Vancouver-based Yaletown Venture Partners has launched a new fund earmarked for technology companies in Canada that have exceptional growth potential, but often too little cash.
Yaletown Emerging Growth Fund is targeted to raise $135 million in committed capital, Yaletown General Partner Mike Satterfield told PE Hub Canada. Fundraising is expected to commence shortly, with the goal of reaching a final close by the end of the year.
The fund, Yaletown’s third since its founding in 2002, will focus on companies with technology that improves enterprise productivity or increases the efficiency of industrial customers. In many cases, these will be revenue-positive companies, but which lack the resources to achieve go-to-market strategies, Satterfield said.
“Over time we’ve seen a lot of deal flow of this type in Canada, and especially in Western Canada,” Satterfield said. “They are companies with great stories and considerable latent value, but that have previously been boot-strapped. With adequate funding, they can be scaled pretty rapidly.”
The new fund will generally undertake Series A and B financings of emerging-growth companies. It will invest between $500,000 and $2.5 million initially, with capital reserved for follow-on rounds for a total of $5 million to $15 million.
Satterfield said Yaletown has had “decent success” with such opportunities in the past.
As an example, he pointed to Bit Stew Systems, a Vancouver-based provider of data integration and management solutions to utilities. The company, which kept a low profile in its early years, has since aimed at expanding and diversifying its industrial customer base with financing from Yaletown and other investors.
Last May, Bit Stew raised $20.6 million in a Series B round, bringing its total funding so far to $30 million.
Yaletown’s previous funds invested in a range of early-stage cleantech and information technology companies across Western Canada and the U.S. Pacific Northwest.
While the firm had success with this broad market focus, Satterfield believes its best prospects now lie with “bearing down” on opportunities in the emerging growth space. Additionally, by taking this step, Yaletown will help fill a crucial capital gap in the domestic market, he said.
Limited partners in prior Yaletown funds have typically been Canadian individual and institutional investors. The latter has included family offices, fund of funds and pension funds.
Satterfield said Yaletown Emerging Growth Fund will be marketed to a similar variety of LPs, but with more emphasis on sophisticated high-net-worth investors. Many of these will be technology entrepreneurs with a strong interest in the emerging growth space, he said.
Along with Satterfield, Yaletown’s management team consists of General Partners Brad Johns, Hans Knapp and Salil Munjal, as well as Principal Eric Bukovinsky.
Photo of Mike Satterfield courtesy of Yaletown Venture Partners