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A Beginner’s Guide to Startup Investing

As an entrepreneur sets off on their journey from humble beginnings to startup success, they will inevitably need financial support to fund their business. This funding may come from a variety of different sources, such as their own bank accounts, friends and family, business loans, grants, or private investment. 

So how does a promising new entrepreneur get a handle on how and when to seek out sector and investor help? Here’s a guide to some of the most common avenues founders will encounter when navigating the weird and wonderful world of startup investment.


A founder who can start their company with little outside investment is said to have ‘bootstrapped’ their startup. They may have little to no assets, but they get things up and running. Later in the evolution process the business and founder may need to scale up or go public to attract investment, but for now they’ve managed to get off the ground without any external investments.

Friends and Family

When a business is first starting out – and is perhaps better described as an ‘idea’ than a fully-functioning organization – capital is an essential asset in funding market research, developing prototypes and testing their business hypothesis. The journey for this capital among many entrepreneurs begins at home, with friends and family. 

At this point, the company would usually not have any sales or customers. The founders are simply looking for capital to explore their business idea to see if their concept has further potential. This stage of VC is also called pre-seed investment, as this capital raise is fairly unofficial with little (or no) paperwork completed. 

In short, this is usually an entrepreneur’s first try at raising capital for their business if they don’t have enough money to ‘bootstrap’ the business and lack the information and business proof-of-concept to look to larger investors. 

However not everyone is comfortable bringing their nearest and dearest into their business plans. 

Angel Investors

Angel investors are typically individuals or family offices who are looking to provide capital to startups they believe have potential. Angel investors can range from a single person to official angel groups who invest across multiple businesses. 

These business angels tend to be wealthy individuals who are entrepreneurial in nature and want to support other entrepreneurs while also seeking a high return on investment. Alongside capital, it’s important for founders to consider what expertise and history of success angel investors bring to the table before offering them a seat at the table.

While securing capital from friends and family is considered pre-seed funding, working with an angel investor (or anyone else who gains equity in the business) becomes the first round of fundraising – otherwise known as “seed funding”. Angel investors will look for a stake (or equity) in the company in exchange for their investment and may or may not be interested in actively assisting in growing the company. Exchanging shares of a company for capital is an official transaction and is considered to be seed funding. 

Lead investors or early stage investors are a form of angel investor; however, early seed rounds are less about one individual who might invest in a business. Instead, they are based on a fund and due-diligence process around private investment. 

Family Office

Family offices are private wealth management advisory firms dedicated to serving high net worth individuals or families. They generally fall under the label of LP (limited partners) who invest in larger VCs or funds. Traditionally, family offices are categorized into two separate types – single-family offices (SFOs) and multi-family offices (MFOs)

Single-family offices serve only one family and are responsible for managing their finances. This includes allocating capital into various investment opportunities such as venture capitalism, along with functions such as succession planning, lifestyle management, risk management, filing taxes, and more.  

Multi-family offices serve similar functions with one important distinction: where single family offices only serve one family, MFOs can be thought of as more traditional private wealth management firms who serve multiple different clients. This allows them to enjoy economies of scale by pooling their clients’ resources together when appropriate. 

The value behind family offices is their ability to manage the entire financial umbrella of a high-net-worth family. Functions like estate planning and taxes are typically done by separate institutions, and for families with extreme wealth these processes can become quite complex. Family offices enable wealthy families to have all financial tasks handled by a single entity, simplifying the process and ensuring their capital resources are managed efficiently.  

Venture Capital Firms (VC)

Venture capital firms can be similar in function to angel investors, yet differ in their expertise and access to resources. These VC firms are most often led by former entrepreneurs who exited their own businesses successfully. They are experts in evaluating and analyzing the potential of other startups, and typically have teams of investment analysts to help them sift through research reports. This makes it easier for them to determine where their investment capital is best allocated. 

VC firms draw their funding from pensions, family offices, and other institutions. For this reason, they have a substantial amount of capital to invest in prospective startups. Many VC firms will focus on companies who have moved past the prototype stage and are looking to expand operations and grow their customer base. However, some firms focus on the early-stage startups where founders are still testing their business hypothesis and researching their proposed market opportunity. 

Just like angel investors, VC firms will gain a portion of ownership in an entrepreneur’s business in exchange for capital, and take a hands-off or hands-on role in assisting the entrepreneur in building their company. 

A common question is how much equity is a VC firm likely to want in exchange for the capital a founder needs? This is a complex question that unfortunately does not have a simple answer. 

The important thing to remember is that VC firms operate with precision and intention. When determining how much equity they are looking to gain in exchange for providing a business with capital, they will usually resort to some sort of valuation model. One such model called a discounted cash flow (DCF) attempts to forecast how much revenue a company will achieve in the future and then work backwards to what a company is worth today. VC firms will then take into consideration other important factors such as risk tolerance and the total return they want to gain from this investment. 

Upon understanding what a company is worth, what sort of return they want to achieve, and what their risk tolerance is, a VC firm can begin to determine the equity required to align with their strategy.

As an example, let’s say a founder wants to raise $500,000. A VC firm, through using a DCF model, values their company at $23 million in five year’s time. Assuming they are looking for a return of 9-10 times their initial investment, that would put the startup’s worth at $2.5 million today. This means that for an investment of $500,000 the founder would give 20% of the company’s equity to the VC firm. Check out this handy startup valuation calculator to understand the relationship between the capital entrepreneurs are looking to raise, the value of a company, and the equity stake a founder would give to a potential investor.

The above is an example of one possible methodology a VC firm may use to begin to value a company and determine how much equity they wish to receive. In reality, several factors – including operating history and whether there is a developed prototype – will come into play when negotiating with a VC firm on the investment amount and equity stake.

The most important thing to remember when beginning conversations with a VC firm is to work with them and not against them. Founders should come prepared with a clear outline of the future potential of their business, as well as projected revenue/earnings. This will help to navigate preliminary negotiations and assist in determining what percentage of equity an entrepreneur is willing to give in exchange for capital.

Why bet on a unicorn when you can ride a camel


Angels, unicorns, centaurs, ponies, dragons, camels… oh my! 

Why should emerging market and early-stage investors nurture the camel before getting googly-eyed at a potential unicorn’s sparkles?

Because savvy investors place value on the real thing, not mythical creatures.

While you may hear about the latest “unicorn exits” in the headlines, it’s important to understand how we came about these “pet” names to categorize the best and brightest tech scales on the planet.

Here’s Metiquity’s who’s who in the zoo lingo cheat sheet:

What’s a Unicorn?

In tech and startup language, the most common description of a success story is usually labelled: the unicorn.

When we say the word unicorn, what comes to mind? A mythical beast resembling a horse with a single long-pointed horn between its eyes and wings on its midsection? That type of unicorn is an ever-elusive storybook creature or goal.

In the Venture Capital world, unicorns are companies that successfully reach a valuation of $1 billion or more. The reason these companies are described as unicorns is that it is extremely rare for an early-stage startup to reach such a high valuation, though it is not an impossible goal.

Becoming a unicorn can seem like a daunting journey. And while most advice focuses on raising as much capital as possible, the shortest path to becoming a unicorn is to focus on your customer and the value your company brings. A sustainable business model with a superior product or technology is what private investment firms look for, and that is the most significant defining factor to becoming a unicorn.

Becoming a unicorn is a true testament to the potential of any startup and puts a company in select groups who (usually) go on to achieve incredible things. 

Startups that gain valuations of $1 billion or more may not be as exciting or mystical as seeing an actual unicorn. But in reality, they’re almost as rare… so other creatures describe successful startup stories?

In the Prairies and Alberta’s tech ecosystem, there are a few notable unicorns gems, including Benevity and  Solium Capital, however – we’re an emerging market, and that means to create more unicorns, we need a beast with consistent tenacity and grit, as well as the strength of character to get us over any and humps (booms and busts, rainy days and most importantly, dry spells – a zone the camel excels in). 

Enter the Camel

Stick a unicorn, a dragon and a pony out in the open desert for a week or two and see who survives… Metiquity Ventures’ bet is the trusty camel. 

This startup metaphor is based on survival and profitable risk assessment. Camels put the management of resources first. They are focused on the long-haul scaleup. Not speedy exit rounds. 

When we hear horror stories such as the dot com crash of the early 2000s and other Silicon Valley cringers we know that we don’t want that happening in an emerging market such as Alberta.

When early-stage venture capital investors focus on growth at all costs (creating unicorns) it works best in the strongest bull markets and best conditions (in which only a unicorn could survive). Emerging markets take grit and planning, business acumen and hard work, plus cash flow and careful management of resources and assets.  

Emerging markets need Camels 

The Prairies and Alberta’s technology sector market need camels. Those founders, early-stage companies and tech startups ready to survive for long periods of growth in the heat and sun, sometimes with little sustenance and watering, because they were smart enough to store their energy and resources for a non-rainy day in their hump. 

They execute balanced growth, take a long-term outlook and make diversification a pillar of all business strategies. This allows them to scale on balanced growth. They can survive more market shocks and downturns. Their tenacity over shiny facade is what gives them the advantage. 

Camels support efficient and balanced economic growth

Investors that are looking to emerging markets such as that of Alberta and the Prairies tech sector and digital innovation ecosystems are interested in sustainable models of development and business. They should also be looking for mixed portfolios with companies that drive capital efficiency and crisis-resistant models. 

Metiquity look at investment in the emerging tech market and asset class from this perspective: where are the camels?

The data is still early, but there are strong indications that this is a strategy for pre-seed investment here to succeed. For one, survival rates are higher in emerging startup ecosystems. At the same time, because they are more capital efficient (and valuations on average are more reasonable), they can generate greater cash-on-cash multiples on higher ownership

By changing the way VCs search for new investments and by valuing more economically stable companies over longer time horizons, venture capitalists can create healthier and less risky startup business environments. This also allows them to reward well-run startups and mitigate their high risks. It is a win-win-win, and in the face of current market instabilities, it seems like the right time to start adjusting venture capital strategies.

When it comes to animals, we love them allwe’re happy to feed and water potential unicorns, dragons, ponies, centaurs and the like. But we’d be telling you a  tale if we didn’t admit that the camel is our favourite of the crew.

The Metiquity team will be the first to point out — much like the desert steed need and deserves a good wrangler, so do companies and founders in the form of their investors.

“Camels commit to a long-term scaleup and aren’t about quick exits. Meaning Camels (founders) should also be critical thinkers when assessing who invests in their company. Not all money is equal. A vetted hands-on investor is almost always the better option than a spray-and-pray fund or angel who is pushing for early exit with no chops for helping guide a company to scale to full potential.”
Jacques LaPointe MBA, PEng, Director and Co-Founder of Metiquity Ventures

Other interesting creatures include: Dragons, Centaurs and Ponies

  • Dragons: You’d think a unicorn would be about as good as it gets  –  but there’s an even more giant behemoth that rarely shows its fiery breath and impact. That is the dragon, also known as a private company valued at over $12 billion or more. 
  • Centaurs: The centaurs are companies with a valuation of more than $100 million in annual recurring revenue.
  • Ponies: These cute but consistent steeds have a valuation of more than $10 million. 

These four-legged categories bring us to the most important animal of all. Have we mentioned how much we love the camel yet?

Camel 101

  • Not blitz-scaling 
  • Measured risk and reward with balanced & sustainable growth
  • Long-haul founders and teams passionate about the global challenges they are disrupting
  • Strategic growth focus
  • Maintain reserves for dry spells 
  • Focus on strategic movement across the desert, no sparkle bombs (no smoke and mirrors) 😉 

Can you think of a more recession-proof animal? 


Is Alberta’s Early-Stage Risk Capital Market Broken?

Bryan Slauko, CFA, June 2020

Alberta’s early-stage startups are in desperate need of capital that traditional venture capital funds are not going to provide and local investors are not ready to provide. Alberta’s early-stage risk capital market is very inefficient and unstable as a result. A massive early-stage funding gap persists where promising companies can’t access the capital they need when they need it the most. Continue Reading

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