Garage Capital
Ottawa to give $5M to 15M to local firm that invests in new tech companies
Local investment fund getting millions from Ottawa
KITCHENER — Ottawa is putting millions of dollars into a local investment fund that supports early stage startups in Waterloo Region.
Garage Capital, founded by some of the leading startup entrepreneurs in the region, will get between $5 million and $15 million under a federal program called Venture Capital Catalyst Initiative.
“We are super excited to be involved,” said Garage Capital co-founder Mike McCauley.
The Venture Capital Catalyst Initiative, announced in the 2017 federal budget, put $350 million into large, private-sector funds in its first stream of funding. The second stream saw seven, smaller funds, including Garage Capital, share $50 million.
The exact amount for each of the seven funds will not be known for a few months. Some funds have more room for additional investment capital than others. That has to be sorted out. Every dollar from the federal program must be matched by a dollar from the private sector.
Garage Capital has already raised enough private capital to match the federal funds, something that impressed Ottawa.
“We are hitting the ground running,” said McCauley.
Founded in 2013, Garage Capital raised its first fund of US$1 million and invested in several new tech companies in the area. Then it launched a second fund with US$7 million.
When it applied for Ottawa’s venture capital program, it had started raising money for its third fund.
“When we told them we already had that private capital raised, and then some, they were quite excited to hear that,” said McCauley.
Garage Capital was founded by McCauley, Michael Litt and Devon Galloway. McCauley was among founders of Buffer Box, a firm acquired by Google in 2012 for about $25 million.
Litt and Galloway are founders of Vidyard, a fast-growing video analytics company in Kitchener.
Buffer Box and Vidyard both went through the Y Combinator accelerator in California. That’s where they also obtained early investors. McCauley, Litt and Galloway started Garage Capital so founders of early stage startups in Waterloo Region would not have to rely on Silicon Valley’s venture capitalists.
Garage Capital’s portfolio of investments includes Apply Board, North Inc. (formerly Thalmic Labs), Bonfire Interactive, Clearpath Robotics, Sortable, Alert Labs, Kiite and People.ai Inc.
McCauley said Garage Capital’s third fund will be the biggest and could surpass US$30 million with the money from the federal government.
“We are really happy that they have recognized Kitchener-Waterloo as one of the premier ecosystems for starting companies in Canada,” said McCauley.
While the tech sector here is the third largest in Canada, behind only Toronto and Montreal, seed funding for startups can be a huge challenge.
McCauley, Litt and Galloway want more successful entrepreneurs from this region investing in early stage startups. That cycle of success and reinvestment is one of the main drivers of Silicon Valley, said McCauley.
“That’s one of the core principals of Garage because we experienced that when we took our companies out to Silicon Valley and raised capital from there and participated in Y Combinator, and we want to bring that powerful cycle to the Kitchener-Waterloo ecosystem,” said McCauley.
It is a huge task. Last year, Canada saw a total of $3.5 billion in venture capital invested in startups across the country, according to the federal government.
At the same time, Silicon Valley saw US$25 billion invested.