Sampford's VC Survey Summary

Introduction

Here at Sampford Advisors, we pride ourselves on keeping our finger on the pulse of capital markets and are regularly leveraging our extensive network to derive insights and trends that we can use to help our clients. One of these methods of research is a bi-annual survey that we administer to three separate groups: Venture Capital, Private Equity, and Tech CEO’s.

Over the next three blog entries, we’ll be shining light into our most recent survey results, as well as providing key insights and analysis. The first entry that we’ll be looking into is the Venture Capital survey.

Respondent Summary

We’ll begin by outlining some characteristics of the respondents to get a better understanding of the demographic that provided these answers.

Some key points of note are the fact that the majority of respondents are Canadian VCs and all invest in software as an investment category. Additionally, the majority of respondents are pre-seed / seed investors. These traits should all be taken into consideration when viewing the results that follow suit. Every VC firm is different in its investment preferences and focus areas.

Key Evaluation Metrics

The key evaluation metrics chart shown below provides immense insight as to what these VC firms are using to evaluate performance of existing portfolio companies, as well as prospective investments.

For context, respondents were asked to rank the unique metrics in comparison to the other metrics (score out of 7). So, in this instance, growth was considered the most important characteristic, while EBITDA margin was of the lowest priority. These results are not surprising, especially when considering the fact that the majority of respondents invest at the pre-seed / seed funding stage. At the early stages, the growth of a company will be the core indicator of future success. An interesting point to note is that retention, both net and gross  (to learn more about the difference between the different retention calculations click here) is seen as more important than gross margin. While profitability is a requirement for long-term sustainability, these results indicate that VCs are focusing more on product effectiveness and corresponding retention, along with the growth prospects for the business.

While not on this chart, other areas VCs noted they focus on are the path to profitability / the business model, their evaluation of the founding team, and the average contract value growth.

Valuation Assessment

We asked participants to weigh in on what they’ve observed regarding valuations over the LTM (Last-Twelve Months) period, as well as their expectations for the NTM (Next-Twelve Months). For the LTM, respondents mainly saw flat or negative changes in a difficult VC environment. However, there was a distinct influx of optimism for the NTM, as the majority of respondents indicated that they expect to see valuation increase over the next twelve months.

These hopeful expectations are supported by the expectation of lower interest rates, and a decrease in geopolitical uncertainty in 2025.

Deal Activity Expectations

We also asked respondents to provide their opinion on how they expect VC and M&A activity to track over the NTM. The respondents were bullish for both transaction types, with the majority of respondents expecting a rise for the NTM.

The bullishness regarding deal activity can be justified by the same tailwinds supporting the optimism concerning valuation. As the macroeconomic conditions improve, deal activity will continue its upward trend through the next twelve months.

Conclusion

In conclusion, our VC survey was able to provide a snapshot on the perspective of the Canadian landscape. Gathering their key evaluation metrics, valuation observations as well as their expectations for deal activity into the next twelve months are all incredibly useful data points.

We’d like to thank all the respondents that took the time to provide us with this information.

To see the full results of the VC survey click here.

Thanks for reading, stay tuned for next month’s entry where we dive into the results from our PE survey, and if you have any questions regarding M&A or any related topics, do not hesitate to reach out!