The Venture Cyclist: Etienne Gauthier, Associate @ Inovia Capital on Investing and Innovation

Nectar: Pleasure to have you on, man. I'm really excited to talk today. There's so many areas I think I wanna cover with you. And I know we were talking about before recording about biking, right? So I think it's a natural place to start. I'm gonna tie back to you had career advice in the notes we were talking about, but I wanna start with biking.

What do you ride? What's your bike? What are you into these days?

Etienne: I think I ride like a hundred to 150 kilometers per week. I ride a trek among the five, so it's like a carbon carbon bike with shiano hundred five. It's perfect for a starting point. You can. Spend so much money while like doing biking and you can always upgrade for the nicest bike that you see out there.

I just think it's a great starting point if you're, you wanna learn about the sport itself. And I truly fall into that four years ago. It's actually my dad who was actually a biker and we were all living in long area when I was younger. And my dad actually went to work every single day, including winter, from long to Montreal with his bike and was coming back.

So he was riding like 7,000, 8,000 kilometers per year. And he actually like, initiated me to the biking world. 

Nectar: Oh wow. So you've only been riding for four years? 

Etienne: Yeah. Only for four years. Now I'll say I'm a climber. I like to go in Charlevoix where there's mountains.

Like I'm not a big guy, so it suits my my buddy weight. So that's what I'm doing. 

Nectar: I'm more of a mountain biker. Definitely do everything on two wheels. And I like this expression. I think it's more mountain biking, but definitely in road as well. Earn your turns. Yeah. Yeah, absolutely.

So it's like climbing. I find people that are like, oh, I just ride in the city. It's no you gotta climb. That's the whole point of riding. 

Etienne: It is. And. It's also how you experiment pain while riding. And if you're a cyclist you'll know what I mean by that. It's weird at the beginning when you start the sport because like it's so painful.

Like you, you don't have the legs, you don't have power in the legs, but eventually you build up that strain and you're like looking for some pain in the rights that you're doing and it that they then become a challenge and they bring you somewhere else. And there are so many things that when you climb like a pretty large month in essentially there's so many things going on in your head, which is essentially your buddy's telling you, Hey, you should stop.

You shouldn't go like that far. But that challenge is something that just now I, Dr. I drive foot. 

Nectar: Have you done any races? 

Etienne: No. No. Not for now. Maybe eventually, but I'll stick to VC as like the main area where I'm spending more, most of my time. I'm also like a super competitive guy. Like I play hockey at a very high level when I was younger.

So I know when I start to get competitive in a sport, it's there's no limit for me. So like I try to stick to VC for now where I'm spending most of my time on. 

Nectar: Like I said, maybe we'll try not to make this into a biking podcast because it's oh, we didn't talk about gravel. But I'll say one thing about races and I don't think there's no tie into business, but I think it's just that maybe a personal grid thing.

I've done like a dozen all gravel and there's all varying distances, but obviously distances that you just don't do off the couch. Gotta train a little bit. And there's definitely moments of FML when you're in them. Yeah. Because you're not like, okay, I'm just gonna turn around and go home. You're not just doing a friendly ride and you're with your buddies and you just want to like, cut the cord when you get tired to your point of like pain. 'Cause you're really pushing yourself. So there's this element of, like accomplishment once you get to it. And then at least in my case, when I was doing them, I never had a KPI outside of no DNF. Like my KPIs, I just wanna get to the end, get to the beer, and celebrate with my friends that I rode.

There's no oh, like I, I don't care if I'm the bottom 10%. Like I really don't. Yeah. It was just the extensive accomplishment. So that's my one pitch. If you do a race for it. No, 

Etienne: absolutely. Absolutely. I think it's that's the mindset you should adopt for that sport. For sure. 

Nectar: Maybe one last thing on biking, because we do tie it to you.

I'm gonna bring it up front. We were talking about it in the notes about like personal brand and how do you develop a career in vc. So I want just start there. One thing you've done really cool is this, these tech rights. Yeah. Which I think the last one kind of exploded in popularity, as again, there's a question of danger as well, which we won't get into in case there's any law enforcement listening. Yeah. But like, how did you come up with the idea, why do you keep doing this, these tech rides, and maybe explain what they are? 

Etienne: Yeah. So essentially three years ago, my colleague Kaja, who's not.

With us at Enovia anymore, she left to actually work with eia, which is a generative AI company based in New York. She started that idea of organi organizing Montreal tech rides. So people working in tech industry and just meeting up with their bikes and go for a ride and then just network with folks on the bikes.

The first two years that was actually like a pretty small group of people, but this year we actually. Decided to just publish some something on LinkedIn with a picture. And we were victim of our own success. So essentially that post just exploded. I think there, there was like more than 250 likes on the post.

And now there is actually, I think more than a hundred or 120 people receiving the invite every single every single month. So essentially we're doing. Twi once a month there's a bike ride and we go out there we cycle together and then we network on the bike and then finish up often at the misam for a nice beer which is well deserved.

Nectar: I was gonna say it. Part of the culture right? You gotta finish with a cold brew. Yeah. How has you have, you find it's going back to personal brand and the reason doing this and of course you're doing it for the fun part, but it's like you find, has you found it's helped you a little bit in, in your job?

Etienne: Yeah, no, absolutely. Like we, we had some opportunities recently coming from that tech ride, so we're meeting with founders. What I act actually like this year is one of my friend who's actually an entrepreneur told me like, Hey it's that type of event where I'm not only speaking with VCs or advisor, there's actually funders coming to the event.

So I think it's a great turnout. It doesn't meant to be like for a matchmaking event for VCs and funders. It's really just have fun, go on the bike and then finish up with a nice cold beer. And so it actually helped me. When you're thinking about building your brand in vc, particularly as a young investor, often it's doing stuffs that are pretty correlated with your own personal interest, both from an investment side of things, but also like for networking events.

So like I love. I love to go for a bike ride. I'm matching that with that event and it just turned out pretty good for us. 

Nectar: Yeah. Yeah. Very cool. How'd you get into vc? I know like you were in strategy before and we could probably geek out on strategy on that topic a little bit. Yeah. But yeah.

But how did you get, was it something that you wanted from an early age or did you stumbled into it? 

Etienne: Kind of stumbled into it? I think I had a lot of personal and professional interests for what. Is inside VCE or what's driving VCs? So I've studied in finance just for background and context.

So I've done internship on the buy side, mostly in private equity. So when I was in management consulting, I knew, like for me it was just a. Management consulting was something for me to learn out of. I knew I didn't want to do my full career in management consulting, but it's such a great school to actually learn the basics of what it is to be a young professional.

How did you communicate to CEOs and C-Suite or a board? So I've learned so much, but I always wanted to go back on the buy side. And I actually thought it was private equity that I will actually just go back and when I actually told this to my girlfriend and my life partners, I'm still with her she actually told me, Hey, you should look into venture capital.

Like I know you there you seem to have just a lot of interest for the buy side, but also for disruption and technology. So from there I actually decided to take coffee chats with folks in the vc ecosystem in Montreal, and I just fell in love with. What VC is. And yeah, I have to thank her for that advice.

Nectar: Yeah. No, very cool. And you're working at like the most prominent firm of the country, right? So not too bad. What do you like the most about the job? 

Etienne: Obviously it's like meetings, funders and having the chance to to be a small part of their growth growth story. Obviously that's what is driving me on a day-to-day basis.

You have to be like, exclu, extremely curious about like new market trends, disruption, and. Solving. Real problems. So having that, that in mind and having the chance to work on startups and founders that are going after this ambitious vision aligns very strongly with what I do. So for me, it's really that, that mix up things.

And also on top of that, you come by in the fact that you're investing. It's pretty cool job in taking like hard decisions sometimes. But you're driving for growth here. 

Nectar: Yeah. I imagine one of the difficulties of the job is like context switching, right? Something we've spoken about. Yeah. How do you get good at that?

Etienne: I think I'm getting better at it. So being a former management consultant, you're getting shipped on a project for many weeks or many months. Sometimes you get very deep in one specific topic. You provide advice, guidance, you build slide decks. Sometimes it was like 250 slides, slide decks. Yeah, that time was a little bit more painful.

And then in VC early stage, essentially you're like. Meaning with 10, 10 founders at a time, you're doing due diligence, maybe on two or three investment opportunities. There's always something with one of your portfolio companies. And on top of that, like LP reporting. So I think it takes time.

It took me a couple of months before developing that skills that skill set. But I think I, I'm also someone who's like extremely structured, so I've just developed my own approach to deal with that volume. And after a few months you're getting more comfortable for context switching.

Yeah. 

Nectar: Yeah. I imagine a lot of it's like you mentioned the part of the job is meaning founders being able toand tech trends, but also the quality of the people. Yeah. And, but it's all that, all at the same time. How have you found we mentioned, I know you've, and go back to the firm for a second, like Affirm hugely respect and the, like the most important firm in the country.

What do you think sets it apart? It's been able to grow and have so much success. 

Etienne: Yeah, so maybe for context here, Innovia was funded in 2007 by Chris Arsano and Shana Bot. The two partners are still with us, still quite AC, active with Innovia Capital. When they started, a little bit less than a hundred million in a UM. Now it's 2.5 billion of a UM of a and that's in a Canadian tech industry that before 2015, it wasn't really comparable to what we're seeing today. So it's just an amazing su success story, particularly in Canada here. For the tech industry and for me, what's the driving factors are, how we differentiate comes from the top, comes from the partners, Chris, Sean, the culture and also what they've tried to implement in terms of values and culture for the firm.

So it's, I believe like what's making and setting us apart is first a funder friendly approach with funders and then a, an operator mindset. So on the funder friendly side of things, I think it can be seen in the terms that we provide in the term sheet, the way we collaborate with funders the way we act on the board, and how we set ourself accountable for the success of companies and helping and supporting the funders when needed.

It also comes with the support we provide to our portfolio companies. In the, in recent years, we have developed that platform team, which is essentially, think of them as a management consulting shop for our own portfolio companies. Those are former entrepreneurs, tech CEOs, CTOs that are available for free to our own port codes.

And they've developed four key pillars of advice marketing and communication. Talent acquisition m and a and tech and product development. So I believe that first two in North America, it's a stable stake for most VCs that have some scale. But then the last two, this is where we actually very we differentiate ourself and that we have like some unique offering.

So that's the first set of how we actually, we continue to establish ourself in that industry. The second set being the operator mindset. All the partners, they are seasoned entrepreneurs and people that have worked with so many startups like Chris, like built startups before launching Inno.

Yeah, hun, about sold Rainbow Technologies. And he also has a patent on the US B key, which is just one of the coolest fun fact you'll have about that. Mag Chao in Montreal, she built and sold password password box to Intel. I'll stop here and I'm probably skipping one a few people here. They all have built tech startups or built tech companies in the past, and they're bringing that experience and providing advice and support to our portfolio companies so that, I really think that's how we actually differentiate ourself.

Yeah. 

Nectar: Yeah, no, totally. And like obviously have, been in the ecosystem for us, I've seen, I know you grow and it's it's just so impressive. I still does not get enough credit, and you mentioned some of those people and it's yeah. It's incredible talent that you guys have.

Etienne: Yeah. 

Nectar: Maybe to go back to you and your role and what you're excited about, I wanna talk about obviously what you're invest in, but I'd be curious to maybe start at a higher level. What is the state of VC today? There's a latest CVCA report, coming out with oh, the numbers are down in Canada, but it's.

But you mentioned it's like Inovia is like super active investing all the time and you guys seem to be pedal to the metal. What would you say, and then more broadly, not just Inovia, how you think about the market today? 

Etienne: Yeah it's an interesting time right now, particularly with ai. There is so mu, so much.

Noise and momentum in, in that industry. So when we're thinking about like capital deployment, obviously there's a lot that is being deployed in ai. For me personally, I believe that there's also other areas that you can actually explore, I believe like that next waves. Next wave of startups is a the wave that we saw with with cloud startups.

So cloud native startups, you need to have some AI function integrated into the product. Otherwise it's gonna be very hard to compete and actually drive attention, particularly with what is happening at the enterprise level and the pressure they're getting with the current microeconomic conditions.

So I think we're switching from a state where. You have system of records where we're gonna go towards system of actions and software that will actually dev, deliver some output and act on certain rules and guardrails that you have. I implemented. So I believe there is a lot to be done, but also a lot of mar marketing and noise in ai.

So I think as a vc, your job is actually to try to reduce that noise and see and look to the fundamentals of those businesses and. Understand where are the great market opportunities? For me personally, cybersecurity is where I do specialize. So essentially we're software agnostic investors at Anovia.

And, but we do specialize in one specific vertical. And in cyber specifically, there's many opportunities for integrating ai, but also protecting ai. So there's different market spaces and dynamics that are pretty interesting, but this is where I'm allocating most of my time these days. 

Nectar: Yeah.

Interesting. And cyber tech is such a broad field, right? In essence, and it seems like a, the very steep learning curve. And, going back to, oh yeah, that is. That is like, how did you like maybe nitty gritty, how did you learn? Was you just spending time on an LLM or reading a lot of books?

How did you ramp up your knowledge? 

Etienne: It wasn't organic to be honest at the beginning. It came from my boss Hir, who's a principal on the venture team. He worked at PSP and work on buyouts of cybersecurity companies. One is Deline, which is a privilege access management platform. And when he actually joined Ivie, I wanted to build that cybersecurity practice and put some like proper function into it and asked me to develop the cybersecurity with a thesis with him.

So at first I had the chance to work on cybersecurity investment opportunities at CDPQ and growth equity. So I had some knowledge of the space, but it takes so much time. You need to understand the jargon. There's so many abbreviation created by Gartner. So like the ramp up time is like a couple of months and it's a little bit scary for investors at the beginning, but after onboarding on the topic, onboarding on the subject, and.

There are so many great resources and reports for investors that are curious about the space. You can look at contrary research. They do a lot of great content for emerging spaces in the tech industry, and they have a pretty, pretty good reports on the cybersecurity industry. And so that's a great starting point.

And eventually you just, you meet with founders in different industries and spaces of cybersecurity and you start to build your knowledge and expertise of that space. So at the beginning it wasn't a natural fit, but eventually it grew on me and now like spending 60, 70% of my time in cyber. And I believe there is still a lot of opportunities up there.

Nectar: What's a common misconception about the space? 

Etienne: That it's not a big space. Essentially there's people that. Think cyber is not critical and is not I don't know that it's not big enough. As a market space, if there is one stat I'd like you to remember from that discussion around cybersecurity is that it's one of the biggest problem that we have in our society today.

Essentially, if you add up all the cost of cyber crime last year, it's the third largest economy in the world. After us and China, it's word, like if you combine all the cyber crime costs, so essentially fraud, lost productivity, ransomware attacks theft of personal and confidential data, and you can like line up a pretty long list of what is cyber crime.

So I'll stop here. But you add up everything together. It was about 10 trillion of dollars of cybercrime costs last year. And this number continues to grow. Why? Because essentially, enterprises a little bit less large enterprises, but SMBs don't. Take care enough of their cybersecurity posture.

People are not educated enough about the risk. And also hackers are now nation sponsor organization that are benefiting from that trend and orchestrate attacks to win on the economic side of things. And. When you think about the average cost of a ransomware attack, it's around 4.5 million this year.

So there is money to be made and there's just bad accu bad actors that are deciding to go that route and attacks legitimate enterprise and small enterprise as well. 

Nectar: It's interesting insight. I find the classic startup trope of do you sell vitamins or painkillers, but it's no, this is just painkillers, right?

So it's easy to sell. Yeah. And you guys have done a few recent investments. Any port codes you wanna plug things that are interesting, maybe to give a few use cases, but feel free to promote. 

Etienne: Yeah. We're Investors in Flair, which is a cybersecurity company. What they do Gartner will call this as.

Cyber threat intelligence. But their platform is a little bit more broad, but just like to simplify it, essentially they monitor the dark web. They'll look at what bad actors are actually doing on the dark web. If there's leak credentials of companies out there, they will actually penetrate the forums of bad actors on the dark web and then gather that data and information, package it and sell it to enterprises.

So we actually invested. In the seed round a couple years ago, we didn't lead it. Then led the series A and then tripled down at the Series B. That was done last December. That was a 30 million USD series B led by base 10. Which is a pretty significant investor in the US in cybersecurity.

So that's a company that has just been on the very strong growth path over the last couple of years. And that's one that we're pretty bullish on. Another one that we've done recently is also cavallo. Essentially what these guys are doing is what Gartner will call data security, posture Management plus for liberty management.

So essentially they look at all the data is spread across your IT environment, and then we'll list. All the data that you have, and if you have confidential information, confidential data, or sensitive data they'll be able to tag it and help you understand what's the risk associated to that.

What's interesting about Calo is that. They go and sell the product with a indirect go-to market approach. So they don't sell directly to enterprises. They will sell to manage service providers or manage security service providers. So these guys are actually ACT actors that are helping small and medium enterprise put in place security function and tools so they don't have to take care of this by themself and capital.

What they're doing by selling the product to MSPs and MSPs essentially. They don't have they lend that business account, which then MSP will push that solution to their customers that they're serving. So that le that lend and expand motion can be extremely lucrative if you're able to create and replicate that, that go to market playbook.

Nectar: Yeah. Interesting. Yeah. Channel partnerships right under, under underutilized, I find. Yeah. What about the two letter buzzword you mentioned, right? Like, how has AI impacted Cybersec, right? Because it's like everyone's ever rushing to, to implement these tools. Yeah. What's the key trend there?

Yeah, 

Etienne: I think there, there's three. Three trends. The first one is not ev, even cyber cybersec. It's the hacking community. So like the hackers are very risk seeker. They're the first one to adopt new tools. So essentially you're seeing all those phishing email campaigns that are being generated by LMS that are selling on the dark web and so forth, so you can actually connect yourself on the dark web purchase an attack that is quite sophisticated, being powered by.

AI agents or lms, and then you can actually push it. It's something that right now, today's, in today's age, hackers don't need to be extremely sophisticated in order to orchestrate attacks. So that's the first trend. So because they have these tools and they're pretty well equipped, you need to actually protect yourself and put in place new cybersecurity tools to help you protect these new emerging trends.

So one trend is that first you can actually use AI into your security operation. And there's a market segment that is called AI Suck, standing for Security Operation Centers, which is essentially us. Internal security teams that need to review the cybersecurity alerts that are being generated by the cybersecurity tools that are protecting each segment of your IT perimeters.

So think cloud security, network security, email security, endpoint security, and I can again, continue for a very long time. But all these tools are. Creating alerts when they think there's something important happening. So you need security analysts that will go through these alerts and it takes a lot of time.

They can, maybe on the monthly basis they're gonna review 30,000 alerts or something like that. And. The context of these alerts is pretty bad. You need to actually have some technical understanding to go through them. So essentially, ai, you can actually plug in AI into your security operation center workflows and help you to actually filter down these alert alerts, but also automate some remediation step.

So let's say your. Seeing that for some reason, your multifactor authentication tool is not enabled for now. So you can actually ask AI to mediate that vulnerability that just happened. And that's something that I'm seeing a lot of security teams adopting on a very fast pace. And there's a lot of potential for sure.

Nectar: You mentioned, cybersec takes up 70% of your time. What's the other 30? 

Etienne: Mostly across. All software verticals. So you can think like digital health, FinTech, vertical ISAs. For some reason telco tech I invested in Gaia, which is an operating software. Power had done for telcos. And then I'm also covering Rob this which is another software company sell selling to Telcos which is within our portfolio.

So for some reason I'm also doing a lot of telco tech. 

Nectar: Yeah. I know my fans again, a little bit and say it's a good move on that one for sure. Yeah. Yeah. 

Etienne: Thanks. 

Nectar: Yeah. Interesting. So maybe talk about the investment process. Obviously there's a lot very easy right? In terms of a topic or I wanna say, very well discussed.

How do you think about, the. Betting on the wave of the trend. Yeah. Betting on the jockey. Like what are the things that you've learned maybe that are just not the classic VC things you hear on every podcast, right? 

Etienne: Yeah, absolutely. It's funny because we have a different analogy.

So do you invest in the wave, the surfboard or the surfer? But essentially for me, it's not one of the other, it's all the tree you need, like all the tree in order to have a proper recipe for success for the team itself. Obviously, like you need personal fit with the entrepreneurs.

You, you need to get along with that person and you need to see yourself working with that person for the next 10 years. So often what I'm like when I'm performing due diligence with founders, I'm asking myself. Would I work with that person? Will I join this company, this startup? If the answer is no, it's probably because it's not an investment that you should be doing.

On top of that, obviously you need to align this with. What the firm is investing in, what's the inve investment thesis that we're underwriting? So for us at a Novia we're we're reaching for funders that have global ambition and want to become and wants to become the next global market leader in their space.

So that, that's a filter filter layer that, that we have internally in terms of the product, obviously like differentiation. But for me it's more around how mission critical is the software for the user. Like how is it integrated in the user workflow? And that's gonna make it extremely sticky.

And I think it comes from my background at CDPQ where I was part of the growth equity team and those were question that. These investors were asking them themself. And it also tied to the your ROI formula and how it drives business drivers for the company and actually drive value for the business that you're serving.

The last one is market itself. So essentially your wave and. For me, it's more around market timing than anything else. Like a surfer. If the surfer wants to take a and ride a wave, you need to time it perfectly. If you're a little bit too soon or a little bit too late, good luck to actually ride that wave.

And I think this analogy applies perfectly to the world of VC and entrepreneurship. You need a large enough wave to help you propose yourself. And it comes from like different. Market drivers that lucky for lucky for me had the chance to actually. Review and analyze that in management consulting and develop that tool toolkit to help me understand like what's actually a market driver and what helps to push like a new solution and adoption for new technologies.

So I'll say those are the kind of three factors and how I'm thinking about like due diligence and also looking at investment opportunities in vc. 

Nectar: Yeah, no, very good background. Yeah, I find the your background in, it's a little similar to mine. I had worked in management consulting a bit.

Even though maybe get shadowed a little bit, this whole notion of strategy is very esoteric. It sometimes can equip you with the right framework and Yep. You mentioned the framework, which I'm gonna steal with pride here of the wave, the surfboard and the surfer I find is a perfect kind of.

Fit of, you need to have the wave at first, right? Yeah. And it's not, you need all three, but the first one is the wave, right? You need the trend, right? Yeah. And it's if you could think of the.com crash, the classic pets.com, it's oh, two, 10 years too early.

And it took 10 years of broadband development for Chewy to come along and. That, e-commerce to fully develop, right? Yep. So it's like really a find of useful framework that which guys have developed. 

Etienne: Yeah. We're often asking that, that question where, when we're running a recruitment process for interns, essentially are you investing in the wave the surfboard or the surfer?

And one thing that is interesting, and one thing that I strongly believe is that even if you have the best performing surfer, if you're not in the right market. It's gonna be very tough to scale. And I think like hopefully if you're betting on the right surfer, that person's gonna be able to pivot and find the right market opportunity to go after.

But without market momentum, it's very hard to scale something. 

Nectar: Yeah. Totally. Totally. Yeah, you need that insight. Maybe as we wrap up here, it san, it's you're obviously on your career trajectory has been awesome to watch. What advice would you give, let's say, to younger people that wanna break into the Yeah. Into the space and yeah, like things that you've learned.

Yeah. 

Etienne: Put myself in the shoes of a founder. And when I'm running a due diligence process, always try to be transparent and be upfront with the founders and not waste this time if I know it's not gonna be a fit for us for some reason. So that number run rule would help, will help you to go a long way in that industry and with funders as well.

Apart from that, we've talked a little bit about context switching. I think that's an. Important skill set to develop very quickly. And finally it's like this game is about networking. And it's all about building relationship with funders, investors that are also looking at different investment opportunities and can actually give you like advice around different market spaces that you don't know that much.

Or maybe they look at. Another investment opportunities that is not a fit for them, but could be a fit for you. So networking is really something you need to leverage and you need to learn how to put this into your advantage 

Nectar: or create cool events like, or create tech rides. Yeah. 

Etienne: Which is almost around build your own brand and try to make a place for yourself in that industry that is quite competitive.

Yeah. 

Nectar: Finding your voice. Yeah, it's, and I could bug you for another hour, man. It would be respectful your time. If people want to connect reach out to you, learn more. Follow the journey. 

Etienne: What's the best way reach out on LinkedIn? I try to answer as soon as possible, but sometimes as a vc you get so many people reaching out on LinkedIn.

So I'll do my best.