We're building up a hands-on, founder-friendly, nano-sized venture capital group focusing on the data value chain and solving big problems with software. We're investing pre-seed, which means that we're typically the first investment cheque outside of friends & family. As we continue to grow a crack team of collaborators from diverse backgrounds and some kick-ass investor partners, we've kept this high-level version of our master plan open-sourced.
Yes, it means that we're open for feedback from startup founders, past and present, so go ahead and post "issues" or make pull requests on anything in this repo! Help us refine how best to support very early-stage venture founders.
Good question! Firstly, there's a lot of inconsistent usage for terms like "accelerator" and "incubator". To complicate matters, there are sub-categories (such as a "corporate incubators") and even regional variations. For clarity, here is how we define the following, based on what we see in the Canadian context:
- Accelerator: An organisation that provides training programs, mentorship, connections and, often, office space to early-stage startup founders. There is sometimes a fee to access these services or for the office space. Accelerators are quite common and typically have cohorts that last around 3 months. A minority of accelerators, like Techstars, also provide some capital for each venture in the cohort. In Canada, there are currently no true investing-accelerators (i.e., that invest in the full batch of startups in each cohort) based west of Toronto/Waterloo.
- Incubator: These generally offer the same types of services as an accelerator, but have programs that last a longer period, often a year. Incubators typically choose to focus on a particular phase of the startup lifecycle, most opting to target the very beginning, the idea stage (validating the business proposition, pre-product).
- Startup-studio: An organisation that generates many ideas internally, builds teams to work on these ideas, and then spins out independent startup companies for the projects that gain some traction. This type of group is often called a startup foundry or venture studio. Examples of such organisations include TandemLaunch, Expa, Harvest Builders, or Idealab.
Which brings us to what we're building... Though having aspects in common with some of the above, we're approaching things differently:
- Providing pre-seed capital in exchange for equity and support over a longer period, but also getting involved in some aspects of the startup (such as product management, business development, or fundraising). To the startup, it might almost feel like having an additional minority co-founder.
- Though offering some human capital to the selected ventures like a startup-studio, potential ventures are beyond the ideation stage and are sourced externally through a selection process.
- The goal is to help founders mature their ventures so that they become ready for the next level of investment. This can look like: Helping the startup go through build-test-learn cycles, refining a beta-version product to become a true minimally viable product, jumpstarting the growth in users, or finding the first paying enterprise client.
- Seeking to stay involved with startup founders even beyond their next fundraising round.
In addition to sheer love of building and growing startups, the motivations for creating this new early-stage VC based in Vancouver, Canada, are based on a few key trends:
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There's an investment gap that's growing between the initial startup phase (side-hustling, ramen noodles, love money and/or government grants) and the new, much higher bar of "seed" capital investment — often $1-5M rounds. In Canada, venture funds, as well as angel investors, typically focus on post-revenue (less risky) startups. As a result, the first $50k - $100k investment cheque is hard to find.
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Given the rarity of pre-seed investors, founders without large personal savings are at a disadvantage. Those that are not able to forego a year of salary to work on their early-stage startup must either maintain stable employment and moonlight their startup work, or get consulting and "dev-for-hire" work to subsidize their remaining time to work on their startup venture. This is generating a socioeconomic bias to venture development speed, but also eventual startup success.
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There's a growing number of low quality, low added-value accelerators popping up around the world that are not meeting the immediate needs of startup founders (and worse, often requiring non-negligible amounts of equity for no monetary investment). Though many mean well, a large proportion of these are glorified training programs, or a so-called "bootcamps". Though learning the ins and outs of lean product development, customer development, branding, legal, go-to-market strategy, hiring, etc., is never a bad thing, founders need more than this.
The Badhouse team core is, and will always be, current and former startup operators. Some of us will be wearing the Badhouse hat full-time, while others will have roles at tech companies and helping out on the side. See: https://www.linkedin.com/company/badhouse-ventures
If you'd like to get in touch with us, feel free to reach out to: hello[at]badhouse.ca