Venture Capital Funding

Garry Tan (CEO of Y Combinator) said it bluntly: “The Canadians that stay in the US raise more money, the ones that stay in SF after demo day become unicorns at 2.5x the rate.” Beneath that one-liner is the entire Canadian venture problem. We don’t have a talent issue, some of the more prominent founders and investors in the Valley are Canadian (Garry included). The real problem is how we fund companies, and it breaks in three ways. 1️⃣ There is no real pre-seed market in Canada Founders raising their first check don’t get Canadian capital, they get on a plane to SF. Pre-seed is a dead zone. Angels want traction. Funds want metrics. That’s not pre-seed, that’s a priced seed round with expectations. So our best founders raise in the US and stay there. 2️⃣ Canadian deal terms are lackluster US VCs move faster, price higher, and take bigger bets. Canadian founders aren’t just chasing a better valuation, they’re chasing conviction, follow-on access, and a path to scale. When the choice is a $6M post in four months or a $12M post in four weeks, it’s not really a choice. 3️⃣ Follow-on capital stops at Series A Canadian funds aren't doubling down on our best companies. So even if you do raise here, you’re still crossing the border by Series B. US firms end up leading the growth rounds and capturing all the upside. So we lose the IP, the jobs, the exits, and most importantly, the next generation of founders. And the wildest part? Most of these founders want to raise in Canada. But if the math doesn’t work and timelines kill momentum, they go where the game is played differently. We’re not getting beat because our founders aren’t world-class. We’re getting beat because our funding structure is broken. If Canada wants to win, we need to show up at pre-seed. We need to move faster. And we need to price like we actually want to compete. Because right now, the game is over before it even starts.

The inventor of the SAFE note Adeo Ressi just eliminated the $150,000 and 6-month tax on starting a VC fund. This is huge, so we need to talk about it. Traditionally: ⏱️ Time: Launching a fund can take 6-12 months from thesis to first investment. 💸 Money: The VC setup cost ranges from $50,000 to $150,000+, with annual operations adding another $50,000+. 😵💫 Complexity: Requires three separate entities (LP, GP, and ManCo), complex legal agreements, and multiple regulatory filings. 🏦 Fund Size: There is a minimum fund size averaging $10M to make the fund economically viable. Each LP typically needs to invest $100K+ minimum because smaller checks are unprofitable due to per-LP administrative costs. 📊 Track Record: In order to raise this type of fund, new managers need larger LPs, and these larger LPs often need to see an existing successful investment track record, which some new managers don't have. These barriers have created a venture ecosystem where only those with established networks, significant resources, and/or institutional backing can participate. In 2025: Adeo came up with the Start Fund, a vehicle addressing all of the above head-on: ⏱️ Time: Set up a fund in ONE DAY vs. 6-12 months. 💸 Money: ZERO setup fees vs. $50K-$150K+. 😵💫 Complexity: ONE Delaware series vehicle vs. three separate entities, with an LPA just 1/3 the size. 🏦 Fund Size: Viable with just $250K+ vs. $10M minimum, and can accept smaller LPs (as low as $25K) because administration is streamlined 📊 Track Record: Fully portable track record that counts as fund one when you move to fund two. The benefits for emerging managers are clear: the barriers to entry are lower, giving a much wider pool of candidates a chance to create impact and shape the future. But here's why this matters for... LPs - The Start Fund allows LPs to participate with smaller check sizes, making it easier to diversify their portfolio - More of their capital actually goes to startups rather than overhead fees Startups: - This means more availability of capital from a wider range of sources - Access to a more diverse pool of venture investors with specialized expertise The Start Fund could fundamentally could change WHO gets to allocate capital to the next generation of startups, and WHO will benefit financially from it. I want to know what you all think. ------------- ✍️ Myrto Lalacos Follow for more content on launching and investing in VC firms

Headlines focus on shutdowns and restructurings, yet the real story in corporate venture capital today is how the model is quietly maturing. In my latest article, "Beyond the Contraction: Why CVC is Rebounding," I share why 2025 became a defining year for the next generation of CVC platforms. After a 2021 peak and a sharp drop to fewer than 2,400 active corporate investors, many assumed CVC would retreat for a long time. In 2024, around 40% of CVC units did not survive beyond three years, a clear sign that too many were set up on fragile foundations. In 2025, we are back above 3,000 active corporate investors worldwide, with a stronger sense of purpose and discipline in how they operate. Under the surface, structures have changed: teams reorganized, some units spun out or were sold, others redesigned their models, closure rates slowed, 46 new CVC units launched, and more corporations leaned into off-balance-sheet approaches. Through my conversations on Corporate Venturing Insider with leaders from JetBlue Ventures, Munich Re Ventures, Intel Capital, ZX Ventures, and AEI HorizonX, one theme keeps coming back: CVC endurance depends less on the macro cycle and more on how the institution is designed from day one. - Alignment needs to live in the institution, not in a single sponsor. - Integration with business units anchors CVC in real strategic pull. - Structural flexibility lowers exposure to any one budget line. - Credibility in the ecosystem multiplies the options a corporation has over time. The disruptions of 2024–2025 acted as a stress test that forced a reset toward more intentional, embedded, and accountable CVC models. What is emerging is corporate venture capital as a long-term innovation engine, with 2025 marking a clear maturation point for the model. My deep thanks to the leaders who shared their time and candor for this work, including Amy Daniels Burr, Bonny Simi, Jacqueline LeSage, Jennifer Ard, CFA, Tammi Smorynski, Annie Goman, Brian Schettler, Victoria Slivkoff, and Angela L. If you are building, backing, or leading a CVC platform, I hope these reflections offer a useful companion as we shape the next chapter together.

A friend of mine sold his company for $500 million but only walked away with $1 million. His story holds a powerful lesson every founder needs to hear before taking their next check. After 8 years building it, he got less than a senior engineer's signing bonus at Google. But he made a lot of equity mistakes. Started with 35% after his seed round. Down to 18% after Series A. 12% after Series B. 4% after Series C. 1.8% at exit. Then the liquidation preferences kicked in. The VCs had 3x participating preferred. Meaning they got their money back 3x before he saw a dime. But that's not even the worst part. Most founders don't understand the preference stack: • Debt holders get paid first • Then secured loans • Then employee salaries • Then investors (in order of preference) • Founders are dead last My friend had taken $40M in venture debt as "cushion" during Series C. Smart move, right? Wrong. $500M headline. -$40M debt repayment -$30M in accrued interest and fees -$320M in liquidation preferences =$110M left for common His 1.8%? Worth $1.98M on paper. Then the acquirer demanded a 2-year earnout. He quit after 18 months. Forfeited 50%. Final take: ~$1M. The Series A lead? Made $120M on a $15M investment. The venture debt fund? Made $70M on $40M, risk-free. A 10x return is great for angels, but surprisingly not that great for seed funds. They need 100x. Your $5M exit is a rounding error. They're playing for billion-dollar outcomes. Everything else is a write-off. Here's what every founder needs to do from day one: 1. Never accept participating preferred It's straight preferred or walk. They shouldn't get paid twice. 2. Cap liquidation preferences at 1x. Anything above is a loan disguised as investment. 3. Avoid venture debt unless absolutely necessary. Debt holders will kill your company for their $10M while you're doing $50M in revenue. 4. Negotiate accelerated vesting on exit. Full acceleration on change of control. Period. 5. Get secondaries at each round. Sell 10% of your stake to diversify. VCs do it. You should too. 6. Get a personal lawyer before fundraising. Never make immediate decisions on investor calls. 7. When an investor pressures you for an immediate decision, say: "Let me think about what's best for the team and company." Your cap table is your destiny. The preference stack is your reality. Guard them both like your life depends on it. Because financially, it does. Are there any other valuable lessons for founders to learn from? #Startups #VentureCapital #Founders #Equity #Fundraising

Defense Tech Just Broke Every VC Record. $38B Says Silicon Valley Found Its Next Gold Rush. 2025 isn't just another funding year. It's the inflection point where venture capital reshapes defense. Global defense tech pulled $7.7B across 100 deals. U.S. startups alone captured $38B through mid-year. Ten rounds exceeded $200M each. The math speaks volumes: Startups now claim 1.3% of Pentagon contracts, up from 0.6% last year. Private equity surged with defense M&A hitting 125 deals in Q3, a 30% year-over-year jump. Who's writing checks? Andreessen Horowitz, Founders Fund, Lux Capital, Battery Ventures, Coatue. They're not betting on missiles. They're betting on autonomy. The mega-rounds tell the story. • Anduril: $2.5B at $30.5B valuation—autonomous everything • Chaos Industries: $510M for AI-powered radar meshes • Saronic: $600M for robot boats that hunt in packs • Helsing: $489M bringing European AI to battlefields Notice the pattern? Software eating hardware. Autonomy replacing humans. Decision cycles compressed from hours to seconds. Border security became the unexpected catalyst. Trump's sovereignty push transformed military tech into homeland tools. Anduril's 300+ surveillance towers now watch Arizona. AI that tracked ISIS finds fentanyl smugglers. Counter-drone systems built for Ukraine intercept cartel deliveries. CBP's fentanyl seizures surge with AI assistance. Autonomous surveillance towers in the Big Bend Sector never blink. Predictive analytics flag suspicious vehicles before they cross. The Western Hemisphere pivot changes everything. Cartels use drones for smuggling, surveillance, and prison drops. Our response: the same swarm tech defeating Russian armor, repurposed for narco-terror. Ukraine proved the model. Robot-on-robot warfare. Persistent surveillance. Force multiplication through autonomy. What works in Bakhmut works in El Paso. VCs see what Pentagon procurement missed: Speed beats perfection. Commercial beats custom. When startups deliver capability in months while primes debate requirements for years, capital follows velocity. Defense tech captured more VC dollars than biotech $19B vs $16.6B. That's never happened before. Is your portfolio still chasing SaaS multiples or building tomorrow's deterrence? ---------- Like this content? Join our newsletter. Link located below my name 👆

Venture capital is full of noise - narratives, anecdotes, and opinions. Over the past few years, I’ve worked to cut through that by doubling down on data: dissecting the structural traits of this asset class, from illiquidity and vintage diversification to the nuances of fund math. As an LP, digging into private and public datasets has given me a sharper view of how allocation decisions are made - and revealed how little of this analysis is shared for other GPs and LPs to learn from. That’s why I’ll be sharing these insights more consistently through "𝐒𝐢𝐠𝐧𝐚𝐥𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐍𝐨𝐢𝐬𝐞" - my data-driven lens on how LPs approach venture allocation, with a focus on uncovering the insights hidden in the data. Whether zooming in on Canadian venture or zooming out to global trends, my aim is to provide frameworks that GPs and LPs can apply to their own decision-making. So where to start? First post below 👇 𝐏𝐨𝐬𝐭 𝟏 – 𝐖𝐡𝐲 𝐝𝐨 𝐬𝐦𝐚𝐥𝐥𝐞𝐫 𝐕𝐂 𝐟𝐮𝐧𝐝𝐬 𝐨𝐟𝐭𝐞𝐧 𝐩𝐫𝐨𝐝𝐮𝐜𝐞 𝐭𝐡𝐞 𝐬𝐭𝐫𝐨𝐧𝐠𝐞𝐬𝐭 𝐆𝐏–𝐋𝐏 𝐚𝐥𝐢𝐠𝐧𝐦𝐞𝐧𝐭? 𝐓𝐡𝐞 𝐚𝐧𝐬𝐰𝐞𝐫 𝐢𝐬𝐧’𝐭 𝐣𝐮𝐬𝐭 𝐨𝐮𝐭𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 - 𝐢𝐭’𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐞𝐜𝐨𝐧𝐨𝐦𝐢𝐜𝐬. In venture, we’ve all heard that “small funds outperform.” That deserves its own deep dive (coming later 👀), but the real strength of smaller funds often gets overlooked: 𝐭𝐡𝐞 𝐚𝐥𝐢𝐠𝐧𝐦𝐞𝐧𝐭 𝐨𝐟 𝐢𝐧𝐜𝐞𝐧𝐭𝐢𝐯𝐞𝐬 𝐛𝐞𝐭𝐰𝐞𝐞𝐧 𝐆𝐏𝐬 𝐚𝐧𝐝 𝐋𝐏𝐬. With smaller funds, there’s only one path to wealth creation - carried interest. And that’s where alignment is sharpest. My analysis makes this clear. Looking across six real funds with different sizes and partner counts, I calculated the Net TVPI needed for each partner to generate $50M: • Fund A ($1.2B, 8 partners) → 𝟏.𝟓𝐱 Net TVPI • Fund F ($15M, 1 partner) → 𝟏𝟑.𝟓𝐱 Net TVPI - 𝟗𝐱 𝐡𝐢𝐠𝐡𝐞𝐫! This shows why smaller-fund GPs must chase outlier outcomes and bring a level of grit and hustle often absent at larger platforms. Even more telling is comp mix. For Fund A, 60% of the $50M comes from fees - guaranteed regardless of performance. For Fund F, 95% is entirely variable, fully tied to carry. And that’s the key. 𝐋𝐏𝐬 𝐨𝐧𝐥𝐲 𝐠𝐞𝐧𝐞𝐫𝐚𝐭𝐞 𝐰𝐞𝐚𝐥𝐭𝐡 𝐭𝐡𝐫𝐨𝐮𝐠𝐡 𝐜𝐚𝐫𝐫𝐢𝐞𝐝 𝐢𝐧𝐭𝐞𝐫𝐞𝐬𝐭 - and in smaller funds, that’s exactly where GPs focus. 𝐒𝐨, 𝐰𝐡𝐚𝐭 𝐚𝐫𝐞 𝐭𝐡𝐞 𝐊𝐞𝐲 𝐓𝐚𝐤𝐞𝐚𝐰𝐚𝐲𝐬? 𝟏. 𝐑𝐮𝐧 𝐭𝐡𝐞 𝐍𝐮𝐦𝐛𝐞𝐫𝐬: LPs should model net fund performance needed for each partner to earn $10–50M. Low hurdles from large funds or oversized partnerships weaken incentives. 𝟐. 𝐁𝐢𝐠 𝐅𝐮𝐧𝐝𝐬 = 𝐁𝐢𝐠 𝐅𝐞𝐞𝐬, 𝐒𝐦𝐚𝐥𝐥 𝐅𝐮𝐧𝐝𝐬 = 𝐓𝐫𝐮𝐞 𝐀𝐥𝐢𝐠𝐧𝐦𝐞𝐧𝐭: Large funds rely on fees, insulating partners from performance. In smaller funds, carry dominates — creating sharper GP–LP alignment. 𝟑. 𝐂𝐚𝐫𝐫𝐲 𝐢𝐬 𝐭𝐡𝐞 𝐎𝐧𝐥𝐲 𝐏𝐚𝐭𝐡: In small funds, GPs earn meaningful wealth only through carry — the same source of returns for LPs. This is just the start of Signals in the Noise 🤓

In just three years, AI’s share of U.S. venture capital has surged to 71% in Q1 2025. This is more than a funding trend. It’s a capital reallocation event. Entire sectors are now competing with AI for oxygen. Foundational models dominate the dollars, but platforms and infrastructure are rising fast, signaling that investors see AI not as a product but as the next layer of economic infrastructure. The deeper question is what this means for other critical sectors, from healthcare to advanced manufacturing. Is this concentration a fleeting bubble, or a structural reset of the innovation economy?  Leaders must prepare for both the opportunities created by AI as infrastructure and the risks created by underfunded adjacent sectors that may be critical to long-term strategy. 

A new global arms race is underway — and it’s getting costly. The demand for weapons in the Russia-Ukraine war is claiming a lot of the world’s capacity, even as the U.S. pulls back. The commitment by many Western countries, including Canada, to big increases in their defence budgets will only add to that demand. By one estimate, there could soon be another $1.9 trillion budgeted in the coming years for defence spending — and that’s just in the West. Where will all that money come from? And who will produce all the equipment, technology and weapons it will go shopping for? To bridge the gap, a lot of companies and public sector enterprises will need a new generation of capital to scale their innovation labs and production lines, and tackle new markets. It’s about much more than procurement and order books. The new defence and security sector will need new forms of capital, from venture to long-term equity. I’m in London and met today with a group of bankers, defence leaders and government officials to discuss a novel approach called the Defence, Security and Resilience Bank, a British-inspired idea that would pool capital from member countries. Those countries could then each borrow from the bank to finance expanded defence budgets, especially if their own borrowing costs in the open market are going up. Another novelty: This new form of multilateral bank could support guarantees for banks to lend to defence and security companies, making them much less risky. Here’s one of the challenges: The defence sector is made up of large multinational companies, which have a straight line to capital, and a vast array of smaller suppliers that don’t. Those small and medium sized enterprises, including a lot of Canadians, could soon see a massive increase in orders that they may not be ready for. That’s why many will need new equity investors or venture backers, depending on their size, to quickly expand. It’s not just defence firms. Lots of dual use security companies will be in the mix, too. Think of cyber, sonar and space, even health. An added challenge: many financial institutions, including government agencies, have shied away from defence companies, especially if they make lethal weapons. A new playbook may be needed, including definitions for security and defence. Eighty years ago this fall, the United Nations was created to help protect the world against major wars, largely through the rule of law, global standards and investments ion peacekeeping and human development. Now the focus is on deterrence. Starting in the 1940s, the UN approach used multilateral finance — think of the World Bank — to keep the world together. Can a similar approach to defence and security work? If it does, it may need to serve its own “dual purpose” — buzzwords of the season — to both deter conflict through strength while promoting peace through prosperity. RBC Thought Leadership

A few days ago, I posted about the fact that the decline in venture capital investment in Canada (both number of investments and total dollars invested) is not, as many people are claiming, an indication of Canada’s weak start-up environment. Instead, it is simply a reflection of the broader global trends and Canada continues to track the US market very closely.  As we look at North American-wide trends, the number of investments per quarter continues to decline. While there are a number of reasons for this, including lack of liquidity at the late stage and high interest rates relative to 2020-2021, there is another factor behind the declining number of investments: seed strapping. Or simply, strong founders building great businesses and opting not to raise another round of financing after their seed round. This is not a new phenomenon: Zapier, Mailchimp, Braintree, and many others followed this path; they raised a seed round and then grew quickly, funded by profitable operations, and built massively successful businesses with no further outside capital. This route has become increasingly common over the last two to three years as AI tools are enabling companies to grow faster with fewer people, and as founders do not want to bet their companies’ survival on an uncertain Series A and onwards fundraising environment. AI tools for coding, marketing, sales outreach, and back-office management enable companies grow more cost-effectively than ever before. At Staircase Ventures we have invested in 10 companies in the past 30 months. Over half of these companies have a plan to more than double sales annually without raising additional financing. They may raise more capital, but they will do so at their option, when the time and terms are right, to further accelerate their growth. I often tell founders that “Raising money is a means to an end, not an end in itself”.  In this environment, I wonder whether the industry’s approach of relying on venture capital investment statistics to reflect the health of the market is the most appropriate approach.  Perhaps it is time to move away from this and find an accurate way to measure the launch and growth of tech companies. It is time to measure what we are trying to achieve: more rapidly growing, sustainable tech companies in Canada. Who is collecting and analyzing this data (for tech companies specifically, not total business formations)?  How can we get better at tracking and acting on this?

📊 I'm excited to release our 2024 report - diving into the world of Corporate Venture Capital. 🚀 With 1 in 4 deals now including a CVC, there is surprisingly very little information for founders on what CVCs look for, the benefits & disadvantages and typical deal terms of receiving investment from corporates. ✅ I hope that our freely downloadable report, with insights from 100+ global CVC investors with over £20 billion in AUM, can change that. Some of the headline findings: 1️⃣ CVCs are continuing to invest in tech, with the majority (90%) investing the same amount or more in early-stage companies over the next three years. Investing directly into startups was the most common type of investment in tech (95%), Series A (90%) the most common stage and B2B & AI the most common sectors (c. 40%). 2️⃣ Founders should consider raising from a CVC for market validation, building a strategic partner, accessing resources, and identifying exit opportunities. However, they should be aware of interest misalignment, a longer investment timeframe, culture incompatibility and be mindful of the terms requested by CVCs. 3️⃣ For CVCs, investing in startups can provide a competitive edge, improve culture, provide market insights and generate returns. 4️⃣ A CVC’s appetite to invest in startups is driven by, first and foremost, alignment with the investment thesis, followed by the alignment with their parent company’s focus, returns, traction and market intelligence. Market intelligence and financial returns are the most important criteria when selecting funds to invest in. In return, internal business opportunities is the most important value-add to founders. 5️⃣  There has been a notable increase in CVCs participating in deals, from 1 in 10 in 2010 to 1 in 4 in 2024, driven by the maturity of the market and the increased appetite from corporates to innovate. 6️⃣ When it comes to investing in venture capital funds, 1 in 3 CVCs invest in VCs or VC FoFs, most prefer specialist over agnostic funds and half are interested in emerging managers. Thank you to our partners Love Ventures, and to the input from Sheridans, FieldHouse Associates and Dealroom.co. You can find the full report attached below and on the Mountside Ventures Medium page.