Raising the Stakes

By Annagray Campbell

In the last year or so, venture capital has become a hot topic in Newfoundland & Labrador. Local technology based companies have raised impressive, and much-needed, funding to support the development of their businesses.

Oliver POS, a payment solution that provides a plugin option for WordPress websites and mobile payment systems for in-person sales, recently closed a $3.2 million round with European investors.

Mysa, the emerging powerhouse in smart programmable thermostats, has a had a legendary month, having raised $6.2 million from Venture NL and BDC Capital, after also finalizing another major deal to sell their products in Best Buy.

And we can’t forget the record-shattering $515 M deal from Verafin last fall, which marks the largest-ever deal in Canadian history.

The missing piece is understanding why venture capital is so important, who it helps, and why we need even more venture capital investment in Newfoundland & Labrador, which until recent years did not see nearly as much VC activity as other regions.

Venture capital is so crucial because startups bear massive expenses: infrastructure, labor, research & development, marketing & sales while being pre-revenue, in early stages of revenue or in the expansion phase.  In this gap, capital is very much needed and can mean the difference between closing altogether or going forward and becoming a successful, self-sustaining business. Harvard Business Review (https://hbr.org/1998/11/how-venture-capital-works) explains it this way:

“Where venture money plays an important role is in the next stage of the innovation life cycle—the period in a company’s life when it begins to commercialize its innovation. We estimate that more than 80% of the money invested by venture capitalists goes into building the infrastructure required to grow the business—in expense investments (manufacturing, marketing, and sales) and the balance sheet (providing fixed assets and working capital)”

So why does NL’s emerging tech sector depend heavily on more VC activity? Because the two go hand in hand. Venture capital fills a gap that other sources of funding miss entirely. You cannot create technology companies with innovative products and services without being able to financially support them. Growing a groundbreaking business is expensive and does not happen overnight.

Many funding organizations are already investing in our province’s tech sector and are looking to continue doing so, but even more increased VC activity is needed. In the various economic challenges of the past decade, NL’s tech sector has continuously proven it can weather the storm. In order to be serious about the tech sector and the massive opportunities it presents, we need to be serious about investing in it.