Ryan Henry of Sand Hill North Discusses the VC Landscape in a Summer Check-In

Tensions are escalating between Canadian venture capitalists (VCs) and startup founders, raising concerns about whether this friction stems from genuine conflict or simply the effects of the summer heat. The atmosphere within the ecosystem is charged, marked by pointed exchanges on social media platforms like X (formerly Twitter), subtle jabs on LinkedIn, and an influx of direct messages to media outlets such as BetaKit. This upsurge in communication signals a broader discontent among participants in the ecosystem, indicating that something significant is afoot.

Ryan Henry, a partner at Sand Hill North, offers valuable insights into the complexities of this landscape. He highlights that emerging managers—those operating their first or second funds—are under immense pressure to identify successful investments. However, a challenging reality persists: most Canadian funds still fall under the category of emerging managers. This adds a layer of complexity to the already challenging process of securing funding, resulting in frustrations for both VCs and founders.

The heart of the discontent appears to stem from recent reporting by BetaKit, which has brought several critical issues within the Canadian startup ecosystem to light. This reporting underscores a troubling trend among Canadian VCs to shy away from leading funding rounds, particularly when compared to the relative ease that startups experience when raising capital in the United States. Additionally, founders are often perceived as having unrealistic expectations regarding funding timelines and valuations, further exacerbating the situation.

While these grievances are not entirely new—they have lingered in the Canadian startup scene since at least 2012—the current atmosphere feels significantly more intense. Both VCs and founders are grappling with a particularly challenging market environment. Securing funding has become increasingly difficult, interest rates remain high, and uncertainties abound regarding advancements in artificial intelligence (AI), upcoming political elections, and shifting tax policies. This confluence of challenges has fostered a pervasive sense of dissatisfaction, with many stakeholders feeling caught in the middle of a complicated and high-stakes landscape.

To delve deeper into these rising tensions, this week’s podcast features Ryan Henry alongside co-host Rob Kenedi. Ryan’s insights are particularly valuable given his role as a partner at Sand Hill North, a family office that invests in both Canadian and U.S. ventures. As the sole partner at a micro-cap VC firm, Ryan operates with a unique vantage point that allows him to articulate his views candidly, offering insights free from the typical constraints of corporate dynamics. This positioning equips him with a valuable lens through which to examine the differences between the Canadian and U.S. markets, especially in terms of their respective investment climates.

It’s crucial to note that Ryan’s perspectives do not reflect the views of all VCs or early-stage startups; however, they provide a useful framework for understanding the evolving relationship between VCs and founders in Canada. As the conversation unfolds, the key question emerges: What’s truly happening in this strained landscape, and how does it differ from common perceptions?

As summer progresses, it presents an opportune time to explore these dynamics further, seeking to uncover the underlying issues and potential pathways forward for both parties involved in the investment ecosystem. The podcast aims to dissect these challenges in greater detail, shedding light on the pressing issues facing Canadian venture funding, the shifting expectations of founders, and the strategies that VCs might adopt in response to the current situation.

In this exploration, the podcast will also consider the broader implications for the Canadian startup ecosystem as a whole. What does the future hold for VCs and founders navigating these turbulent waters? Are there innovative solutions or frameworks that can bridge the gap between these two groups? By engaging in this dialogue, the hope is to foster a more nuanced understanding of the Canadian venture landscape and to promote constructive conversations that ultimately benefit both VCs and founders alike.

As tensions rise and market dynamics shift, there is much to be learned from the ongoing discourse surrounding funding, expectations, and the path forward for the next generation of Canadian startups. This examination is crucial, as the relationships between VCs and founders will determine the success and sustainability of the Canadian startup ecosystem in the long run. By taking the time to unpack these challenges, the podcast endeavors to contribute to a more informed and engaged community that can navigate these complexities together, ultimately paving the way for a more robust and resilient venture capital landscape in Canada.

The increasing discord is an indication that the Canadian startup ecosystem is at a critical juncture. As VCs and founders grapple with the realities of funding in a challenging economic environment, it becomes essential for both sides to find common ground and work collaboratively towards shared goals. The discussion promises to uncover valuable insights that could lead to a more harmonious and productive relationship between these two vital components of the entrepreneurial landscape, fostering an environment where innovation and growth can thrive in Canada.