In a recent feature column for peHUB Canada, Cameron Chell, co-founder and managing director of visual search platform Slyce, observed that seed investing is a tricky business.
Indeed, while securing seed capital is often an essential step in a young company’s life cycle toward commercialization, it is also a particularly tough chore to undertake.
It is therefore important to tip our hats occasionally to those who practice the art of seed investing and show results for their efforts. That includes not only the VCs, but also the market agents who help shape dealmaking.
A few weeks ago, the Private Capital Markets Association of Canada (PCMA), which represents Canadian entrepreneurs, investors and service providers active in the exempt securities market, recognized the work of GreenSky Capital, a boutique advisory firm that specializes in long-term partnerships with high-growth technology companies, and taking them from seed rounds to exits.
GreenSky was singled out, said PCMA executive director Geoff Ritchie, because it is one of “a few key, illustrative stories that we wanted to tell about the exempt market and the firms that have been instrumental in raising private capital for businesses.”
GreenSky was among six recipients of the 2014 PCMA Awards—Private Capital Markets Deals of the Year. It won the palm for accomplishing a challenging task: helping a Canadian clean-tech company attract early-stage financing and line up global partners.
The startup in question, Smart Energy Instruments (SEI), is the developer of a next-generation technology that precisely measures power flows on the electrical grid. This “smart sensor” chipset is intended to create a more sustainable supply of electricity through higher grid efficiency, reliability and renewables integration.
The company describes its innovation as the missing component of the smart grid—the application of modern information, communication and technology to electricity delivery infrastructure. Thanks to startups like SEI, the smart grid market is in growth mode. A number of sources estimate the global market’s current size in the tens of billions annually, and forecast major expansion in the years ahead.
However, good businesses with good ideas don’t always get the recognition (or funding) they deserve. This certainly has been true of clean-tech companies, which in the past few years have seen reduced levels of venture capital investment.
Founded in 2004 and led by CEO Jeff Dionne, SEI became a client of Canadian innovation hub MaRS Discovery District in 2009. In fact, it was one of the very first companies to enter MaRS’ early-stage clean-tech pipeline. It was around this time that SEI also became acquainted with the services of GreenSky.
GreenSky founder and partner Geoff Simonett told peHUB Canada that his firm focuses on the logistics of “preparing companies to raise capital, and then helping them with that raise.” That’s everything from supporting the ongoing company building process and scouting out partners to crafting the right message for attracting the right early-stage backers.
In 2010, the firm played this role on behalf of Wave Accounting, a provider of online small business software products. Simonett said GreenSky brought the startup to OMERS Ventures and several angel investors, paving the way for the company’s seed-stage and Series A rounds. Wave Accounting eventually obtained nearly US$25 million from Canadian and U.S. VC firms.
In the case of SEI, initial funding came directly from GreenSky’s team of professionals and advisers. As this team reflects a mix of entrepreneurial and management skills and backgrounds, the startup was also able to access mentoring and strategic guidance, said Simonett.
By 2011, SEI was in a strong enough position to attract seed capital from angel investors, the Ontario Emerging Technologies Fund and VentureLink Funds. The company used the money to begin pilot projects of its smart sensor prototype, hire employees and solidify a number of important commercial relationships.
In 2012, SEI closed its Series A financing round with ArcTern Ventures, a Canadian clean-tech venture capital firm that recently closed its debut partnership. ArcTern said it backed the company’s platform because “it represents the single most important breakthrough in sensors for the emerging smart grid.”
With the support of GreenSky, SEI raised more than $6 million in seed and Series A funding in less than three years. During this time, the company also partnered with Brookhaven National Labs, Hitachi High-Technologies, Siemens Energy and Tailyn to bring its technology into the marketplace. Last December, SEI and Japan’s Hitachi unveiled the first chip of a planned product line of smart-grid applications.
Michael List, a GreenSky founder and partner, and a lawyer at Ormston List Frawley, said SEI’s experience is “a good example of GreenSky’s ability to get the right financing at the right time.” By implementing “a funding road map,” the startup was able to make progress executing its commercialization strategy and advancing its strategic partnerships.
GreenSky recently has taken its advisory role in a new direction. In 2013, the firm launched GreenSky President’s Club (GPC), a group of angel investors dedicated to backing a range of early-stage technology companies.
Simonett said he believes “GPC is a different type of angel organization,” chiefly because opportunities are thoroughly sourced, pre-screened and managed by GreenSky. “We are pretty careful about picking companies to appear before GPC,” he said. Before selected candidates for investment are brought before the group, GreenSky works with them and completes its own due diligence for review by club members.
GPC’s first meeting was held last November at MaRS. Since then, GPC members and GreenSky principals have invested in three companies and soon will invest in two more. Portfolio companies have included Cyclica, a platform for accurately testing drug candidates and designing new drugs, and Mirexus Biotechnologies, a developer of sustainable nanoparticles for use in personal care products.
Other 2014 PCMA award winners included Cranson Capital Securities, Crosbie & Co, IBK Capital, Portland Investment Counsel and Western Investment Properties. Details about these firms and their respective awards can be found here.
Based in Toronto, PCMA was founded as a not-for-profit association in 2002. Its Canada-wide membership currently totals more than 300.
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