Skip to main content

Mark Skapinker and Sophie Forest, who are managing partners at Brightspark, pose for a photo in Toronto on Friday, Nov. 24, 2017.

Michelle Siu/The Globe and Mail

Mark Skapinker built some of Canada's top software firms in the 1990s, then became one of Canada's leading venture capitalists in the 2000s.

Now, he's drawing on both experiences with his latest plan: to turn traditional venture capital on its head.

Together with fellow managing partner Sophie Forest, Mr. Skapinker is hoping to establish their Brightspark Ventures as a unique à-la-carte venture capital firm that dramatically expands the number of Canadians investing in startups, using a proprietary software platform that may have commercial value to other financial managers.

Story continues below advertisement

"We're democratizing venture capital," Mr. Skapinker said. "We think we can get 10,000" Canadians investing in Brightspark deals – a figure more than three times larger than the amount of active angel investors in Canada.

That approach has not only attracted hundreds of investors to Brightspark deals, but turned the firm into an attractive investment opportunity itself. On Wednesday, Brightspark is announcing that it has raised $6-million in a deal led by Toronto investment firm Kensington Capital Partners. "They're building a corporate finance machine" that enables Brightspark to quickly and efficiently raise money from investors, Kensington managing director Rick Nathan said.

Typical venture-capital firms invest in high-risk startups. VC firms usually raise a pool of money from investors and put the cash to work over a fund's life, charging management fees of 2 per cent of invested capital annually and keeping 20 per cent of gains.

Brightspark's approach is different. It creates a mini-fund for each startup the partners want to back, typically Canadian firms in flourishing markets such as mobile or artificial intelligence, ideally with a product in market and generating $1-million in revenue.

The Brightspark team typically commits to invest a range, then turns to a network of more than 2,500 individual "qualified investors" – people with $1-million in assets and an income of at least $200,000 – they have cultivated to finance the fund.

Mr. Skapinker co-founded Brightspark in 1999 after selling two successful software firms, Delrina Corp. and Balisoft Technologies, in the previous four years. Ms. Forest, then an investing partner with the Caisse de dépôt et placement du Québec's venture investing arm, joined Brightspark in 2003 after previously financing Balisoft and Brightspark's first fund. Brightspark managed two conventional VC funds launched in 1999 and 2006 that raised $60-million to $65-million apiece, posting a better-than-average annual internal rate of return of 66 per cent after backing Think Dynamics and Radian 6, which both sold for huge gains.

But when the partners set out to raise a third fund in 2012, they ran into difficulty. The only large investors still backing Canadian venture capital firms at that point either had specific demands – such as governments wanting investments tied to jobs, regions or specific sectors – or urged Brightspark to raise substantially more money than they had in the past.

Story continues below advertisement

But individuals who'd backed Brighstpark's earlier funds were keen to invest in the deals Brightspark found interesting.

So the team decided to raise funds one investment at a time to try the model out, starting with a Toronto business-to-business marketplace startup called Hubba Inc. in early 2014. Brightspark charged a management fee of just 1.5 per cent and a 15-per-cent take of the profit. After bringing in friends and family for the first deal, they expanded their network and are hoping to further increase their investor pool by making deals available to clients of wealth management firm Richardson GMP.

So far, Brightspark has completed nine deals, investing $15-million. The company hit its stride this year, investing $7.5-million in six deals, and aims to invest $10-million or more a year, on par with a venture capital firm investing from a $100-million fund.

The Globe chats with entrepreneurs Ben Zifkin, Sharn Kandola and Ben Zlotnick to get tips on raising venture capital. Produced by Sean Liliani. Globe and Mail Update
Report an error Editorial code of conduct
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter