The new iNovia Capital and Canada’s scaling VC industry

Canada’s venture industry is entering a new evolutionary phase as leading firms unveil big, bold plans for scaling brands, taking on new challenges, and filling market gaps.

INovia Capital, a 10-year investor in North American tech companies, provides the latest and perhaps most ambitious example of the trend.

Last month iNovia said it would blend its longstanding early-stage focus with an ability to do growth-equity deals.

The initiative is reportedly allied with a major fund launch. The Globe and Mail said iNovia is raising a fund with a target of US$500 million ($640 million), more than triple the amount raised by its predecessor in 2015.

General Partner Chris Arsenault told PE Hub Canada the goal is make iNovia a “full-stack venture firm,” able to back companies “at every step of their journey, from inception to IPO and beyond.”

Arsenault says this type of firm, modeled after Silicon Valley’s top VC investors, is needed in today’s Canadian market. That’s because companies in scaling mode lack a local partner with adequate capital and talent resources.

“Canada is everywhere showing growth — in our revenue and round sizes, our available capital, our exits,” he said. “That positions us to build billion-dollar companies in our own backyard. But to do this we need to better ourselves in terms of how we support high-velocity growth.”

Historic deal sizes have fuelled six years of expansion in Canada, Thomson Reuters data show. In 2017, financings of $20 million-plus took $2.4 billion, the highest sum since 2000, while the average round was nearly $10 million, more than twice the average four years earlier.

However, much of the money has come from foreign VCs with priorities that do not always align with local entrepreneurs, Arsenault said.

A company poised for breakout growth must have access to a well-heeled Canadian VC able to lend “greater optionality over the long term,” he said.

As part of its plan, iNovia aims to take the ”driver’s seat in multiple stages,” Arsenault said.

In practice, this means a capacity for writing initial cheques of $20 million to $30 million or greater, and leading or co-leading most deals across the spectrum. The firm currently leads or co-leads the majority of its early-stage rounds.

Arsenault says iNovia’s recent dealmaking has hinted at this capacity thanks to the co-investment dollars of several limited partners.

In all, US$260 million ($334 million) was invested by LPs in iNovia-backed deals over the past 36 months. This includes cash made available to the US$166 million ($207 million) Series D of retail software provider Lightspeed, Canada’s biggest IT financing in 25 years.

Left to right: Patrick Pichette, Dennis Kavelman and Chris Arsenault, General Partners, iNovia Capital
(Left to right:) Patrick Pichette, Dennis Kavelman and Chris Arsenault, General Partners, iNovia Capital

Star Power

As part of the April announcement, the firm introduced two new GPs: Patrick Pichette, formerly a senior vice president and CFO at Google, and Dennis Kavelman, formerly CFO and COO at RIMBlackberry.

Pichette and Kavelman are charged with driving the growth-equity strategy. They will do this by channeling years of high-level operating experience into mentoring iNovia-backed teams, as well as tapping extensive networks to create fresh opportunities.

Pichette, who played a key role in Google’s expansion between 2008 and 2015, overseeing more than 200 acquisitions, says Canada’s ecosystem has produced a new generation of startups with “chutzpah,” some of them potential “world champions.”

“Promising later-stage companies are increasingly looking to double down on growth and raise bigger money instead of exiting early,” Pichette said.

He describes his and Kavelman’s job as “putting the after-burners” on such companies and preparing them to “pounce and take the territory, like Google did.” 

Kavelman is currently a director of two iNovia investees, wearable-tech developer Thalmic Labs and online video platform Vidyard. He will operate from iNovia’s office in the Toronto-Waterloo corridor, where he has been active both as an operator and angel investor.

Pichette will focus on local opportunities while also opening a new London office, another piece in iNovia’s strategy to create a European beachhead. Additionally, the firm will boost personnel at its San Francisco location.

Other big, bold plans

Other investors expanding their horizons include Georgian Partners, which last month announced a plan to scale its brand and reach in the North American market. It is at the same time raising a fourth growth-equity fund targeted at US$500 million.

Yaletown Partners is also raising a new fund to address a perceived gap in Canadian mid-stage financing. PE Hub Canada in December reported the fund’s target was bumped up to a minimum of $175 million because of strong LP demand.

And last November, Real Ventures closed a $180 million fourth early-stage fund featuring a multifaceted strategy for matching resources with a tech company’s growth life-cycle.

If iNovia and its Canadian peers succeed, the result would be unprecedented capabilities for supporting home-grown entrepreneurs and innovation.

Their activity is also likely to place upward pressure on fundraising in Canada’s VC industry, which has recently made large gains due to public-policy stimulus and an influx of new and returning LPs.

Photos of Chris Arsenault, Dennis Kavelman and Patrick Pichette courtesy of iNovia Capital

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