Vancouver's startup factory is re-thinking venture capital
Vancouver's startup factory is re-thinking venture capital
Shafin Tejani often uses the pronoun “we” when discussing his exploits as the founder of more than 20 startups and an investor in dozens more, as in, “We’re making a big push into Europe.” Technically he is an executive committee of one, but he is building a team of sorts.
He recently sat down for a meeting in a conference room in the Vancouver offices of BC Diabetes, the practice of Dr Tom Elliott. While Tejani is investing about $400,000 in a venture with Elliott to develop a genetic test that predicts how diabetics will respond to the drug liraglutide, his real purpose on this day was to get Elliott’s reaction to a product demonstration.
Thirty-nine and preternaturally affable, Tejani, who greets almost everybody as “brother”—partners, friends, the waiter at lunch—had asked a couple of graduate students to demonstrate a device they had designed to test glucose levels. “I saw the market size and the market opportunity,” Tejani says. “Diabetes is global. It’s borderless.”
It’s also out of his comfort zone, which is why he sought the counsel of Elliott, a clinician with two decades of experience. Ultimately the doctor expressed scepticism, but Tejani had woven another strand into the web of startups he is building. In the past two or three years, he has seeded an eclectic portfolio featuring some of Vancouver’s top young entrepreneurs. Through an investment entity called Victory Square, he has supplied time, knowledge, support services, access to his network and financial assistance—generally not more than several hundred thousand dollars—to some 16 startups.
British Columbia’s technology companies—there are more than 9,700 of them—employ more people than the natural resources companies that once dominated the region, according to the BC Tech Association. Tejani has seen real benefits in being based in Canada. For one thing, his companies often pay their expenses in Canadian dollars and receive their revenues in American dollars. Plus, he helps his entrepreneurs take advantage of generous government support and incentives: Grants and credits for making investments, for hiring recent college graduates, for R&D and more.
He likes to call what he does “venture build” as opposed to venture capital (VC). Unlike VCs, who often leave startups to their own devices—so long as they are hitting milestones—Tejani showers his portfolio companies with support. “As a VC, you’re making a bet knowing you’re going to get one home run and a hundred outs,” he says. “I go in planning to win every time.” To improve his odds, he tends to think small, seeking startups that can turn a profit in six months and that are in need of his “core competencies,” as he calls them, in online customer-acquisition and software development.
Lately, though, he’s been thinking bigger. At the centre of his efforts is a bid to stitch together a publicly traded enterprise, called Fantasy 6, that will stake out a piece of the fantasy sports market—never mind that the space is occupied by two behemoths, FanDuel and DraftKings. Tejani purchased one company outright and created a couple of others from scratch to fill roles in the nascent empire. He thinks Fantasy 6 could find a buyer in the next one to three years—a media company “like Disney” prepared to pay $150 million or more.
Tejani’s parents, who are of Indian descent, immigrated to Vancouver from Uganda as young adults. Most of the entrepreneurs in Victory Square’s portfolio are themselves first- or second-generation Canadians, many from Asia. “Even before capital, there was trust,” says Samarth Chandola, who came from India and wound up working for a political candidate whose campaign rented office space from Tejani. In 2013, Tejani agreed to stake Chandola $25,000 to build a suite of learning games for children called Boximals.
Within a year, Tejani and Chandola sold the company for $1 million to a Brazilian private equity fund. Then they started a mobile gaming company, V2 Games, that today employs more than 40 and is profitable on nearly $3 million in annual sales. Chandola has become something of a junior partner to Tejani, with a stake in both Fantasy 6 and one of its main affiliates, Immersive Environment, which is building real-world interactive experiences, starting with escape rooms. Immersive is managed by another Tejani protégé, Adrian Duke, whose first Victory Square company designs water slides with a 90-degree drop and a full loop. It built a prototype at a park near St Louis and has sold four units.
Tejani started his first business 20 years ago in a dorm at what is now Western University in Ontario, a college sophomore hoping to make up for a lost scholarship. The business, iFluRtz, was a dating quiz-and-match service that he pitched as a fundraiser to high schools, which sold the programme to students. Within a few years, the business generated about $2.8 million in revenue and led to a school discount programme and a mailing list of more than 60,000 merchants. From there, Tejani slid neatly into retail loyalty programmes, creating and selling six companies.
Meanwhile, after a friend asked him to build an online gambling site, he developed a rudimentary affiliate marketing tool to track traffic and compensate websites for leads. When his friend sold the site, Tejani was left with both his tracking tool and the website architecture, which he began marketing to other gaming sites, particularly in South America and often in exchange for equity.
He retired from online vice four years ago with, he says, $125 million in profits from all his ventures, as well as a back office of developers and digital marketers and a global address book. Darius Eghdami, CEO and co-founder of FansUnite, which will soon join the Fantasy 6 family, says his association with Tejani lowers his costs because a developer who would otherwise expect a salary of $60,000 to $65,000 might take 10 percent less to work with Tejani. And he marvelled at Tejani’s network of marketing and gaming contacts. “If I reached out to them,” Eghdami says, “they wouldn’t return my calls.”