Before the official interview with Thin Air Labs managing partner James Lochrie, he offered an informal tour around their Beltline office in Calgary.
Heck, he’s the one who let us in the front door when he walked up to the building on a late-September morning.
The second floor, open-air space, where computers were lined up on desks, people were catching up on water cooler chat and a friendly dog came up for a pet, was being prepped for a gathering hosted by one of their portfolio companies.
Along the perimeter of the room is a series of offices where groups are collaborating, innovating and charting the path to be one of Calgary’s next big tech companies.
Through a doorway and into a hallway, there’s a kitchen – and more innovators are set up. Other portfolio companies, like Fillip, operate out of the space, too.
It’s a hub of entrepreneurial activity.
Thin Air Labs is a venture capital firm set up in Calgary. They also provide startup services for Calgary and Alberta entrepreneurs. They operate Thin Air Labs Fund I, which has a portfolio of 19 companies. In June, Calgary’s Opportunity Calgary Investment Fund provided $4 million as part of an initial $20 million raise for fund one.
Lochrie is one of three partners in Thin Air Labs Fund I: Rick Bird is a general partner, as is Raghu Bharat.
Thus far, Thin Air Labs has invested $7.5 million into the portfolio companies.
The informal tour finished in a larger meeting room. This is where the official interview began.
Betting on Calgary
Lochrie’s rise to venture capitalist began in earnest as a co-founder of Wave, a global small business accounting and payments platform. In 2019, it was sold to H&R Block for $537 million.
While Lochrie had taken a step back from the daily operations of the company in 2015, he stayed as a strategic advisor and to support his business partner and CEO, Kirk Simpson.
“I had that time to take a breath,” Lochrie said.
“I made some investments in Calgary, and I just started working with people.”
He said along the way he made four investments in Calgary. Three became some of Calgary’s fastest growing companies, he said.
“There was this unknown about where I wanted to go with my life and what I wanted to do when I grew up again, but I knew I wanted to do something in the entrepreneurial realm,” Lochrie said.
After his Wave exit, Lochrie envisioned being an investor. He admitted that he didn’t really have the confidence at first.
“I’ve been around some great (investors), saw how they acted and behaved but didn’t know if I was going to be able to make that transition,” he said.
Lochrie took a couple of years to find out what he was good at. He was a builder, an entrepreneur, but he wanted to flesh out the philosophy of how he wanted to do it.
In order to advance the idea of putting together a venture capital firm, Lochrie said he also had to put together a solid team. There are 16 people on their team roster today.
Calgary’s tech catalyst
In 2019, with the sale of Wave, Lochrie said there was a rush of liquidity. He was confident enough in his investment thesis and geographic focus: Calgary first, Alberta second, then the Prairies.
He said what they do is “super, super high-risk investing.” With the combined experience and knowledge Thin Air Labs has, Lochrie said they were able to examine different ventures, dig into their challenges and find solutions.
“We found a way to just help people at the right times go through certain types of problems, and de-risk the investment and thus far, all of our investments continue on,” he said.
The opportunity in Calgary was there for the taking, Lochrie said. There were burgeoning engineering, life sciences and agri-tech sectors that were untapped. Capital was available, but it just wasn’t pointing in the direction of technology.
Much like Toronto’s tech boom was triggered by the financial collapse in 2008, the oil crash in 2014/2015 was the catalyst for Calgary’s transformation, Lochrie said.
“The oil downturn was the catalyst here,” he said.
“Policy, capital, all those things shifted and started going in this direction.”
Now, Lochrie said Calgary’s potential is massive. It will be incredible to see the next three to five years, he said.
“We’re going to see exponential growth in the technology ecosystem here,” he said.
“It’s inevitable at this point. There’s just so much happening at the grassroots level that is yet to percolate up.”
He said Toronto is saturated with different firms trying to get in on the tech sector in the same way Thin Air Labs is in Calgary. Plus, Lochrie enjoys the city and the entrepreneurial spirit.
“That was the big attraction to me. It was just this culture of business building here,” he said.
Thin Air Labs role in helping build Calgary tech
Lochrie said their team has a role to play in building a strong Calgary tech and business community. The expertise they bring can educate, not only entrepreneurs, but policy makers as well.
“That’s even more important because – I have nothing against politicians, whatsoever – but they don’t work in our space, yet they want to help our space,” he said.
“So how do they make the right decisions to move policy forward, and strategy forward, that’s going to help us.”
As for how they connect with founders – Lochrie said sometimes it’s a serendipitous meeting. Other times founders just knock on the door. You meet them around the community at different tech events. They work with tech organizations like Platform Calgary and through Lochrie’s role with the Creative Destruction Lab at the University of Calgary.
Those companies are curated and vetted and then they take a closer look at them. From there, Lochrie said they see if the companies match their investment thesis and if they’re the type of companies Thin Air Labs wants to work with.
Lochrie said it’s important for them to be a part of building a strong Calgary tech scene. That’s how they scale up.
“We want to win in our backyard first, and we’re doing that,” he said.
“There’s just not a lot of people doing what we do in this part of the world. And that’s a huge advantage for us. But it’s also a great responsibility to for us to do that.”
Lochrie said they have their eye on building a national venture capital fund down the road.
Measuring success in tech
In August, the province announced 33 venture capital deals worth $70 million went ahead in the second quarter. The first quarter was a behemoth: 56 deals worth $481 million (with the bulk of that in Calgary.)
“Both Edmonton and Calgary’s tech sectors are seeing significant growth. Calgary ranked as the fourth-highest city in the country for venture capital investment at 42 deals, only two behind Vancouver and five behind Montreal. Edmonton was fifth in the nation,” said Parliamentary secretary for small business and tourism, Martin Long, in a prepared release.
“Our continued increases in the amount of venture capital deals and investment send a strong signal to the rest of the country and the world that we are developing a robust innovation ecosystem.”
Are venture capital investments the best barometer of success? Lochrie said success is best viewed like a ladder. He tells his three sons, who are athletes, that they need to become the best at something in their family first.
Then your age group. Then your club.
“I think that’s a great stage of development. It’s an amazing milestone to step up and say we’re on that level,” Lochrie said.
“I’m not concerned about are we better than this, are we better than that. It’s just, are we continuing to make progress, are we continue to step up the ladder every single day.
“If you’re trying to compete against the outside world all the time, you’re going to fail internally. Just compete against yourself.”
The barriers ahead
Lochrie said most of the tech companies in Calgary – and the world – are facing a talent crunch.
With an energy sector somewhat on the rebound, it’s lured many engineers back into that field. Most of the folks who wanted to transition out are already into technology, he said.
“We are starting to reach the boundaries of talent that’s available here in the city,” Lochrie said.
“But that’s no different than any other place in the world that’s building tech hubs.”
It’s a typical business problem – like access to capital, markets. He said whether it’s Calgary or Silicon Valley, you still have the labour crunch, just on a larger scale.
“We don’t let our entrepreneurs use those as excuses to be able to slow down or think about pivoting or moving out of it,” he said.
“That’s just the world we live in. It’s the way we have to build businesses.”
Lochrie said that one of the knocks against Calgary’s tech ecosystem has dissipated over the years. Different groups had splintered out, working on their own to advance the local tech scene.
There was some siloed work going on, but Lochrie attributes that to the early days in Calgary when there really wasn’t much happening. Being siloed isn’t all bad either, he said.
“Innovation happens in small chunks, with small groups of people,” he said.
“We need to experiment ourselves, play around with it, see what works. And then if things are working, other people will see it and they might adopt certain things or coming to work with us on it.”
We asked Lochrie to crystal ball Calgary’s tech scene 10 years from now.
Larger. Significantly larger.
Large firms built here. Large exits (companies built and sold).
“That creates a flywheel effect. If founders are growing their companies here, monetizing them here, and they remain here, they do things like I do. We’re entrepreneurs, we never stop doing stuff,” he said.
“I see it just continuing to explode and in different ways.”
Calgary could see a non-stop growth pattern in tech, Lochrie said. Sure, there will be geopolitical, economic and social woes to contend with. But that flywheel is already starting to spin.
“There’s just way too much momentum behind what’s going on. The only thing that truly can stop it is a lack of capital going into these companies to help them grow,” he said.
“And there’s just way too much money in the system in the venture world to ignore what’s happening here.”