Boris Wertz once sprang a surprise skydiving adventure on his wife. For years she had said she wanted to parachute out of a plane, an interest he didn't share. "I said, 'We're going to do something fun today,'" says Mr. Wertz. "I let her guess the whole way." As they turned into the airport, "suddenly she was really afraid." They went through with it. She had a blast; as for Mr. Wertz, "I'm glad I did it," he says. "I won't do it again. It's probably the most extreme thing I've ever done."
Some would disagree. He doesn't need to. Mr. Wertz makes his living as a daredevil investor.
The affable Mr. Wertz has built a reputation as one of Canada's most respected venture capitalists. It's said he doesn't follow the crowd; the crowd follows him. His Vancouver-based Version One Ventures is currently deploying its $35-million Fund II, but his clout goes beyond that: He serves on boards on behalf of heavyweight Silicon Valley VC firm Andreessen Horowitz, and companies he's backed have sold to Twitter, Salesforce.com and Google. He was an early backer of some of Canada's hottest startups, including VarageSale and Wattpad.
VarageSale CEO Carl Mercier says Mr. Wertz's early investment in 2013 "really helped" the company – which runs an online second-hand marketplace – raise further funding. "I kept hearing 'Oh great, Boris is investing.' Many investors say, 'If Boris believes in you, it must be something special.'"
"Boris has definitely been early to a lot of things," says Albert Wenger, a partner with New York's Union Square Ventures and Wattpad co-investor. "Any time Boris says, 'You should look at this thing that I have invested in or I'm thinking about,' we always [do]. It's guaranteed to be interesting, reasonably valued and not part of the mainstream craziness."
Mr. Wertz has chosen a safe bet for lunch on a sunny, late-June day: Chambar, a Belgian restaurant in Gastown that boasts a Michelin three-star chef and B.C.'s best sommelier. With its exposed brick walls and beams, Chambar is casual and fast, which makes it an ideal choice: Mr. Wertz is speaking at a nearby startup conference right after lunch.
Investing in startups requires a strong stomach. Venture capital is one of the few careers where failure is an accepted, and even expected, outcome.
"In a venture portfolio, one third [of companies] will die, a third will roughly pay back what you invested, and a third will do well – and hopefully, one will have a 20-, 30-, 40-times return," says the 42-year-old, dressed in a blue-and-white checkered collar shirt, jeans and sneakers, and sporting a scruffy beard.
"If the fail rate of our companies is not high enough, it's not because we are exceptional investors, it's probably because we're not taking enough risks. You need to invest in things that nobody has seen, where nobody recognizes the opportunity, and where nobody else would invest – and be right." Luck, he says, "plays a huge factor."
The eldest son of two pharmacists from a village near Stuttgart, Germany, Mr. Wertz was expected to follow in his parents' footsteps. He had bigger plans: He wanted to build a business. After trying to commercialize his parents' hobby vineyard and import cars, Mr. Wertz earned degrees in business and logistics at the WHU – Otto Beisheim School of Management. He was set to join a small German telco as an executive in 1999. But that summer some schoolmates sold their Internet company to eBay for millions. Seeing his contemporaries strike it rich during the dot-com bubble, "it seemed like the opportunity of a lifetime." He passed on the telco job, telling his would-be employer, "'I need to figure out this Internet thing.' I didn't have any idea what to do."
As we peruse the menu, I'm drawn to the thon au miso: seared albacore tuna on a sesame emulsion, served with sauteed kale, broccolini, greens and papadums. Mr. Wertz orders it too. We give the sommelier a rest; it will be fizzy water and coffees for us today.
After weeks of brainstorming and planning, Mr. Wertz and university chum Hannes Blum found their big idea – an online marketplace for used and out-of-print books. They launched JustBooks in October of 1999 and expanded across Europe. "My mom didn't fully understand," he says with a laugh. "She said, 'We've paid for all this good education, now he's become a used-book seller?'"
After the dot-com bust, JustBooks caught a break: AbeBooks, a prosperous online book seller from Victoria, was looking to expand, and bought JustBooks in October, 2001. The founders stayed on, but grew dissatisfied with their diminished roles. Rather than accept their resignations, AbeBooks CEO Brent James asked them to take over. The pair moved to Victoria; Mr. Wertz became chief operating officer, while Mr. Blum became CEO. "I thought I would stay for a year or two," says Mr. Wertz.
Instead, he stayed at AbeBooks for six years and met his wife, Luisa Mather-Wertz, a Canadian entrepreneur, in Vancouver. Mr. Wertz ran marketing, customer service and sales, and was a tenacious deal-maker and networker, says Mr. Blum. Colleagues were amazed by his tireless drive.
"He has the uncanny ability to work amazingly hard and operate on several time zones – in the early days I witnessed him working straight through the night on a flight from Frankfurt to Vancouver, then go off to meetings that day – yet at the same time he never seems rushed in conversation and genuinely had time to hear about new ideas or go for coffee," says Marci Hotsenpiller, who led international public relations at AbeBooks and now runs B.C. public relations firm Zinc PR.
By 2007, Mr. Wertz was ready to move on. Amazon bought AbeBooks in 2008, and he took "100 per cent, basically, of what I made" – less than $5-million – and committed it to backing entrepreneurs seeking their first financing beyond friends and family. Mr. Wertz had previously dabbled in early-stage venture investing, but his wife wasn't happy with the all-in bet. "In retrospect, it was probably a little aggressive," Mr. Wertz admits.
Mr. Wertz spent four years getting steeped in early-stage investing know-how, following the writings of Union Square managing partner Fred Wilson and joining two American VC firms for apprenticeships. After investing his own money and briefly serving as interim CEO of one firm, Mr. Wertz understood venture capital "was difficult and a lot of work." But he also racked up several good "exits" – deals for companies he backed that put cash back in his pocket. Now he was ready to invest other people's money.
Mr. Wertz raised his first, $18.7-million fund from outside investors in 2012 and backed 20 startups. His impressive 50-per-cent average annualized return enabled him to raise a $35-million fund last year. So far he's backed five companies from Fund II. As with Fund 1, he's put about 10 per cent of his own money into the pot.
Investing in early-stage ventures, Mr. Wertz once said, is "98 per cent about the team." I ask about that as we dig into our tangy, delicious main course. "When you invest in these companies … there's not much there," he replies. "We're not looking at spreadsheets and saying, 'If we move this margin from 29 per cent to 35 and reduce marketing spend, that would be a killer business.' When we invest, it's at such an early stage that there will be 1,000 decisions the team has to take" before hitting it big. "If you don't have an amazing team, you're going to take the wrong decisions. We spend a lot of time getting to know the entrepreneur, understanding how they think" about the opportunity – and determining if "they will stick it through if the going gets tough."
Being a successful venture capitalist means knowing when to advise and when to ease off, when to criticize and when to push management to think bigger, all while remembering you are a coach, not a player. It means accepting that while some investments fizzle out, you will also pass on investing in future winners. Two of Mr. Wertz's biggest misses were Shopify Inc., the Ottawa retail software company that recently went public and is valued at more than $2.6-billion, and Vancouver social media management firm Hootsuite, which is expected to follow suit. "Sometimes it doesn't fit our investment thesis or we just made the wrong decision," he says matter-of-factly.
One of the startups that most excites him is Figure 1 Inc., whose app allows health-care professionals to share anonymous medical images online to get feedback on their diagnoses. He invested $300,000 in 2013 when the Toronto company had 10,000 users. At the time, "people said, 'How stupid is that, social media for doctors?'" Now, hundreds of thousands of professionals worldwide use the platform to discuss cases. "Where we get super excited is if a doctor in a little village in India suddenly has access to experts from around the world that help him diagnose a certain disease. If you create this global platform, that's pretty powerful."
I ask if venture capitalists almost have to banish the line "That's a stupid idea" from their vocabulary. "Not all of these things work out; sometimes it actually is a dumb idea. But sometimes it works out, and it's just magic to be part of that," he says. "The real risk is that you close your eyes to innovation. Remember what people said about Twitter – how stupid is it that you post your status update? We as investors always have to remind ourselves not to judge too much about what may have worked in the past, and keep an open mind. Sometimes the weirder the idea is, the more potential of success it has."
Boris Wertz, founder, Version One Ventures
Resides: Point Grey, Vancouver
Place of birth: Besigheim, Germany
Education: WHU – Otto Beisheim School of Management: Master, Business Administration (1992-96); PhD, Logistics (1997-99)
Family: Married nine years to Luisa Mather-Wertz; four children, aged 7, 5, 3 and 1
Book most recently read: Elon Musk, Inventing the Future, by Ashlee Vance. "I read it over the summer – really great book. Musk is one hell of an entrepreneur … ."
Favourite vacation spot: Salt Spring Island, B.C.
Preferred mode of transport: Walking (wherever he can)
Who he'd like to have lunch with (anyone dead or alive): Steve Jobs
Hobbies: travelling, reading, skiing
Interesting anecdote: "A year after arriving in Canada I was ready to go back to Germany, but my parents convinced me to stay a bit longer. Shortly after, I met my wife Luisa, and the rest is history."