Despite 2021 being a boom year for venture capital in both the U.S. and Canada, female founders saw their share of the VC pie shrink. For Atlee Clark at Ottawa-based Backbone Angels, this just shows there is a lot of work to be done.
Last year, according to U.S. firm Pitchbook, female founders secured two per cent of the $330 billion US in VC deployed, the smallest share since 2016. It was the second consecutive year that women’s percentage of VC funding shrank, even as the overall dollar value of funding to female founders rose. It’s likely a similar story in Canada, which saw a record-breaking $14.2 billion in VC deployed across 751 investments, more than double the record set in 2019.
Claudio Rojas, CEO of the National Angel Capital Organization (NACO), confirms that the situation in Canada for women founders mirrors that in the U.S. “COVID-19 really conspired against women entrepreneurs,” he said, explaining that founders without established networks were often left out of the VC loop once in-person events stopped.
He also points to a “scale-up bias” that favours those who have already achieved success over those who face structural barriers. This helped lead to more money flowing last year to later-stage investments versus early stage.
Recognizing the problem, particularly for seed investments, Clark and nine of her current and past Shopify colleagues banded together last March to form Backbone Angels and get much-needed capital to under-represented founders.
“For Backbone, we’re really proud of our year,” Clark told OBJ, adding that she and her fellow angel investors were flooded with submissions from women and BIPOC entrepreneurs.
“It really is incredible how many ideas (there are) and people who want to put it all on the line,” Clark said. “It took us weeks to dig out of the first wave of responses and then we got into our groove.”
That groove resulted in the deployment by Backbone Angels of more than $2.3 million US in 42 ventures, the majority in Canada with some in the U.S. and India. Seventy-two per cent of the capital deployed was in first-time founders and 56 per cent in women of colour.
“Out of all the companies we have invested in over the past 12 months, the founders are all different kinds of styles, come from really different backgrounds … but they’re all super passionate about the problem they’re solving and hyper-focused on solving it. As long as you see that, that has no gender,” Clark said.
Instead of having an investment fund, the Backbone angels deploy personal money. They prefer to invest alongside a colleague, but sometimes go it alone. Deal sizes typically range from $10,000 to $50,000.
While each of the Backbone women may look for different stages of company development, they have one philosophy in common. “When we look at opportunities, (we ask) can we be helpful? Yes. Do we think this person is someone who can bring their idea to life and into the world? Yes. Alright, here’s some money, good luck,” said Clark.
While that may sound a bit laissez-faire, Clark and her fellow investors often act as advisors and are never more than a phone call away. “I have one founder I meet with every month, there’s another founder she just calls when she needs something, and another founder I just get updates on,” said Clark.
Going forward, Clark said Backbone Angels hopes to further diversify its portfolio and potentially do follow-on rounds alone or with other investors. Clark said the VC ecosystem has “embraced” Backbone Angels and been very supportive.
Of course, while angel investing is a long game, Clark said they are always looking for that elusive return, although it’s not their initial focus. “Really the spirit for Backbone is to get capital to women founders … and we know some of them might have returns, some of them might not,’” she said. “We don’t invest not to get returns, but we are clear-eyed about the reality of angel investing.”
When it comes to an exit strategy for their investments, Clark and her colleagues are inspired by their time at Shopify.
“We’re less focused on the exit and more on the build. The 10 of us sat inside Shopify in the early days and got to not just watch but participate in building that company,” explained Clark, director of operations for Shop at Shopify. “We wanted to take that experience and that insight and bring it to women founders and help them achieve the success that Shopify has had and also maybe avoid some of the mistakes that we all made early on.”
On the plus side, research from NACO shows that the proportion of women who are members of angel groups is increasing, from 17 per cent in 2019 to 24 per cent in 2020. Still, Rojas said, more must be done.
“There is an urgent need to address the barriers faced by capital-seeking women entrepreneurs to ensure their full participation in the innovation economy, driving economic growth and prosperity in communities across Canada,” he added.
At Backbone Angels, this year will see a streamlined application process and more timely responses for anxious applicants.
“We were surprised (last year) at the volume,” Clark said. “We would love to give every single person who sends us a deck or a business plan feedback, but then we realized really quickly that, for the 10 of us, it was a heavy load.”
Backbone Angels is accepting applications from March 8, 2022 to April 19, 2022 and aims to reply to applicants within two weeks.