Pangaea Ventures, a Canadian pioneer of advanced-materials investing, has opened a new U.S. office to broaden its access to sector opportunities south of the border.
Earlier this year, Pangaea set up shop in Phoenix, Arizona, increasing North American locations to three, including its Vancouver headquarters.
Chris Erickson, Pangaea’s founder and general partner, told PE Hub Canada the move recognizes the fact that a growing share of the firm’s deal flow and portfolio companies resides in the U.S.
The choice of Phoenix, the fifth largest city in the U.S., reflects the dispersed nature of tech ecosystems and universities responsible for most emerging advanced-materials startups, Erickson said.
“The advanced-materials sector is not as concentrated in the U.S. as software is in Silicon Valley and medtech is in Boston,” he said.
The new office is led by Erickson, who recently relocated from Vancouver. He is joined there by Matt Cohen, director of technology, and Janelle Goulard, director of healthcare.
Other senior team members, including GPs Keith Gillard, Andrew Haughian and Purnesh Seegopaul, will continue to operate from Canada and Pangaea’s Hillsborough, New Jersey, location.
News of the U.S. market expansion follows this month’s close of Pangaea Ventures Fund IV at $95 million (US$70 million) in committed capital.
Fund IV is the largest fund in the firm’s nearly two-decade history, up 19 percent from Fund III, which raised about $80 million (US$60 million) in 2012.
Pangaea achieved this by adding to its base of limited partners, especially among strategic corporate investors.
More than a dozen major corporations based in North America, Europe and Asia signed on. They include returning LPs CoorsTek, JSR and Mitsubishi Chemical and new LPs Adidas, Doosan, Henkel, Lam Research, PTT Global, Sekisui, Severstal, Shin-Etsu and TOSOH.
They were joined by several institutions, including VanCity and BC Tech Fund, managed by Kensington Capital Partners.
Pangaea’s strategic backing signals a growing appreciation of tech that leverages advanced materials, such as metals and alloys, polymers and composites, organic and organometallic materials, ceramics and biological materials.
“Corporations put strategic value on new technologies using advanced materials to solve industrial production and sustainability challenges,” Erickson said. “They’re looking for a window on this innovation, which is typically being generated by startups.”
A 2018 report by TMR reinforces this point, forecasting growth in the global advanced-materials market to US$102.5 billion by 2024 due to rising corporate investment.
Fund IV nears halfway mark
Pangaea’s focus is materials-driven tech opportunities addressing energy, electronics, health and sustainability. Fund IV will maintain this strategy, Erickson said, investing in 12 to 14 companies.
The fund is already approaching the halfway mark, backing six startups to date. Among them is Aeponyx, a Montréal maker of micro-optical switch chips, which in March raised a $7.9 million Series A financing led by Pangaea.
In late 2018, Pangaea also led a US$7 million Series B for Modulim, an Irvine, California, developer of imaging devices for assessing skin conditions, and a US$5 million Series 3 for Tactus, a Fremont, California, maker of protective and writeable films for computers and smartphones.
Other Pangaea investments include Airborne, a Dutch provider of advanced-composite solutions, and CarbonCure, a Halifax CO2-utilization platform.
Last year, Pangaea elected to track the impact of its advanced-materials portfolio, accounting for CO2 reduction, freshwater produced or saved, food production increased and lives impacted, metrics that align with the United Nations’ 17 sustainable-development goals.
The firm, which will provide a cumulative portfolio impact in 2025, in April issued its first yearly findings for 2018. They include an estimated 549,000-ton cumulative reduction in CO2 emissions.
Erickson launched Pangaea in 2000. He was previously a partner at Osler, Hoskin & Harcourt, specializing in environmental and corporate law.