The Company’s investments include SkipTheDishes and Sheertex.
Eva Lau’s Two Small Fish Ventures moves upstream with the launch of a third fund.
The venture company has secured CA$24 million (US$17.5 million) in an initial closing as it aims to reach a total fund size of CA$40 million.
With 40 investments under its belt, including notable bets and exits, Two Small Fish has the confidence and returns on investment to build a much larger fund than it has in years.
“That means they’ve seen our success, they know what our secret sauce is, [and] You know our recipe for success.”
– Eva Lau, Two Little Fishes
Founded in 2014 as an angel investment group, Two Small Fish is coming to its third fund with a total of five exits, including SkipTheDishes, which exited with CA$110 million. Two Small Fish has also invested in Sheertex, unicorn startup Ada, and TealBook.
Founder and General Partner (GP) Eva Lau explained that while Fund III remains focused on early-stage investments, the larger fund allows Two Small Fish to be a lead investor for the first time in its history.
Two Small Fish was founded by Eva and her husband, Wattpad co-founder Allen Lau, with the aim of bringing operational experience to early stage investments in Canada.
The Toronto-based company raised its second fund in early 2019, raising CA$9 million in an initial close. Two Small Fish had hoped to reach CA$15 million with the fund, although Eva found the COVID-19 pandemic put an end to that.
After securing an additional CA$3 million before the outbreak of the pandemic, the second fund closed with a total of CA$12 million. Eva explained that it was intentional not to raise additional capital afterwards: The company could have raised more funding, but chose to focus on investing rather than fundraising as the pandemic led to an influx of new startups and competition for led capital. In addition to the follow-on capital, Two Small Fish has fully deployed its second fund.
For its third fund, Two Small Fish has continued to raise capital from limited partners (LPs), which are a mix of high net worth individuals, family offices and institutional investors. The company declined to disclose the majority of investors, but noted that all of Fund II’s anchor investors have returned for its latest fund, including CIBC and Canso Investment Counsel. Fund II’s LPs also included Wealthsimple’s Michael Katchen, Red Hat’s Bob Young, and Globalive and Wind Mobile founder Anthony Lacavera.
New investors also joined Two Small Fish for its latest fund, but the company declined to name the newcomers. However, Eva noted that Wattpad’s exit to Naver helped attract interest from international family offices.
“That means they’ve seen our success, they know what our secret sauce is, [and] You know our recipe for success,” said Eva.
This recipe for success is something Eva has been working on since she started making angel investments through Two Small Fish around 2014. She recalled founding Fund II around 2018, which was her first venture fund.
“Allen has raised a lot of money from Silicon Valley on a [entrepreneur], but raising a fund is something else entirely. Back when I first became a GP, I’m sure a lot of people looked at me and said, ‘What’s your history? How can we trust you to choose the winners?’”
Eva claimed to have seen 3 times the invested capital of her angel mutual fund at the time, a number that has since grown to 15 times. It’s this data that she said gives investors confidence in Two Small Fish.
In addition to SkipTheDishes, the company’s exits to date include Helpful, Gallop Labs, CalendarHero (formerly Zoom.ai) and Anthony Lacavera’s Globalive Technology. A spokesman for Two Small Fish also told BetaKit that the company had “a number of partial exits,” but noted that they were unable to disclose details.
Eva began cutting angel checks after Wattpad raised $17.3 million in Series B funding in 2012.”[I was] I just want to share my war scars and experience with the ecosystem because back then we didn’t have that many entrepreneurs who turned into investors,” Eva said.
Prior to starting Two Small Fish, Eva was a founding member of Wattpad and served as the community leader for a number of years. She has also worked at companies such as Symantec, ATI Technologies (acquired by AMD) and Brightspark overseeing various tech startups.
After more than 15 years at the helm of Wattpad, Allen recently began working more actively with Two Small Fish after stepping down as CEO of Wattpad (where he remains in an advisory role).
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Brandon Zhao, Partner at Two Small Fish, also comes from Wattpad, where he helped build the company’s platform as an early data scientist.
The Louse see their experience of starting Wattpad and leading it to its $600 million exit, combined with decades of operating experience at other technology companies such as Symantec and IBM, as a key differentiator of Two Small Fish.
The louse aren’t the only operators turned investors, as many former entrepreneurs are looking to invest in up-and-coming companies. Part of what sets Two Small Fish apart is that most successful entrepreneurs don’t raise a $40 million venture fund to invest in the next generation of companies.
“We’re able to jump in and share our experiences more effectively because, in part because of the Wattpad exit, our experience is actually more complete now,” Allen said. “So we can say to the founders, ‘Hey, while you have these five topics at hand, we’ve already covered them ten times.”
Allen added that closing a fund now is a great opportunity, noting that Lau’s collective experience places Two Small Fish well positioned to both find and service companies in the current macroeconomic environment.
While the dollar amounts are larger, Fund III continues to build on the same premise that Two Small Fish has championed from the start: investing in early-stage technology companies, regardless of industry.
The company plans to make 20 investments from its third fund with check sizes ranging from $250.00 to $2 million. In this high-end space, Two Small Fish hopes to lead deals rather than just co-invest.
Two Small Fish hopes that by leading more rounds it will be able to work more closely with companies to share its team’s operational expertise.
“[Two Small Fish wants] simply looking for the next generations of tech giants while they are still early days and rocking them to the full journey based on our operational and product mindset,” said Eva. “[And] Help them navigate this journey together.”
Featured image courtesy of Two Small Fish.