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Waterloo’s Lethal Combination
Venture capitalists simply cannot get enough of the growing talent in the Waterloo Region.
Every week, Sunil Sharma travels the tech corridor from Toronto to Waterloo. The venture capitalist simply can’t stay away from the Regions’ dynamic and fast growing technology startups. As an executive in residence (EIR) with Communitech, he works hands-on with entrepreneurs, helping founders connect to partners and investor networks. And through his Extreme Venture Partner’s (EVP) fund, he funds the growth of their fledgling companies.
"Waterloo has until quite recently been under appreciated by the investment community," says Sharma.
"The world over, Waterloo is recognized for its engineering and computer science talent. Now, you are seeing Waterloo’s reputation for true technology development coincide with the birth and rise of the startup movement globally. And this has led to a rise in interest from investors and venture capital firms, who are seeing the potential of this area and increasing their own presence here."
Extreme Venture Partners clearly sees the opportunity and Sunil’s weekly presence on the ground here in Waterloo Region gives him and his partners a deep understanding of companies coming out of programs such as the Accelerator Centre, Hyperdrive and Velocity and investment opportunities they represent.
"My EIR role puts me in a place of good fortune," he explains. "I get to work hands on with the companies, determine what is trending in terms of technologies, and who’s onto something really interesting, then leverage that prolonged due diligence effort as an investor."
He is quick to relay that Waterloo has all the ingredients to become an investment hotspot. "The centerpiece of the Waterloo success story is really the University of Waterloo, says Sunil. Add to that the University of Waterloo’s technical pedigree, and its open IP policy – which really limits investment risk – and you have a lethal combination. Then, when you go beyond the University, it is the sense of community, and the type of companies that are here, and the type of people building those companies. And even beyond that you can look at other advantages this community offers such as cost of living, cost of engineering salaries – which are very favorable when compared to other parts of the world where there are deep centres of activity with regards to technology output, such as New York, Boston, Silicon Valley. Waterloo is also fantastic at community oriented programming – people here are very supporting, very enthusiastic of each other’s success."
Since initiating its first fund, EVP I in 2007, Extreme Venture Partners has invested in more than 20 companies, creating more than 1,000 jobs and yielding substantial returns for its shareholders. Sunil and his partners launched a second fund in July, with a specific mandate to invest in tech startups in Waterloo Region; attract international talent to the Toronto-Waterloo tech corridor; and build companies within exciting, emerging technology markets such as Open Data and the Internet of Things.
Sunil’s eyes light up when he talks about the market opportunities. "There are two areas that are really relevant to Waterloo that are very exciting to me. One is in the field of open data – a technology field that OpenText originally pioneered. There are massive amounts of data coming from government agencies and sources; information such as population data, traffic data, census data, pollution data, crime data, and governments are now being mandated to make this data available to people. There’s huge opportunity for people to build businesses around these kinds of finite analytics, by making them available through mobile applications and so forth. The other area that really excites us is the Internet of Things, fields such as hardware engineering, wearable computing, connected devices, home automation, and autonomous vehicles. Waterloo is literally world class in this area. The University of Waterloo’s mechatronics engineering program has produced such startup successes as Clearpath Robotics, Thalmic Labs and Bufferbox. It’s simply a smart area for focus and for investment."
As a former Canadian diplomat, Sunil has a unique perspective cultivated during his time in Southern California, that only increases his appreciation for Waterloo Region. It is also the motivation behind Extreme Venture Partner’s second funding thesis – Immigration. New immigration reforms in Canada, called the Startup Visa, mean international founders who secure the backing of a Canadian investor can fast track their Canadian permanent residency in as short as three months.
"Canada has an amazing brand as a country. Investment in international founders is a way for us to leverage that brand and connect startups with ecosystems who are ready to accept them," says Sunil.
"In my previous job running the Canadian Consulate in San Diego, I had the opportunity to meet with CEOs of large global nationals, such as Invitrogen and Qualcomm. They would talk about Waterloo as a place they were completely aware of; where they found their very best engineers. For a city that is so small, so far removed from California, it is really remarkable that we have that kind of brand presence in the world."
Sunil’s Investment Formula: Look at the Technology, Team and Market
"Your technology has to be strong. Waterloo has a distinct advantage here due to the strength of technical talent coming out of University of Waterloo. Your team needs to have the tenacity and drive to do the very hard things, such as taking something from an idea to a meaningful, standalone companies that grow into enterprises that employ lots of people, make lots of revenue and provide real returns for early investors. And your market needs to be one that that is showing global trends, and on point with what’s happening."