Raising $15M+ for Rural Canadian Startups: The 5-Year Journey of Startup TNT
Neil Vande Bunte and Jesse Wiebe explain how Startup TNT drives growth in Western Canada's emerging markets: investment summits, 8 weeks of due diligence, ranking system
Hailing from the picturesque landscapes of rural Alberta, Canada, Neil's journey has been varied. With a career spanning continents and industries, he initially honed his craft in various operational and leadership roles across four continents within the ever-evolving realm of oil and gas.
In a twist of fate, Neil took a leap of faith into the world of angel investing with Startup TNT in 2020. What started as a stroke of luck soon transformed into a passion project as he dedicated himself to leading the charge in the Calgary region for the next three years. From these beginnings as a volunteer to his current role as the Partnerships Lead, Neil's mission is clear: to build community by increasing the number of investors in the space, investing early, and investing locally.
Jesse is a multi-faceted entrepreneur, investor, and consultant with a broad skill set, wide knowledge base, and extensive network. Jesse enjoys helping others create a better future for themselves and for us all. In 2021, he formed WieGrow Capital and Consulting with his father, Doyle Wiebe, and joined Startup TNT as the Local Lead in Saskatchewan to achieve those goals. He also manages local creatives through WieManage: Creative Asset Management and works with his family to put on an annual festival called Art in the Garden. He loves creating synergistic connections and has helped prairie startups raise over 2 million dollars.
We learned about:
The origin story of Startup TNT
Its continued evolution into geographic expansion, and new models including the venture fund
Deep dive into a few portfolio companies
A 30,000 ft view of the Western Canadian venture ecosystem, funding landscape, what kind of companies are coming out, quality of entrepreneurial talent, and Startup TNT's role in it
Tapping into diaspora communities in W. Canada like Bangladeshis, and others
🔴 Listen on Spotify.
💼 Actionable insights
Here's a summary of our key takeaways and highlights from the episode:
[10:26] Zack, one of the two co-founders of Startup TNT, is an early-stage angel investor and entrepreneur. For those unfamiliar with Canada, our market is relatively small compared to the United States. Within Canada, the venture capital hotspots are in sections of Ontario, particularly in Waterloo and Toronto, as well as in Vancouver and to a lesser extent, Montreal. Startup TNT operates in these underrepresented and smaller markets. Zack became frustrated with the existing support systems for early-stage or venture-stage companies, which were primarily geared towards companies in the scaling phase and beyond. He recognized that teams of 1 to 5 people face unique challenges that differ significantly from those encountered by larger teams of 50 to 500 people. To address this gap, he started hosting events called "happy hours." These events aimed to foster peer guidance and facilitate genuine connections among founders and investors interested in pre-seed and seed-stage companies. These happy hours ultimately brought together a team that started Startup TNT.
[18:19] We follow a process similar to venture capital firms when performing due diligence on companies. All applicants submit a pitch deck and answer basic questions such as the nature of their company, previous fundraising amounts, and current capital-raising plans. This context helps all our investors evaluate the companies. Next, investors score these companies and hold coffee meetings with the top 20 to get to know them better. As we narrow down to the top 10, we conduct reference checks and review data rooms. Eventually, we select 5 finalists for final deal structure negotiations. These finalists pitch at our summit finale night with pre-agreed terms, ensuring a smooth decision-making process to determine the winner.
[28:24] The final decision on the best company is made by our investor cohort through a ranking exercise. At the top 10 stage, each investor ranks their top 10 companies from 1 (their favorite) to 10. The company ranked as number 1 receives 10 points, while the company ranked as number 10 receives 1 point. We aggregate this ranking data from all investors to determine the overall sentiment. This process isn't a simple majority vote where the company with the most number 1 votes wins. Instead, it aggregates sentiment to identify the collective favorite. Sometimes the top choice is clear and aligned across the group, but in cases where there's polarization, the company that ranks consistently high across the board may emerge as the winner, even if it isn't everyone's number 1 pick. This method ensures a balanced decision reflecting the group's overall preference.
[35:30] Since Q2 of 2022, we've been actively involved in funding startups. Initially, our median valuation ranged around 8 to 9 million dollars, but it has since decreased over the past year or two. We primarily use convertible safes or convertible notes for investments. While our standard check size for startups is typically 150 to 200k, including side deals brings the average down to around 100k. Most of our portfolio companies are raising between 500k and 1.5 million dollars, resulting in an average round size of approximately 1 million dollars.
[37:23] When investors inquire about quick exits, we address it by being transparent about the potential exit horizon, which can vary significantly. Historically, the average time from the seed stage to exit was around 7.8 years in more favorable times. However, exits can often extend well beyond 10 years. Setting this expectation early with new investors helps mitigate concerns that may arise about why exits haven't occurred sooner. As an organization, being four years old, we are eager to achieve exits as they can enhance our ability to attract new investors. We're beginning to observe a slight uptick in IPOs and increased acquisition activities. Keeping abreast of these developments allows us to maintain realistic optimism and share relevant success stories that resonate with our investment thesis. To summarize, our approach focuses on managing expectations upfront and staying informed about market trends to ensure ongoing transparent communication with stakeholders.
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