Buy low, sell high: Investing in tech

Buy low, sell high. High risk, high reward. Pretty simple concepts, right? Not necessarily!

Investing in tech comes with its own unique set of potential land mines, but despite this, the technology investment space in Saskatchewan is growing. Unlike investing through your local bank or stock broker, and different from jumping online and using a technology platform like Questrade or Robinhood, we’re seeing organizations and individuals investing directly into companies.

“When you start working with tech companies, first you need to leverage your own knowledge and where you can focus on assessing a company; a company that is tech based at the end of the day is still a business and so there are operations they need to execute, market research they need to do, marketing strategy they need to have,” says Evelyn Cerda, director of programming for Valhalla Private Capital.

Separating science from fiction in tech investing can be a challenge. Sean O’Connor, managing director of Conexus Venture Capital & Emmertech says it’s a bit of an art. “If you’re investing in a tech company, maybe even before they have customers or a finished product, you’re doing this because you truly believe the founder is the best person in the world to solve this problem. They’re not just competing with the businesses in their area, they’re competing with the entire world.”

O’Connor explains that there are basic metrics for a company, no matter how complicated the technology involved. Investors can educate themselves on the companies without necessarily needing a deep technical understanding of the solution. You want to see problems being solved in a profitable way. “In Canada we’re very lucky there is [government] funding available for those ideas that have potential to become something. That is one thing to make sure of—that if you have a company heavy on R&D that they are tapping into those grants . . . We always ask that question: How much (funding) have you gotten from grants?” explains Cerda. Not being able to access funds from the grant programs in place can be a red flag for investors.

Angel investors and venture capitalists inject capital directly into businesses in exchange for promises of future wealth. Here, there have been investment funds operating in the technology space for decades, but the growth of organizations investing in technology has looked to keep pace with the growth of the new technology ecosystem itself. This presents a lot of opportunities for people to get involved in investing in tech, and a lot of opportunities for people to lose money investing in tech.

It’s this fear of loss that has in many ways held many Saskatchewan investors back from supporting the tech sector in a direct way. Investing hard earned money into a company that has no assets, no revenue and no potential for profit in the short-term does actually sound a bit crazy.

The first step to minimizing the risk of investing in technology and helping the Saskatchewan tech ecosystem to grow is to eliminate the fear through education. Finding out the potential pitfalls, and understanding the probable timelines, milestones, and key performance indicators of a company can be a daunting starting point.

As O’Connor explains, when you’re used to investing in brick-and-mortar businesses and there’s no tangible assets there are a different set of growing pains to be considered. “It (investing in tech) comes with unique challenges . . . and it can be a much different headspace for investors.”

The good news is that as the prairie ecosystem evolves and more companies launch, it’s also trying to scale the community that fostered that growth in the first place. If you’re looking to get involved there are several options to explore. “I think when you’re a new investor in tech the best way to get started is to find some people you can talk to and bounce ideas off, run things by them, start getting out there to events, watch pitches,” says Cerda.

O’Connor explains that for many the first step is deciding how you want to invest. An investor could get actively involved in the various angel investing networks and be ready to dive into due diligence and work to help companies grow. Or some may want to simply invest money but not time, look at a variety of the great funds available. Both help the tech sector grow and come with rewards and challenges.

More events and programs to make the whole experience of investing in technology better for potential investors are also arriving. Great tech investment stories are coming out of Saskatchewan and the people here are getting better at telling those stories. The core theme of these tales is often similar: someone saw a problem in everyday life they were passionate about solving and have now shared this solution with the world.

“Make sure that you learn, talk to people that are investing in tech already, leverage your strengths, outsource the knowledge you don’t have, and when you’re ready—do it. Once you do it once you’re going to continue doing it. You have to see it through the lens of an investment—a long-term investment with the potential for a big reward,” Cerda says, “I encourage people to get out there and see if this is for them or not—there is a lot of educational programming out there if you’re interested in angel investing.”