‘WE’RE GOING TO CREATE MASSIVE COMPANIES’
WHY WAVE FINANCIAL’S CO-FOUNDER IS BETTING ON ALBERTA TECH
GO TO CALGARY AND IT’S THE EXACT OPPOSITE OF THAT. IT’S AN INCREDIBLY OPEN ECOSYSTEM OF INVESTORS, ENTREPRENEURS AND BUSINESS PEOPLE THAT WANT TO COLLABORATE AND BUILD GREAT THINGS.
— JAMES LOCHRIE, FOUNDER OF THIN AIR LABS AND WAVE FINANCIAL
When James Lochrie and Kirk Simpson co-founded Toronto-based fintech Wave Financial in 2009, a tech boom was just taking root in the city amid the carnage of the global recession. A decade later, the pair sold Wave to tax-preparation company H&R Block for $537 million.
Today, Lochrie similarly sees the beginnings of a burgeoning tech industry in Calgary, the city he chose as the launchpad for Thin Air Labs, a $100-million investment fund established in January 2020 that he hopes will finance the next round of fast-growing startups, focusing on areas like information technology, fintech, life sciences and human resources.
“It’s not going to be as big, because Calgary isn’t as big as Toronto,” Lochrie said. “But its growth will be (equally) as spectacular, maybe even more so. And so that’s what I’m expecting over the next 10 years. We’re going to create massive companies here.”
Lochrie’s launch of Thin Air marks his return to Calgary, where he’s betting on Canada’s next tech boom.
That viewpoint solidified around 2015, he said, when the oil price crash pumped new oxygen into alternative sectors like IT. The momentum has continued to build into a steadier deal flow in recent years. In 2019, Morgan Stanley bought Calgary-based fintech Solium Capital, now called Shareworks, for US$900 million; the next year, the British private equity group Hg Capital purchased a controlling interest in Benevity, an ESG platform, for US$1.1 billion. Symend (in which Thin Air is an investor) and Neo Financial have together raised almost $200 million in funding in recent years, injecting more confidence into Alberta’s nascent industry.
“There was this ripple going through (the sector) that, I felt, had a lot of parallels to what happened during the financial crisis in Toronto,” he said. “From there, I hypothesized that if the energy downturn was long … we would have a great deal of highly educated, highly experienced people on the market that were great at solving problems.”
Lochrie, born to Scottish immigrants, grew up in Ontario and spent much of his career there, but moved to Calgary when he was 29. He later returned to Toronto, where he co-founded Wave. During his time in Calgary, he said he came to appreciate a business culture that was distinct from Toronto’s crowded tech sector, bereft of the big city’s cliquiness that he had often encountered as an entrepreneur.
“I didn’t go to the right schools. I didn’t have a cottage on the Muskoka; I didn’t belong to a country club. My parents were immigrants who had to build up our lives from the ground up when they arrived. So I didn’t have that built-in social network there, and I found Toronto to be fairly closed-off, even though I was having success,” Lochrie, now 51, said. “The doors weren’t opening; it was hard to get meetings at times.
“Go to Calgary and it’s the exact opposite of that. It’s an incredibly open ecosystem of investors, entrepreneurs and business people that want to collaborate and build great things.” His optimism in Alberta’s tech potential comes as the sector continues to grow, drawing a record-breaking $561 million in venture capital funding in 2021. Still, the province lags well behind Ontario, Quebec and B.C., which made up 93 per cent of VC dollars in 2021. By comparison, Saskatchewan firms attracted $210 million in venture funding last year, despite having a population a quarter the size of Alberta’s. Lochrie says he established Thin Air in hopes that it could capitalize on that growing deal flow, largely by investing in early-stage companies. It has also made bets on mature firms like Athennian, a Calgary-based legaltech company that raised US$33 million in Series B funding in March; and Symend, an automated-billing platform that raised US$95 million over two rounds in 2020 and 2021. Investments in younger companies include Syantra, which is seeking to commercialize its blood-screening test for breast cancer, and Arbor, an Esg-tracking company. The fund, which has so far invested $5 million out of its $100-million target, explicitly avoids investing in energy, where he says investors have already trained plenty of attention.
“We’re in Calgary; there are hundreds of great energy investors in this city. If people are coming to us with their energy deals, we know they’ve already knocked on the doors of the best (energy) investors in the city. So it just doesn’t make sense that we would be that investor.”
Thin Air also provides additional services for startups, like mentoring or guidance in applying for government grants. That is in line with a growing trend in venture capital where investors offer assistance on everything from public relations to navigating complex regulatory affairs. Alex Todorovic, CEO of Arbor, said Thin Air’s services, along with Lochrie’s experience building a company, provides entrepreneurs with a range of tools they need to be successful.
“He’s a guy who’s done it, from step zero to the final piece, which is selling a company, so he’s been there for the entire journey,” he said. “It sounds like a diva thing, but it’s very hard to put yourself in a founder’s shoes unless you’ve been there and done it, and he has.”
Most important, Lochrie said, the company takes an active investment approach to early-stage companies, potentially helping to fill funding gaps for smaller startups.
“Depending on what you read, the failure rate of seed companies is 50 to 80 per cent. And so that level of failure is really difficult for institutional investors to wrap their heads around.”
Lochrie also hopes Thin Air can fill a gap by injecting more private capital into the venture space.
While public funding through agencies like the Alberta Enterprise Corporation is necessary and welcome, he warns about a potential “overdependence” on government funding in early-stage financing in Canada.