Venture firm Inovia Capital raised $450 million to invest in startups that are ready to scale up, the latest sign of a maturing Canadian industry that produced the biggest technology IPO in Toronto Stock Exchange history last year.
For its second growth fund in about two years, Montreal-based Inovia attracted investors including Toronto’s Northleaf Capital Partners, and Caisse de Depot et Placement du Quebec and Investissement Quebec in its home province. That brings capital under management to $1.5 billion at the firm, which started out in 2007 and counts Twitter Inc. Chairman Patrick Pichette among its partners.
The global pandemic has intensified consumers’ and companies’ reliance on technology, sparking a boom in tech valuations. In September, Canadian payments company Nuvei Corp. raised a record $805 million for a tech company in its initial public offering in Toronto. The company’s now worth $9.1 billion.
Inovia, which also manages early-stage funds, had no trouble convincing existing investors to sign up for its new growth pool, which originally aimed for $400 million, according to Chris Arsenault, a founding partner. That’s a contrast to just a few years ago, when some investors worried the Canadian market wasn’t big enough for a technology fund, he said
"Canada has always been very conservative, and until five years ago, lacked ambition both on the investors' and on the entrepreneurs' side," he said in an interview. "The conviction, the ambition, that’s what’s changed in five years, and accelerated with the pandemic."
Success at Lightspeed
Canadian venture capital investment reached C$4.5 billion last year, a drop from C$6.2 billion in 2019 but still 22% above 2018 levels, according to preliminary findings of the Canadian Venture Capital and Private Equity Association.
Still, large tech IPOs remain rare in the country of 38 million people, where there’s a history of companies selling to larger players before they reach a critical size. The S&P/TSX Information Technology Index is dominated by Shopify Inc., the e-commerce platform that became the country’s most valuable company last year, and now has seven companies worth more than C$5 billion.
Like its predecessor, Inovia’s second growth fund will focus on sectors such as health care, financial services and the future of work, zeroing in on 10 to 12 companies with global ambitions. Arsenault, Pichette and Toronto-based partner Dennis Kavelman will lead it. After injecting an initial $25 million to $35 million in the startups, the venture firm works closely with them to accelerate expansion.
One of Inovia’s biggest success stories is Lightspeed POS Inc., a point-of-sale and payment company that the venture firm first bet on around 2012 with its early-stage fund and later with its growth fund. It also brought in the Caisse as a co-investor to buy out a U.S. fund. Lightspeed went public in 2019 and is now valued at $9.2 billion.
From Lightspeed’s growth to Shopify’s rising status, “you can see Canada getting in everywhere and shining,” Arsenault said. “And that makes me smile.”
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