Panache Ventures general partner Prashant Matta suggest founders and investors must get back to playing offence.

I am finally ready to call a market bottom.

I know you have heard about the doom and gloom in the venture market. All you have to do is look at the VC X-sphere (RIP Twittersphere) over the last couple of years. Many have tried and failed to predict when the current venture downcycle (except AI) will end. From the pandemic highs to the recent lows, the sentiment has been stubbornly defensive. But I am finally seeing early indicators to call a market bottom. It is time to play offence or get left behind.

Private markets are hard to predict because of the inherent lack of reliable information and near-real-time data. The best VCs read market signals in combination with their own proprietary data, track record, and experience (i.e., gut), deeply understanding that their mission is to invest in visionary entrepreneurs and technologists and to help them build high-growth businesses.

For any market to function properly, you need to understand both the supply and demand dynamics. A lot has already been reported on the plummeting venture investment volume and the tough fundraising environment. This data tracks the number of venture investments in a specific quarter and is usually self-reported by venture funds to databases maintained by organizations such as the CVCA, PitchBook, and Crunchbase. I call this the supply-side data. This data is important and helpful in understanding the venture financing environment; however, it is a lagging indicator.

The demand side data—i.e., the number of startups and founders coming to market—is more difficult to gauge. If you are a late-stage VC, you could look at early-stage financings and build a deal pipeline. However, as a former late-stage VC, I know it would still be challenging to foresee predictable demand. Moreover, what if you are an early-stage fund such as Panache Ventures looking to invest up to $50 million in pre-seed stage startups over the next two years?

Thanks to advancements in AI, Panache Ventures has been actively tracking startup formation data over the last two years. The fund scrapes social media and online datasets to identify new technology startups that are being created in Canada, providing a pulse on the future demand for capital. Most importantly, it focuses on the founders, who drive the demand for VC dollars. To our knowledge, this dataset is unique and Panache Ventures is sharing it publicly for the first time. My hope is that the founder and investor community can band together and steer the market narrative to one of growth and optimism.

Technology startup formation points to future demand for capital

Panache Ventures’ analysis shows a significant boost in new Canadian startup formation in 2024, setting the stage for stronger investment activity.

By the numbers:

• In the first half of 2024, over 800 new technology and software-related startups were launched in Canada, a notable expansion from the previous year. Company creation was especially strong in sectors such as AI, climate tech, FinTech and SaaS.
• More than half of the companies were founded in Ontario.
• Over 30 percent of the companies are operating in stealth mode, indicating that many founders are quietly bootstrapping and building before they raise their first round of capital.

Why it matters:

• The data highlights a shift in Canada’s entrepreneurial landscape. After a relatively slower 2023, the surge in startup creation indicates that founders are gearing up to build.
• Investors who have been cautious in recent years may become more active due to the uptick in deal flow in the coming quarters.
• As startup creation grows, there will be more opportunities for early-stage investments. Robust early-stage financings will also result in greater late-stage investment opportunities in the coming years.

The increasing startup formation activity, declining cost of capital due to lowering interest rates, improving macro and liquidity conditions, accelerating technical advancements, and thriving entrepreneurial ambition give me the confidence to call the market bottom. I don’t expect the venture ecosystem to party like it’s 2021 but the worst is over and the venture market will soon find a new level of equilibrium. Get ready to play offence.

Prashant Matta is a managing partner of Panache Ventures, a leading pre-seed stage venture capital fund.

Feature image courtesy Pixabay.

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Panache Ventures Hosts Inaugural CEO Summit in Toronto: A Day of Big Ideas and Transformational Change

At Collision Conference in Toronto last week, we had the pleasure of hosting over 40 Panache Ventures CEOs from across Canada and abroad for our inaugural CEO Summit in Toronto. The event was an incredible gathering of the visionary leaders and innovators we’ve backed over the last few years, filled with learning, exchanging of ideas, and fostering meaningful connections. Safe to say, it was a big success - one that we hope to do again soon.

Here's a recap of the highlights from this inspiring day.

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🔔 Ringing the Opening Bell at TSX:The day began with an exciting start as we rang the opening bell at the Toronto Stock Exchange (TSX). We proudly celebrated the recent Series B raises of Relay, Colab, and Qohash, showcasing their achievements on the big screen outside the building.

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💡 Sharing Big Ideas:

Our Summit featured insightful presentations on some of the most pressing and groundbreaking topics in technology and innovation today:

• Consciousness in AI:Dr. Suzanne Gildert, co-founder of Sanctuary AI, presented her pioneering thesis on using quantum and biological neural networks to advance AI. Her vision of integrating these technologies could lead to revolutionary breakthroughs in AI consciousness.
• The Future of Compute:Ath Caramanolis, founder of a new clean energy optimization stealth startup, discussed the critical role of compute power in the future. He highlighted the prediction that data centers will consume 9% of the US electricity grid by 2030 and presented strategies for decarbonizing this energy-intensive infrastructure as well as physical and practical limitations for building decentralized and optimized compute networks.
• Africa’s Leapfrog Opportunity:Dickson Nsofor, CEO of Korapay, made a compelling case for startups to expand into Africa. Among other things, he emphasized the continent's incredible growth in internet penetration, from 2% to 43% over the last 20 years, representing 600 million users and vast untapped potential in areas like healthcare, financial markets and e-commerce.

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🔎 Expert panels on key topics

Sales and Go-to-Market :Michael Hyatt of Kicker AI and Andrew McLeod of Certn provided valuable insights on sales and go-to-market strategies. They stressed the importance of treating sales as a science, building repeatable processes, and focusing on trust within sales teams.

Building with AI:Rodrigue Hajjar of Cohere and Colin Toal of AWS discussed the best applications of Large Language Models (LLMs) and the importance of embedding these models in products that address key pain points. They also highlighted the power of building task-specific models via RAG systems fine-tuned on contextualized data.

Fundraising Insights:A panel of experts, including Damien Steel of Deepsky, Marina Pavlovic Rivas of Eli Health, Simon Bourgeois of Nmbr, and Yoseph West of Relay, shared their experiences and strategies for successful fundraising. They emphasized the importance of differentiation, building relationships with investors early, and prioritizing trust and alignment with investors, above prestigious names and size of cheque.

Paths to Exit (M&A/IPO):Orest Pizyo and Peter Miller from BMO Capital Markets provided comprehensive inside insights into exit strategy best practices. They discussed the current exit landscape, the importance of meticulous preparation for M&A processes, and the benchmarks for successful IPO candidates.

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🤝 Fostering Meaningful Connections:

We concluded the day by hosting Collision's most sought-after mixer, bringing together over 300+ founders and investors. This event provided a fantastic opportunity for networking, exchanging ideas, and building relationships to drive the future of the Canadian tech ecosystem. 🇨🇦

We extend our heartfelt thanks to our sponsors, Telus Ventures and BMO, and to everyone who joined us. Your support and participation made this day a resounding success.

Inspiration and Transformation

The CEO Summit left us feeling inspired, energized, and incredibly proud. The collective brilliance and dedication of our CEOs are driving transformational change across diverse sectors. From pioneering advancements in AI and energy  to unlocking growth in healthcare, financial services and beyond, our leaders are making a significant impact in Canada and beyond. We’re excited to be a part of their journeys.

Stay tuned for more updates and stories from Panache Ventures as we continue to champion and celebrate the remarkable achievements of our portfolio companies.

The Panache Team 🦌

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Today, we are proud to announce the next steps in our quest to build Canada’s next billion-dollar venture capital firm. Panache Ventures is acquiring San Francisco-based Commonwealth Ventures to help our portfolio companies reach their growth targets even faster. We are also announcing the launch of Panache Ventures Fund II, targeting 75+ companies with initial investments of up to $1M.

Our mission is to back the most ambitious founders and support them in building industry-defining companies. Through this acquisition, our entire portfolio will benefit from Commonwealth’s proven Silicon Valley fundraising and growth programs.

We’ve interviewed thousands of Canadian founders over the last five years, and know that they have the talent and drive to create huge successes — but one key area needed improvement: mindset. These programs shift founder mindsets and allow them to compete on the world stage.

As part of the acquisition, Chris Neumann, Commonwealth’s Founder and CEO, will join Panache as our new Vancouver/San Francisco Partner, where he will lead our founder growth and fundraising platform. Chris’ addition to the team makes Panache the only pre-seed fund with partners in Canada’s four largest cities.

But we’re not stopping there. We’re also excited to announce two more team members as part of our impact initiative:

• Scott Loong, formerly founder of Covera.ai, an InsurTech startup that used technology to automate insurance renewal shopping. Prior to that, he was a principal and entrepreneur in residence at one of Canada’s pioneering FinTech venture funds. Scott is a business lawyer, advises regulators on issues of innovation and is a mentor at Concordia’s District 3 and Creative Destruction Labs.
• Roxanne Leduc, a former management consultant and marketing director with Bell and Car2Go, will lead our community development initiatives out of our Montreal office.

As VCs, we provide capital and guidance to entrepreneurs in order to generate returns for our LPs. Our first fund, 500 Startups Canada, is currently amongst the top 10% of venture funds in North America, and Panache Ventures I is already a top-quartile fund, with 93 companies in the portfolio thus far.

We have been able to achieve these results because the Canadian startup technology ecosystem is filled with incredibly talented entrepreneurs, enlightened mentors, and prescient investors. Your support has been key to our success, and has motivated us to set our sights even higher.

We’ll have more to share about these initiatives in the coming months. For now, we’re excited to welcome Chris, Scott and Roxanne to the team!