Startups solve problems at scale. The bigger the problem, the faster the growth and the greater the return…except, it seems, when it comes to the biggest problem of all.

Runaway climate change is the single greatest long-term challenge facing humanity. And with the ability to move at breakneck speeds, disruptive start-up innovation is one of the few ways we can bend the curve downward and away from the possibility of long-term global disaster.

So why hasn’t green tech seen the same sort of success, the same sort of sizzle, that is celebrated in other areas of innovation: fintech, cryptocurrency, software as a service, you name it?

In my experience, the green tech ecosystem is misfiring because non-economic actors—politicians and policymakers—are rarely able to effect profound positive disruption on their own.

If we want such change and we want it quickly, we need to instead mobilize capital, tech talent and entrepreneurial leadership to advance the green goals championed by activists. When that combination comes together, it can move the needle pretty quickly.

Whether in the form of natural disasters or the latest environmental protest movement, climate change confronts us every day. It reminds us of our own personal consumption choices, as well as the pent-up popular demand for action. The market pressure, and the market, is there.

When it comes to effectively motivating government policy, however, market pressure has been less successful.

Greta Thunberg, for instance, compelled hundreds of thousands of Canadians across the country to call for immediate action on climate change as the 2019 federal election unfolded. The result? Canada elected a minority government with a relatively mild climate change action plan.

The federal Green Party went from two seats to three, essentially a rounding error in a Parliament with 338 members.

The 2019 election was perplexing failure that seems uniquely characteristic of Green parties across Canada. Had Canadians poured into the streets demanding immigration reform on a similar scale, Maxime Bernier might be crowning himself god-emperor right now.

Or, less fantastically, the federal Greens could have taken a lesson from the Bloc Québécois, who turned a similar share of the national vote into decisive leverage through a savvier strategy that understood the constraints of our first-past-the-post electoral system,

The same is true closer to home, with the less said about the rout of the B.C. Greens in our recent provincial election, the better. They now have four years to reflect on the importance of lost leverage, while Site C construction and the expansion of our LNG megaprojects continue apace.

By relying on public pressure generated by activists to produce meaningful policy changes, we have been pushing on string. And with the time running down, we now need to mobilize different resources.

Consider companies like Tesla, Zoom, and even Uber and Lyft. Nobody would classify these as conventional “green tech”, yet all have fundamentally changed their industries while starting to make inroads into reducing overall carbon emissions.

After only 11 years in the market, Tesla has unquestionably disrupted the auto industry and forced the world’s largest automakers to respond with electric vehicles of their own. Affordable mass-market EVs are now a reality, and that is a huge win for anyone concerned about climate change.

Despite its unicorn status, few people had heard of Zoom Video Communications Inc. 12 months ago. The sudden shift to distance meetings has led to an eight-fold increase in its stock price. More significantly, this sea change is also rewriting business travel—a leading miscreant when it comes to carbon emissions—for the foreseeable future. Has anyone calculated what Zoom’s net carbon footprint might be?

Uber and Lyft, meanwhile, have redefined urban mobility in less than a decade. Their long game—the end of car ownership, with autonomous electric vehicles offered as service—would be another huge win for those concerned about climate change. Today, the companies are wrestling with net emissions, but their plans for more pooling, faster electrification, and better integration with public transit hubs should quickly push them below the footprint of private vehicles.

For this reason, Shred Capital is working with other “green-minded” investors from cities like Copenhagen, San Francisco, and Montreal. Our plan is to knit together early stage capital networks to support the most entrepreneurial innovators, creating a private-sector bridge between policy and procurement.

With this in place, we want to start backing startups that have the potential to be next generation of category-killer companies. To see such success will take seven to 10 years… which is not a lot of time when one thinks about the climate deadlines highlighted by the UN Intergovernmental Panel on Climate Change. But then again, startup years are often like dog years. We get a lot done in a short period of time.

And here is the good news for politicians and policymakers: the COVID-19 pandemic has shown that there is a real role for them too. Their work in this crisis has shown, with different degrees of success, that government can pivot entire economies and create the market conditions to drive profound innovation at (ahem) warp speed.

Matt Toner is the former Vancouver-based deputy leader of the B.C. Green party. He has led startups in New York, Toronto and Vancouver, and recently cofounded Shred Capital to seed the most promising Western Canadian tech investments. The Georgia Straight publishes opinions like this from the community to encourage constructive debate on important issues.

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Jettison the raunchy atmosphere that would induce nightmares for any human resources department and Matt Toner doesn’t mind likening his ideal investment target to that of Pied Piper, the tech startup featured in HBO’s Silicon Valley:

“We expect them to be pre-revenue or early revenue. We expect them to have early partners that are already set up – relationships with people that can help them grow, whether it’s technology or marketing or distribution networks,” said the entrepreneur-turned-venture capitalist. “And we’re looking for founders that have had a couple of scrapes on the bumpers already.”

The founder of gaming company Biba Ventures Inc. launched his latest VC endeavour this month, Vancouver-based Shred Capital Ltd., as the pandemic-battered economy remains precarious.

But even amid the current climate, Toner and other West Coast venture capitalists seem confident about the prospects of investing in early-stage companies tackling problems brought to the forefront by the COVID-19 crisis.

“Officially launching and closing the new fund couldn’t be more timely because there was already a whole bunch of trends, for example, within health that were driving technology usage,” said Maria Pacella, senior vice-president and portfolio manager at PenderFund Capital Management Ltd.

The Vancouver-based diversified asset manager this month officially launched a new brand, Pender Ventures, with $100 million in assets under management aimed at spurring growth within Canadian tech companies.

Pacella said the COVID-19 crisis has only accelerated trends in the types of companies Pender Ventures was already eyeing for investments.

“Whether it’s having … more personal medical data, wanting to be preventative about our health, having access to more imaging technologies, etc., it was sort of already happening. COVID really highlighted some of the challenges within our hospital systems, within delivery, within technology,” she said.

“[The pandemic] has eliminated some of the hurdles faster than would normally happen.”

Earlier this week, Vancouver-based Telus Corp. (TSX:T) revealed it was launching a $100 million VC fund aimed at “purpose-driven” startups.

Investments targeting for-profit, early stage companies will typically range in size from $500,000 to $1 million, with follow-on dollars reserved for down the road.

Shred Capital also has its sights set on early-stage Canadian tech companies that are navigating changes brought on by the pandemic, according to partner Toner.

“With the pandemic today, I think there are a lot of pain points that have been suddenly revealed that need solutions,” he said. “From education, and travel, and conferences. All these physically intense activities that we all can’t wait to get back to are now needing an augmentation.

“So we’re very curious [about] companies that are looking at the present landscape and saying, ‘You know, there’s intense, short-term disruption that’s occurring in this vertical right now. But we think that there’s going to be a longer-term trend change that needs better solutions, and that’s where we want to play.”

Shred Capital will begin deploying investment dollars in the next six to 12 months, although Toner said he wouldn’t pass up a solid opportunity that comes before then.

While he wouldn’t reveal how much capital the company plans to deploy over the coming years, Toner said his firm is supported by “fairly deep-pocketed backers in New York” – a reference to Shred co-founder Yechiel Kopelowitz, managing director of Leonite Capital LLC.

Investments will range from $250,000 to $750,000, although in some cases Shred Capital may deliver up to $1 million.

“We approach it really not from the perspective of bankers or accountants,” Toner said.

“We’re founders ourselves, we started companies ourselves, we know how awkward and ugly those early months and years can be.”

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New breed of investment firm addresses problematic lack of financing available to innovative Canadian startups

VANCOUVER, CANADA – With disruptive ideas and technologies needed more than ever before, Shred Capital (Shred) is launching to provide venture financing solutions to early-stage companies focused on revitalizing the industries that have been hardest hit by the COVID-19 pandemic.

“The best startups aren’t the bandwagon companies you see popping up during boom times,” said Shred Co-founder Matt Toner, the Biba Ventures CEO who has launched half a dozen startups in New York, Toronto and Vancouver. “We believe the best ideas are those that address a real pain point, and we sure are seeing a lot of those right now. Post-pandemic, we need disruptive ideas to reinvent theatre, travel, restaurants, concerts, conferences, education, you name it. But those ideas aren’t going to get off the launch pad without early-stage investors willing to share the risk.”

As a new breed of investment firm that shares the energy, passion and tenacity of its clients, Shred deeply values (and enjoys) getting to know and understand the people, vision, technologies and management styles underpinning innovative businesses. At the same time, Shred helps startups navigate and fund claim preparations for SR&ED, IDMTC and other tax credit programs, as well as proposals for the Canada Media Fund, BSP or IRAP. The extra diligence delivered by this unique layered approach allows Shred to structure the best equity investments for its clients, while providing financing that lets startups focus on building momentum and value right away. 

“Our competitors will typically make an investment decision based on a slick pitch deck and a short meeting with a startup’s founders, but that’s not how we roll,” said Shread’s other Co-founder, Yechiel Kopelowitz, who also serves as Managing Director of Leonite Capital, a New York-based investment firm that has partnered with Shred to establish a presence in Western Canada. “Many early-stage equity funders are looking for the next so-called ‘unicorn,’ but at Shred, we’re more about rhinos – game-changing businesses that are robust enough to survive and thrive for the long haul.”

Shred is also working to overcome a problematic lack of earliest-stage financing in the Canadian startup ecosystem, which shows tremendous promise owing to factors ranging from robust government support and a dynamic business environment to world-class talent and training. 

 

“We are looking for committed founders who have the team and the technology to unleash an idea that can change the world,” Kopelowitz said. “And if it takes years to affect that change, so be it. We have the expertise, experience, passion and resources to make that change a reality.”

About Shred Capital

Based in downtown Vancouver, Shred provides funding opportunities to early-stage Canadian companies across a range of innovative sectors. Shred’s offices in New York and Tel Aviv enable it to access an investor network that spans the globe.