Two former bank executives and the former chief technology and product officer of the point-of-sale software company Lightspeed have joined Framework Venture Partners, as the startup financier attempts to raise its second fund during challenging economic times.
Two of the new arrivals have joined Framework as partners: Jim Texier, a tech sector veteran who left Lightspeed LSPD-T last August, and Barbara Dirks, a past executive with Royal Bank of Canada RY-T, Bank of Montreal BMO-T and Silicon Valley Bank’s Canadian arm. Mike Dobbins, Royal Bank’s ex-group head of RBC Ventures and corporate development, has become a venture partner, meaning he will work on Framework’s behalf with companies it backs.
They join partners Peter Misek, who co-led Framework’s spinout from Business Development Bank of Canada in 2018, and Ajay Gopal. Andrew Lugsdin, Framework’s other founding partner, has left his day-to-day role but still represents the company on some boards.
The new partners have joined Framework as it raises its second fund, with a goal of securing US$250-million to back startups. The fund closed on US$100-million from Framework’s past investors in late 2021 and has until December to finish fundraising.
Mr. Misek said fundraising is “10 times harder” than in previous years, because many institutional investors are now taking a wait-and-see approach. “Whenever there is this much uncertainty in this short a period of time, the first and right response, when you don’t know what to do, is sit still,” he said.
Framework raised $105-million for its first fund in 2019, short of its $150-million goal. The fund – which was backed by BDC, RBC, Cadillac Fairview and Kensington Capital – has performed well on paper, earning a 97-per-cent average internal rate of return, according to Pitchbook. Two of its 11 companies reached “unicorn” valuations of US$1-billion or more as the market peaked in the past year: Montreal “tutoring-by-text” startup Paper Education Co. Inc., and San Francisco-based identity verification software provider Incode Technologies Inc.
The tech sector is experiencing its most challenging era since the dot-com bubble burst in the early 2000s. Valuations have crashed and waves of layoffs have hit the sector as unprofitable young companies cut costs to preserve cash. Inflation, rising interest rates and a worsening economic outlook have contributed to a slowing of venture capital investment and a reset in valuation expectations.
Nevertheless, Framework’s partners sounded an optimistic note in interviews. “There are a lot of positives in a bear market,” Mr. Texier said. “There is no more hype, no more distraction” and more talent available.
Mr. Gopal said the “the pipeline is robust and full” of promising startups. “Most funds are sitting on their hands and waiting; we’re taking the opposite approach – we’re leaning into the market and looking for opportunities and engaging with startups,” he said.
The company is doing so with expanded operational experience on its team. Mr. Dobbins described himself as “a partnership builder.”
“I wanted my network and banking experience to be additive to the venture investing part,” he said.
Ms. Dirks comes to venture capital after a career that included stints as BMO’s chief learning officer and chief operating officer of commercial banking in North America. The lawyer by training led Silicon Valley Bank’s Canadian operations in the late 2010s. She also had a brief tenure as CEO of PACE Savings and Credit Union in 2020 that ended with her and the entire board resigning after their attempts to turn around the scandal-plagued institution hit turbulence over escalating disputes with an Ontario financial authority that oversaw recruitment of the board.
Ms. Dirks described herself as a generalist who enjoys moving between roles to “reshape a business, or take out costs or grow or launch something.” She said she has enjoyed the variety and dynamism of venture capital since joining Framework in 2021, initially as an executive in residence.
“I think it’s a great time to be in venture,” she said. “We’re still pretty optimistic about the future.”
Framework invests in North American software and software-backed marketplace companies that have achieved initial success with products in market. It makes investments of US$4-million to US$10-million each.
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Sean Silcoff