Tech startups typically begin with a couple of guys who have an idea, little money and no customers. Few manage to raise money; fewer achieve commercial success.
Helge Seetzen has a different strategy for starting tech firms. So far, it's working exceptionally well.
The Montreal-based venture capitalist starts by asking customers – typically consumer electronics giants – what trends they're looking to incorporate into their products. Then his incubation and seed investment firm, TandemLaunch Inc., scours the world's universities looking for inventions that fit the need. Once TandemLaunch has validated and secured rights to the patents, an in-house team builds a demo based on the research. TandemLaunch finally creates a company around its product, provides about $500,000 in seed financing and hires a management team.
"Normally if you build a seed-stage company, you end up almost inevitably doing fairly vapid stuff: You're two guys, you have to code together, build a website. There's only so much you can do," said Mr. Seetzen. By the time TandemLaunch founds companies, "you're [at] this jump-off point that is so far away from any normal startup, that you can actually do really interesting stuff."
Indeed, TandemLaunch firms don't just build your average smartphone apps. One of its creations, LANDR, has built a digital audio tool that automatically generates studio-quality sound mixing. Another, Aerial, uses wireless signals from devices to create frequency grids that can detect movement and even identify people inside buildings. "I live in deep tech, but that one is black magic," Mr. Seetzen said. A third, Stratuscent has developed an "electronic nose" based on U.S. National Aeronautics and Space Administration technology. Its polymer sensors can identify and quantify air quality and whether milk has gone sour.
"Some of the stuff they're working on is genuine science fiction – although they're making it a reality" said Montreal entrepreneur, startup financier and TandemLaunch backer Ben Yoskovitz.
The firm, which recently raised its second $15-million fund from outside investors, has so far had great success for an early-stage venture capital firm: Of the 17 companies it has created and financed since its 2010 launch, 10 have raised a combined $30-million-plus from such investors as Warner Music Group and U.S. billionaire Mark Cuban. Six others are incubating at TandemLaunch offices in a vast heritage industrial building in the hip Saint-Henri borough. Only one has failed. TandemLaunch ventures have attracted founders from around the world, licensed technology from about 60 universities, including the California Institute of Technology and the University of Toronto, and created more than 300 jobs.
TandemLaunch stands apart in three other ways. The firm charges no fees or carried interest – a rarity among venture capitalists. Mr. Seetzen makes his money as a limited partner alongside other TandemLaunch investors, including Quebec business personalities Guy Laliberte and Nathalie Marcoux, and runs a lean ship, with 90 per cent of capital going into investments, much higher than a typical seed fund or accelerator. "I don't like charging for my time," he said.
Meanwhile, TandemLaunch is a welcome vehicle to help understaffed university technology transfer offices find markets for campus inventions. "That's the biggest problem that Helge addresses," said Roger Miller, a technology transfer manager with the University of British Columbia.
Most impressive is Mr. Seetzen's commitment to addressing the tech sector's chronic diversity woes. As the industry faces well-founded criticisms about its gender-imbalance problem, Mr. Seetzen is showing up his peers: about half of the founders TandemLaunch has recruited in the past two years are women.
Mr. Seetzen, who is married to Dominique Anglade, Quebec's Economy, Science and Innovation Minister, says that is "100 per cent intentional. My talent team (including CFO Emilie Boutros) knows that if I see a sequence of dudes, I'll just stop interviewing until they field some [female] candidates. It's the only way to fix things … Trust me, if you meet 20 awesome women and 20 awesome guys, you will hire 50-50."
"He has encouraged a lot of female leaders," said Soodeh Farokhi, the Iranian-born co-founder of TandemLaunch-backed C2RO, which makes an artificial intelligence cloud software platform for robots. "In leadership positions and the tech industry in general, there is a lack of females," she said. "He was the true mentor for me and the one that gave me courage" to be an entrepreneur.
The 38-year-old Mr. Seetzen's emergence as one of Canada's most sophisticated and enlightened early-stage investors is the culmination of what he calls a "random walk" of a career. His parents, who were from a small German village and didn't get past Grade 10, wanted him to be a roofer. But Mr. Seetzen was interested in studying physics and learning English, which led him to UBC, known internationally for its particle accelerator [other than touring the facility, "I've never had anything to do with particle research," he said, laughing]. Shortly after arriving in 1998, he met associate dean Lorne Whitehead, who invited him to work on a project developing display screen technology. Before long, the undergraduate was working for a company that evolved out of the project and, by fourth year, he was chief technology officer of a spinoff developing LED display screens, called Brightside Technologies Inc.
Mr. Seetzen discovered he was as skilled at science as leading people and talking to customers. As a campus innovator, he also knew there was much underexploited cutting-edge research gathering dust at universities. He obtained rights to 100 patents from 11 institutions globally, and sold Brightside in 2007 to San Francisco-based Dolby Laboratories for $32-million (LED technology is now embedded in millions of TVs), becoming head of its video business.
By 2009, he was an accomplished 30-year-old, when his Quebecois partner, then a McKinsey & Co. consultant, said she wanted to return home. He left his job and their young family moved to Montreal.
The down-to-earth, financially secure Mr. Seetzen arrived in a city that had not yet become the teeming startup hotbed it is today, unsure what to do. He soon decided to pick up where he had left off in his 20s, this time as an investor, creator and mentor of firms like Brightside. His timing was good: Many giant companies were open to partnering with nimble startups to remain innovative.
For three years he funded TandemLaunch, tapping into university invention-reporting disclosure systems (a team of five reviews 6,000 projects from 600 universities annually) and feeding promising papers to a network of 40 domain experts on retainer to review and identify the best science. Once he secured rights to collections of patents, he farmed "qualified opportunities" to several entrepreneurs-in-residence he recruited, typically business-minded PhDs like Ms. Farokhi, who studied cloud computing in Vienna. With his Bay Area experience and track record, he had little difficulty attracting entrepreneurs or local investors for his first fund in 2013; they "loved the fact he was different from all the other business they have been investing in," said Ms. Boutros.
The model is working so far (TandemLaunch companies are all still young), but Mr. Seetzen acknowledges it can only scale up so much. He focuses on technologies he knows well – audio and video systems, computer vision and smart sensors – and his hands-on approach limits him to launching about five companies a year.
"There's a magic sauce in the way he picks the technology," said Code Cubitt, whose Ottawa-based Mistral Ventures has invested in Stratuscent. "It's not for drive-by venture capitalists."