Conexus Credit Union (Conexus) has never shied away from innovation and building community. The credit union launched the full-service automated teller machine, the first mobile payment app, and the first social impact bond. “We have a long, rich history in innovation,” says Eric Dillon, CEO, Conexus. “It’s that spirit that led us to ‘venture’ into venture capital.”
Situation critical
In 2017 and 2018, Saskatchewan (despite its burgeoning number of tech startups) saw less than half a per cent of all venture capital (VC) deployed in Canada—just $14M of $3.5B in 2017 and $16M of $3.7B in 2018. A grim
statistic indeed. The province had world-class tech founders with great ideas, but access to capital was a significant challenge. Conexus started thinking about how the credit union could serve a sector that was being largely ignored but showed so much potential.
Going back to their roots
“We went back to where we started for a solution,” says Dillon. “We, and all credit unions, are founded on the idea of pooling local capital and support to build the local economy. We applied that principle to a 21st century problem.”
First, tech founders needed a place to nurture their ideas to launch them into the world. That need would create Cultivator powered by Conexus, the first credit-union backed tech incubator. That important first step would lead to another.
Dipping a toe
Once Cultivator was off the ground, it was time to address the other elephant in the room—the lack of money for tech. Not afraid to blaze yet another trail, Conexus entered a brand-new space for credit unions—venture capital.
Conexus Venture Capital Inc. (CVC) was founded with a mission to connect local capital to local founders and prove that prairie-based founders can build globally successful technology companies when given a level playing field. “We got off the ground in 2019 with our first fund of $30 million,” says Dillon.
Rocket up
Sean O’Connor speaks at the Agtech Accelerator Beta Cohort Demo Day.
The first fund would do more than just raise money. It would also perform with unprecedented levels of success. Since its launch two and a half years ago, the fund has seen a 38 per cent internal rate of return. “It’s early days, but we’re seeing clear signs that if you can untie that one arm behind the back of Saskatchewan founders, they can compete with anyone in the world,” says Sean O’Connor, managing director, Conexus Venture Capital Inc. and Emmertech. “We still have a long way to go, but we’re blowing past all our expectations so far.” Today, the original CVC fund is performing in the top quartile of North American VC funds that launched in 2019. Not bad for a prairie credit union’s first foray into the VC space.
Playing to our strengths
With the success of its first fund, Conexus started looking around at other areas where founders are being overlooked, and venture capital could fill a gap. “Agtech was the obvious choice,” says O’Connor. “We’re literally in the heart of agricultural innovation, and the agtech sector needed the help.” Unlike other tech companies, agtech has unique needs when it comes to venture capital. Emmertech, an agtech-focused VC fund, was founded on the principle that Canadian agtech needs a playbook—one which recognizes the nuances of building agtech companies compared to the typical venture-backed assets in Canada. For example, farmers don’t want to deal with minimum viable products. They have 30 to 40 growing seasons in their careers, and often have a significant portion of their net worth at stake with every harvest. As a result, agtech founders need investors to bet bigger and earlier than typically seen in the tech space. The space needs reliable solutions that deliver a clear return on investment to the farmer.
It needs patient capital upfront, and lots of it. However, agtech also offers major payoffs when it succeeds. “The need in agtech led us to our next fund, Emmertech,” says O’Connor. “Open to founders and startups across Canada, Emmertech also attracted interest from other Canadian credit unions across the country, along with farmers, agribusinesses and other business leaders who believe in our vision of helping propel Canada into a global agtech hub.” Emmertech is not only an important step in fueling Canadian agtech, but also a proof point that credit unions across Canada are joining this movement into venture capital as co-operative values are reimagined for the technology space to benefit communities and members.
Growing opportunity
There is more to Conexus’ venture to VC than just money. It’s also about growing opportunities in the province it serves. “Our work has elevated the sector as a whole, attracting VC from all over,” says Dillon. Saskatchewan used to be a footnote when it came to tech VC. Remember the paltry $14 million in VC from 2017 and $16 million in 2018? At the end of 2021’s third quarter, Saskatchewan saw $201 million in VC flow into the province, our highest year of investment yet.
The road ahead
“Not only are we helping attract money, we’re also helping create jobs and more opportunities for more startups,” says Dillon. “The combination of credit union ideals and Saskatchewan’s resilient, ‘git ‘er done’ entrepreneurial spirit has led us here and we have only scratched the surface.”
And what about finding an elusive Saskatchewan unicorn (a unicorn is the term used in VC to describe a privately-held startup with a value of over $1 billion and every tech ecosystem wants them)? “I think there’s one coming soon,” he hints.
Learn more about Conexus Venture Capital Inc. and Emmertech at Conexus.ca/venturecapital