In the latest episode of TechAlliance’s podcast Idea to Investment, that explores the fascinating intersection of entrepreneurship and investment, we sit down with Lynn Davis, President of Alegria3 Inc., an investment company dedicated to fostering social and environmental change.
Read more on what an ideal investment looks like for an investor, the current Canadian investment landscape and what the future holds for the vibrant tech ecosystem.
Ken: Can you share your investment philosophy with our audience?
Lynn: From my first meeting at the Southwestern Ontario Angel group to running an impact investment company for a decade now, I have always sought companies with a social or environmental ethos. I’m also keen on supporting female Founders who often receive less attention.
Ken: Are most investors solely concerned with the bottom line? How do you balance financial returns with social impact in your investment decisions?
Lynn: There is a significant number on the hockey stick who want to see that 10X return on their investment, but there’s also a contingent of us that look at how can we make things better on the planet, whether that’s from an environmental or a social standpoint. These investors often understand the importance of aligning profit with purpose and so they also tend to navigate the waters together as they have identified that common purpose.
Ken: Has your investment philosophy evolved over time?
Lynn: My approach has evolved to recognize the long-term commitment required in nurturing startups. It’s not just a one-shot deal; it’s about being there for the company’s growth and evolution. I’m going to be in this company’s sightline for a significant amount of time, as they try and figure out who they are, and to become self-sufficient on the financial front.
Ken: How do you manage the level of involvement with founders?
Lynn: I’ve opted to kind of be in the background 90% of the time because I want to give the founder the opportunity to really dig in and figure out how they are going to make this work. If there is a moment where there is something in my background that would be beneficial, in terms of a business strategy or just idea sharing, then I’m always happy to step in, lean in, do what needs to be done.
Ken: What key elements do you look for in a pitch, and what pitfalls should founders avoid?
Lynn: I think it’s important for a pitch to help you understand what’s the problem they’re trying to solve, how do they anticipate solving it and where is the revenue stream that’s going to make this a viable business. If you can pull that all together in 90 seconds, or in the given timeframe, then you’re well on your way to capturing somebody’s attention and potentially having a cheque written.
When it comes to the pitfalls, I think that would all depend on where the Founder is in their journey. If you’ve got a fledgling Founder, you might hear something that you’re going nope that (a) doesn’t work or (b) doesn’t resonate. So, I think it really depends on where the founders are to know, discover or see something that’s just not going to work.
Ken: What challenges do female founders face in accessing investment opportunities?
Lynn: Female founders often face gender bias in the investment landscape. I have seen firsthand when a female Founder presents, they are asked different questions than a male Founder. There’s just a sense that men are going to be able to do so something in a better, more definitive way and yet I’m watching female Founders do remarkable things in their specific industries and gender has nothing to do with it! If the idea is sound, then they deserve the same time and attention, and it doesn’t always happen that way.
Ken: How do you manage investment losses, and what constitutes a loss from your perspective?
Lynn: Out of the 12 to 15 investments that I have made in my entire journey, I have only had two cases of losses. I would say it goes back to the basics – don’t invest more than you can afford to lose. For me, it was also really early on in my investment journey, so there were things that I didn’t understand, in terms of what the trajectory could be. There is always lots of learnings, in terms of what this could be or how it may end. I’ve also had successful investments, so you take those, and you go ‘well that kind of paid for that.’
Ken: Considering current disruptions and changes in policies, how do you perceive the future of investing?
Lynn: That’s a good question! The mood is cautious, given ongoing disruptions and budget constraints. During the pandemic, there was an opportunity where we just wanted to protect what we had already invested in, and then realized, in that moment, that there was an awful lot that was coming down the pipeline that had the potential to impact in a positive way. But there was not much interest in fessing that out because we wanted to protect what we already had. So then, you extrapolate for years beyond pandemic, and I think we’re still grappling with what we didn’t pay attention to. Now, we’re trying to play catchup to be part of the investment opportunities in the pipeline.
Ken: If everyone on the investor side is trying to catch up, what do you think the future holds for entrepreneurs and the funding landscape?
Lynn: It’s important for the Founder and the Funder to meet each other at the right time. We need more investment to further equip organizations like TechAlliance, which are doing an incredible job of bringing the Funders and the Founders to a point where they can be in a good position to pitch to angels, just individual funding bodies or simply at a pitch competition. There is still a gap and organizations like these in Southwestern Ontario would help in connecting these dots.
Ken: Finally, what advice would you offer to founders?
Lynn: Stand your ground, persevere, and embrace your ideas with confidence. Belief in your vision and resilience in navigating challenges are key to success.
To listen to the entire podcast episode, stream Idea to Investment on Spotify here.