Canada’s venture funds collect $2.2 bln in 2016, as fundraising hits 14-year high

Blackstone Group, Apollo Global Management, Carlyle Group, Kohlberg Kravis Roberts, KKR, private equity

Canada’s venture industry in 2016 had its best fundraising year since the dot-com era, thanks to greatly improved supply-side conditions.

Some 25 funds banked more than $2.2 billion in committed capital this year, according to preliminary data from Thomson Reuters and supplementary data compiled by PE Hub Canada.

That’s up 86 percent from $1.2 billion raised in 2015, giving the domestic VC industry its first year of solid growth since 2012. In fact, the data suggest fundraising levels in 2016 are the highest in Canada since 2002, when $2.5 billion was secured.

Fundraising activity this year was led primarily by established general-partner teams.

Many of these teams raised considerably more in their latest offerings than in the past. This year’s biggest Canadian fund, the third applied-analytics fund of Georgian Partners, closed at $485 million (US$375 million), better than twice the size of its predecessor (2015).

Georgian’s Fund III, one of Canada’s largest private tech partnerships on record, figured among a number of successful IT funds.

They included the third mobile-tech fund of Relay Ventures, which raised $200 million (US$150 million); the fourth early-stage IT fund of iNovia Capital, which held a $175 million close; BDC Capital’s second mid-stage software fund, unveiled at $150 million; and the second IT fund of Vanedge Capital, which raised an initial $104 million.

The enterprise-software vehicle of a new GP team, Leaders Fund, was also formed with a $100 million pool.

While IT dominated fundraising trends this year, some major partnerships in the biotech and cleantech spaces were also launched.

For example, Quark Venture and China’s GF Securities launched a global health-sciences fund, which has so far raised about $130 million (US$100 million). And established fund manager Genesys Capital pulled in an initial $90 million for its third life-sciences fund.

Additionally, BDC Capital unveiled its second cleantech and energy-tech fund, capitalized at $135 million, while Cenovus Energy and Suncor Energy sponsored a $100 million sustainable energy fund, Evok Innovations.

Supply-side fix

Growth in Canadian VC fundraising in 2016 owes to a stronger limited-partner base, partly the result of a recent influx of corporate, institutional and high-net-worth investors.

Private investors, both new and returning, were drawn by various influences, not the least of them being the increasing attractions of Canada’s tech scene. A substantial number entered via Ottawa’s Venture Capital Action Plan, a 2013 program designed to bolster supply and direct more resources to cash-starved startups.

VCAP spawned four funds-of-funds: Northleaf Venture Catalyst Fund, Teralys Capital Innovation Fund, Kensington Venture Fund and HarbourVest Canada Growth Fund. The majority closed this year, bringing total capital managed to more than $1.3 billion, $900 million of which came from private LPs.

Along with stimulating fundraising, VCAP created new pools of co-investment capital. Both factors played a key role in intensified venture deal-making in Canada in 2016.

Preliminary Thomson Reuters data show Canadian VC funds, U.S. investors and other groups deployed close to $3.5 billion to domestic financings this year, well up from $2.7 billion invested in 2015.

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