In the News...

Venture Coaches' latest investment in a Vancouver-based photonics startup could be a sign of things to come, says managing partner Claude Haw.

Last week, the local VC firm participated in JGKB Photonics Inc.'s $6.7-million series A round. The West Coast investment was the first such deal for Venture Coaches, which usually focuses on Ottawa.

"When we set out to build Venture Coaches and to launch the first fund, we said we would target Canada," says Haw, who founded the firm in October 2000.

He is now examining additional opportunities in Western Canada, especially in Vancouver and Calgary. When asked about the risks of flying over a good deal to get to a good deal (a saying often used by skeptical American VCs in reference to deals in Ottawa) Haw did not express concern.

"There are good deals in Ottawa, but we're trying to do the best deals. A little diversification is a good thing," he says.

Besides the geographical deviation in Venture Coaches' most recent investment, the largest difference is the stage of the deal. Traditionally, the firm has acted at the seed stage, but the JGKB investment was a series A round. Because of the distance between the two parties, it was necessary for Venture Coaches, says Haw.

"We felt more comfortable that they wouldn't be a going concern and that we wouldn't have to do a lot of early heavy lifting. They had local investors that already provided that," he says.

The investors Haw speaks of are Greenstone Venture Partners, whom Venture Coaches know from industry circles. In fact, Greenstone invited Venture Coaches to the table in the JGKB deal. With a local VC to keep daily tabs on the startup, Haw figures he will only have to visit Vancouver on a monthly basis.

"When looking outside of Ottawa, we're looking for strong local partners," he says.

For JGKB, having Venture Coaches on board gives them a foot into Ottawa, which is considered by many to be a hotbed of photonics activity. In fact, a lot of JGKB's customer base involves system vendors in Ottawa, such as Nortel Networks, Ceyba Inc. and Innovance Networks.

"There are at least three customers we're interested (in Ottawa), as well as suppliers and other things," says JGKB CEO Alan Guest. "We just find we get a lot done when we come to Ottawa. It's a hot spot."

As for the local landscape, Venture Coaches is still seeing a lot of dealflow out of Ottawa. Haw's partner Jaswinder Kaur cautions that Ottawa remains priority No. 1 for the firm; however, she says, the JGKB deal just made sense. "It's not a reflection of a lack of dealflow here in Ottawa. It just makes sense from a valuation perspective and in terms of what we can bring to the table," says Kaur.

Looking eastward, the firm announced last spring that it would be exploring more opportunities in Montreal and Quebec City, but has yet to make any investments into the province. Haw says it's a matter of timing.

"We have done quite a lot of trips back and forth to build relationships (with Quebec-based VCs), and we will be announcing an on-the-ground relationship with a venture partner in Montreal next month.?

The partnership will give Venture Coaches an office presence in Montreal and should open the door to new opportunities in Quebec. With just less than half of its $40-million first fund having been spent, Venture Coaches is still open to new opportunities. The firm also announced last week its participation in Toronto-based Chantry Networks' $9-million series A financing.