October 21, 2021
At RBC Ventures, the way we imagine and invest in new platforms really does break the VC mold, positioning ourselves as much more than just “money men” (or women).
We carve out a unique space between traditional banking, social entrepreneurship, and game-changing tech that seeks more than just pure profit. In this Q&A, we sit down with Managing Director of RBC Capital Partners Barrie Laver to learn more about Ventures’ unique approach to investing.
Q: Tell us about your role as RBC’s Head of Venture Capital?
BL: I’ve been in the venture capital world for over 20 years now, many of those with RBC, and some with my own independent fund I raised back in 2000. Our strategy has evolved over time, particularly when it comes to striking the right balance between seeking pure financial return and strategic benefits for RBC. While making strong financial returns is obviously essential, we also invest to support RBC’s business units in areas of innovation that aim to create deeper ties and revenue opportunities with our clients. These days, a lot of my time is spent in conversation with various RBC business units attempting to understand their priorities and how they might be enhanced and supported by our investments.
Q: What types of opportunities do you look for, whether they be direct investments or VC funds?
BL: We manage two pools of capital, one targeted for fund investments and the other for direct investments. For fund investments, we take our lead from the business (for example, Corporate Client Group, RBCx), in terms of funds they want to strengthen their relationship with to drive new revenue. We then do our due diligence on the fund to evaluate its investment merits.
For direct investments, we’re mostly using our networks to look for companies we think could be interesting partners for the bank as well as good investments. Once we find a potential fit, we work to see if we can support the development of a commercial relationship between the company and the appropriate RBC business before we evaluate an investment.
Q: How do you evaluate companies or funds? What do you value most?
BL: For funds, we’re primarily focused on evaluating their track record – for example, their performance over at least one to two prior funds. We rarely invest in a new fund, although if the strategic alignment with RBC is strong enough, we’ll consider it. As part of this process, we’ll spend a lot of time with the General Partner (GP) of the fund discussing their strategy, differentiation, portfolio, team, etc. We’ll also do extensive reference checks, speak with portfolio company CEOs, other Limited Partners (LP) who know the fund, and other VC or PE funds who have worked with them.
For direct investments, the standard line in VC and PE is “management, management, management.” So we focus on that a lot, although with early stage companies you need to realize the management team is usually small with many gaps. So often, we’re trying to evaluate the founder and the strengths they bring to the business. We also evaluate the products, market size and competition, the company’s differentiated value proposition, the business’ maturity, go-to-market strategy, and more.
Q: What are some of your direct investments that have worked well?
BL: In many ways, it’s still early days for our portfolio of direct investments, so we’ve only seen one successful exit with Wave Accounting, which was sold in 2019. Others that are doing quite well though include OJO (personalized guidance for home search), Maple (a B2B and D2C virtual healthcare platform), League (an employee health benefits platform), Fidel (a card-linking solution), Extend Enterprise (virtual credit cards for businesses), Visible Alpha (investment research), Drop Loyalty (a consumer loyalty platform), and Car IQ (vehicle initiated payments).
Q: You operate like a VC inside a 150-year-old organization. What’s that like? BL: Corporate venture capital units are actually now quite common globally, and most have a strategy that looks to weigh financial and strategic return on some basis. Some are more focused on strategic benefits and vice-versa. I like to think we’re fairly balanced, with both elements being very important. The major benefit for us is that RBC is a large global and highly-respected enterprise. This is a real strength when we look to partner with companies or funds. We also have the ability to draw from innumerable extremely talented people within the organization who have deep sector expertise as we evaluate investments. That said, a large financial institution also brings with it numerous regulatory and process matters we need to manage.
Q: How is your approach to investing different from a traditional VC? And how do you differentiate your work with Ventures and the recently launched RBCx team?
BL: The principal difference between us and a traditional VC is that they look for purely financial returns and often have a relatively larger team to support their portfolio. So our need to focus on the strategic rationale for any investment is the primary difference.
As for RBCx, we work closely with them. Their goal is for RBC to be the leading financial institution for Canadian technology companies, allowing RBC to build market share in this important sector by offering a broad range of banking products, as well as related and differentiated services. A core element of this strategy means building strong relationships with Canada’s leading VCs and, in some cases, that’ll mean investing in their funds. When that happens, my team does the work to evaluate, close, and manage the fund investment while working in close partnership with RBCx.
Q: How do you measure success?
BL: Most specifically, I measure success by our financial returns: is the portfolio driving market-based returns over time? We also work to measure the strategic benefits for all direct and fund investments, but that can sometimes be hard to do. We do report quarterly on both financial and strategic performance and, while we don’t measure this, I also assess our success by our ability to engage with and support our business partners across RBC on a timely basis.