Edtech is one of the sectors that BKR Capital co-founder Lise Birikundavyi is most excited by among a new crop of start-ups focused on solving problems, especially in Canada, where BKR Capital launched in 2020.
“We are seeing edtech companies that are making the educational system future-proof to occurrences like the recent pandemic by enabling a seamless learning [experience], whether virtual or in-person,” Birikundavyi told Venture Capital Journal in an email. Some are even using virtual reality tools to provide more engaged learning experiences, she added.
Birikundavyi, who was named one of VCJ‘s Women of Influence this year, started her investment career working for hedge funds and more recently developed an edtech impact strategy for the Jacobs Foundation in Cote d’Ivoire. Edtech-focused start-ups, along with those concentrating on web3, proptech and e-commerce services, are what BKR is most interested in backing.
Those four sectors account for about 16 percent of the deals BKR is currently vetting and are likely where some of the four companies that BKR expects to add to its portfolio by year-end will come from.
The Toronto-based VC firm closed its inaugural Black Innovation Fund at the end of July for $18.5 million, nearly double its $10 million target. Birikundavyi and BKR co-founder Isaac Olowolafe closed on the first $10 million a year earlier and have since invested in five tech companies across Canada. Their portfolio includes a fintech business aiming to make credit more accessible and affordable, a one-stop beauty services app, a travel app meant to make public transport in Africa more convenient and an online marketplace for sustainable homewares.
BKR Capital is Canada’s first institutionally backed Black-led VC firm, whose focus is investing in Black-owned tech start-ups. The anchor investors in the fund are Business Development Bank of Canada and Royal Bank of Canada.
BKR plans to invest in 13 additional startups in the next few years. Check sizes will range from C$150,000 ($113,000; €113,000) to C$600,000, with opportunities for follow-on investments, said Birikundavyi.
Partners such as the DMZ’s Black Innovation Program, which was co-founded by Olowolafe, also help BKR discover promising Black entrepreneurs.
“Many of the companies we’ve connected with have already taken part in the DMZ’s incubator or accelerator [programs] before touching base with us,” she said. “If they haven’t and want to be involved, we are happy to offer guidance.”
BKR will invest 90 percent of its capital in Canadian start-ups and earmark the remaining 10 percent for companies in other regions, including the Caribbean and Africa. One of its portfolio companies, Treepz, a platform that helps people plan and book bus travel, operates primarily in West and East Africa.
Web3 appeals to Birikundavyi because of its focus on decentralizing not only data but also ownership and wealth. “The web3 space is a great environment to address financial inequities for the creative and sports industries, where members of underrepresented communities often have the short [end] while being the ones attracting most of the revenues,” she said.
NFTs, for example, enable fans to fund their favorite artists or athletes directly, allowing those artists and athletes to retain a bigger share of their income, she noted. NFTs also create passive income opportunities for community-based investors, she said.
As for proptech, Birikundavyi is interested in start-ups that are using AI to drive more efficient, automated processes. She said she isn’t concerned by market predictions that tech innovation geared toward real estate will be at a disadvantage in the coming quarters because of anticipated declines in real estate values.
“Any start-up that’s positioned to make processes and systems more efficient might potentially benefit more from a [capital] crunch, just like we saw during the pandemic”
“For most of the deals we’ve considered, it might be more of a propeller than a hindrance,” she said. “Proptech that is leveraging AI to make pre-construction processes more efficient by replacing many hours of human labor and providing a more accurate output in minutes would only benefit from any economic downturn as firms would consider better alternatives.”
Another differentiating factor is the kind of problem in the real estate market a proptech product is intended to solve. One that applies innovation to address housing challenges for the increasing stream of international students is more likely to find a market than an application that is actively competing with agents on the retail side, Birikundavyi noted.
“Any start-up that’s positioned to make processes and systems more efficient might potentially benefit more from a [capital] crunch, just like we saw during the pandemic,” she said.
Still, she concedes that the market challenges tech is facing have made her and Olowolafe more cautious toward existing and potential portfolio companies. BKR has become more insistent on “cash reserves, prudent hiring plans and a long-term financial runway while negotiating with founders.”
“During due diligence we look for signs of efficient growth over a ‘growth at all costs’ approach, and we are spending more time in research and in vetting a company,” Birikundavyi said.
That hasn’t diminished her commitment to Black founders, however, including providing networking and mentoring opportunities that they might not otherwise have. A deep understanding of the challenges Black entrepreneurs face “positions us in a unique manner when it comes to adding value,” she said.