany Lapierre, whose company tripled revenues in the past year and is nearing 100 employees. “She’s really special because she’s building this amazing community of really unique founders building amazing companies. We need more female founders to have big companies here. That’s the only way we can inspire more women and investors to think differently about women founders.”

Ian Carew, managing director with Northleaf, said: “The first thing that attracted us to StandUp is we think Michelle is a smart, experienced, established investor and is going to generate returns for us. She is investing into a category of companies we are just not getting through other managers” that Northleaf backs.

“She’s helped showcase that there are some fantastic female entrepreneurs in Canada. We believe that Michelle and StandUp can deliver returns commensurate with anything else” that Northleaf finances. “Her early performance is competitive for a portfolio that is maturing well.”

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