Yaletown ups emerging-growth fund’s target with $100 mln first close

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Yaletown Partners raised more than $100 million in initial commitments for its emerging-growth tech fund, encouraging the firm to bump up the pool’s target, two people familiar with the matter told PE Hub Canada.

Yaletown Innovation Growth Fund secured the capital in a first close in November, the sources said. It was anchored by a mix of new and returning limited partners, both domestic and international.

Participating LPs included a large Canadian pension fund and other institutions, among them family offices, the sources said. Wealthy individuals also invested, including several tech-sector CEOs.

The investors were not identified. Last month, Alberta Enterprise Corp said it committed $10 million.

Strong LP demand for the fund prompted Yaletown to increase its target, the sources said. The Vancouver firm, which originally set a goal of $135 million, is now seeking a minimum of $175 million and may go as high as $200 million if demand is sustained.

Yaletown declined to comment.

Yaletown Innovation Growth Fund was unveiled in 2016. It is earmarked for investments in mid-stage companies in Canada’s intelligent industrial and intelligent enterprise tech sectors.

Research by Yaletown and other sources indicates that many of these tech companies encounter barriers to financing, despite showing early commercial success. Many are forced to bootstrap growth, resulting in slower expansion and delayed exits, typically at lower values, relative to competitors.

A report issued by a TMX-backed working group earlier this year cast further light on the issue. It estimated the size of the Canadian emerging-growth capital gap at $4 billion and climbing.

The Yaletown fund will help address the gap by investing in a dozen or so mid-stage opportunities. In a 2016 interview with PE Hub Canada, Partner Brad Johns said the fund would act as a “catalyst for putting great mid-stage companies on the radar screen and attracting more investors to the space.”

Fundraising activity gained impetus from last year’s sale of Yaletown portfolio company Bit Stew Systems to GE Digital for $208 million.

Bit Stew, an industrial internet software platform, first raised institutional financing in a Yaletown-led Series A in 2013. With the company’s sale, Yaletown earned 7x its initial outlay and an overall IRR of 98.3 percent, for which it won the CVCA’s 2017 Venture Capital Deal of the Year award.

Going national

With the Yaletown fund’s launch, the firm moved away from its traditional emphasis on deal-making in Western Canada. It now has a pan-Canadian strategy based on an operational presence in Vancouver, Calgary, Toronto and Montréal.

Throughout 2017, Yaletown has added substantially to its Canada-wide bench strength. Recent hires include Shyam Gupta, founder and CEO of Somel Investments, as a partner, and Sophie Gupta, Shyam’s daughter and Somel’s managing director, as a principal.

Yaletown also brought on David Harris Kolada, formerly the head of Open Text’s VC program, as a venture partner. Harris Kolada is based in Toronto, while the Gupta father-and-daughter team run the firm’s Montréal office.

The new investment pros join Managing Partner Salil Munjal, Partners Johns, Eric Bukovinsky, Hans Knapp and Mike Satterfield, and the firm’s other personnel.

Along with fundraising, Yaletown has been active on the deal front of late. Recent investments include big-data-solutions provider PHEMI, which secured $10 million in June, and software lifecycle integration provider Tasktop, which took about $15 million (US$11.3 million) in April.

Photo courtesy of AlexSava/iStock/Getty Images