Relay Ventures raised $200 million (US$150 million) for its third venture fund, earmarked for investments in a new generation of mobile tech startups in Canada and the United States.
The Toronto and Silicon Valley firm announced the close of Relay Ventures III today. Finishing at the same size as its 2012 predecessor, the fund brings Relay’s total capital under management to $670 million.
Some 20 limited partners committed to Fund III, most of them Canadian institutional investors that signed on to prior offerings, Relay Managing Partners John Albright and Kevin Talbot told PE Hub Canada.
Northleaf Capital Partners was the lead investor. It was joined by AEC, Caisse de dépôt et placement du Québec, EDC, Generation Capital, Kensington Capital Partners and Royal Bank of Canada, among others.
Pioneering mobile investing
Fund III’s close comes eight years after Relay was founded by Albright and Talbot. Then seasoned VC pros, the pair decided to focus exclusively on early-stage mobile software, services, content and technology.
It was a pioneering move. Relay preceded the broad adoption of smartphones, which today account for nearly 75 percent of Internet use, as well as a full appreciation of mobile’s disruptive power.
“Our fund was the first to have a vertical focus on mobile computing,” Talbot said. “Not everybody was certain that what we were doing would be sustainable. Now smartphone technology is reflected everywhere and the opportunities are many times greater than we predicted. We made the right bet.”
Creation of a specialized fund met a need among mobile entrepreneurs who needed “more than just capital,” Talbot said. Eventually a “tipping point” was reached, with Relay’s portfolio itself becoming a network and its deals attracting top-tier VCs and co-investors.
Relay is now one of the most active deal-makers in North America’s mobile industry. To date, it has invested $355 million in 76 companies, almost one-third of which have been exited.
Albright and Talbot say the firm’s portfolio has also made its mark. They estimate that half of smartphones worldwide run software from a Relay-backed startup.
Mobile’s next chapter
A study released this week suggests that mobile tech’s horizon will continue to expand. The mobile industry will add US$1 trillion in value to the North American economy by 2020, the report forecast. Growth will to a large extent be led in new innovative areas, such as the Internet of Things.
Albright and Talbot agreed, calling IoT the mobile industry’s “next chapter.”
“The Internet of Things has the potential to transform mobile technology as we know it,” Albright said. “Connected things already number in the billions, and soon everybody with one or more mobile device will be addressable 24 hours a day. You can already see the trend across Relay’s portfolio.”
Out of the gate with new deals
Fund III’s investment strategy will show continuity with Relay’s prior funds.
The fund will look for opportunities that are “fundamental, not incremental” and where Relay can account for “the first institutional money going into a company,” Talbot said. Most investments will be made in seed and Series A rounds.
Relay banked about two-thirds of Fund III’s commitments in an initial close late last year. This helped the firm keep a consistent deal pace, with about 10 percent of the capital pool deployed so far.
Fund III’s debut investments include FreshGrade, a K-2 classroom communications and assessments tool, which in May secured a $11.6 million Series A financing, and 7shifts, a provider of employee scheduling software for restaurants, which in the same month closed a $1.2 million seed round. Relay led both deals.
The fund also invested in artificial intelligence and bot platform Automat.ai, wellness and loyalty rewards provider Carrot Insights, IoT-based retailing company Kwik, and mobile-first customer service specialist UJet.
Relay’s other senior investment pros include Alex Baker and John Occhipinti, formerly a managing director at Woodside Fund.
Earlier in 2016, Relay introduced its first entrepreneur-in-residence, Norman Winarsky, co-founder of Siri and previously the head of SRI Ventures.
Photo of John Albright (left) and Kevin Talbot courtesy of Relay Ventures