Montreal-headquartered Inovia Capital has raised $450 million for Development Fund II, the agency’s second growth-stage funding fund. The shut of this funding comes just a bit over two years after the announcement of its first in February 2019, a $400 million pool of funding capital that marked Inovia’s first foray past the early stage offers it initially targeted on.
Inovia now has investments throughout each stage of an organization’s improvement — together with retaining stakes in a few of its portfolio corporations which have had profitable exits to the general public markets, like Lightspeed, the point-of-sale and commerce firm that went public in a virtually $400 million public providing on each the NYSE and the TSX final 12 months.
As with Development Fund I, the purpose of Development Fund II is to spend money on corporations with a spotlight totally on Canadian startups, but additionally trying to targets within the U.S. and EU, the place Inovia additionally maintains places of work. The companies’ companions, together with Chris Arsenault, Dennis Kavelman, and former Google CFO Patrick Pichette, have targeted on constructing out a group of skilled operators to assist their portfolio corporations, and make investments particularly in areas of specific want for startups outdoors the Valley, like sourcing high-demand, senior expertise with high-profile tech business expertise.
Inovia’s unique Development Fund was based mostly on an assumption that the agency might leverage its relationships and its expertise to ship worth to its portfolio corporations not simply once they’re beginning out, however throughout their progress cycles. Arsenault defined in an interview that Fund I used to be form of a proof level that that this assumption was right, which then paid huge dividends when the agency went out to boost Fund II final 12 months.
“We principally constructed the group round Dennis, Patrick and myself,” he stated. “We actually adopted via on our key assumptions over why it made sense for Inovia to make use of its platform to really construct a progress stage fund that may profit not solely from insights into the portfolio, but additionally all the relationships and the platform that we constructed over the past decade.”
What wanted proving, Arsenault stated, was that Inovia might stand toe-to-toe with the growth-focused companies that had acted as follow-on traders for its early stage offers over time. That was no straightforward job, when you think about that Inovia supplied deal movement to among the most revered enterprise companies in expertise, together with Bessemer, KKR, TA Ventures and Sequoia.
Inovia employed quite a lot of operators with expertise at high-growth corporations, and targeted on with the ability to shepherd its investments via challenges like constructing an actual board, and engineering a cap desk to correctly handle and put together secondary gross sales. With a plan to spend money on between 10 to 12 corporations with the $400 million in Fund I, Inovia started making offers – the primary was with Lightspeed, after which they received into Ahead (tech-enabled main well being care), Hopper and Snaptravel (two journey business startups) and extra.
Many of the corporations that Lightspeed picked with Fund I (it did 10 offers in complete) ended up having a really sturdy 2020 – together with, surprisingly, all of the travel-focused startups. Based mostly on the power of their efficiency, Arsenault and his companions determined to speed up their timetable for elevating Fund II, and located LPs greater than prepared. They ended up capping the fund at $450 million (with a goal of between 10 to 12 investments, as with Fund I) given what Arsenault says felt like the best dimension for managing throughout the funding and working group, regardless of out there demand to seemingly increase fairly a bit extra.
Arsenault famous that a lot of the LPs contributing to this fund additionally had capital within the first, although some new traders have additionally signed on. And whereas Inovia’s focus will not be strictly Canadian, he added that the agency’s success, together with the make-up of its funding companions and portfolio (two-thirds of the businesses it has backed are Canadian) tells a narrative of a altering funding panorama north of the border.
“Nearly all of our LPs are Canadian, and I take it to coronary heart that it’s essential to create patterns of success, so that individuals can look in the direction of fashions and both replicate or adapt to their very own state of affairs,” Arsenault stated. “I believe that we’d like extra success tales that individuals can have a look at and say, ‘I can do the identical factor, or I can do higher.’ And the truth that our LPs got here again with us, and once you have a look at, you understand, what Georgian [Partners] is doing, and what Novacap is doing, and what OMERS Development – that is nothing just like the VC ecosystem and business that I used to be in 10 years in the past, proper? We’re positively on one other stage now in Canada.”
He added that there are examples at each stage of company-building, citing the brand new Backbone Angels collective led by quite a few put up and present Shopify staff together with Arati Sharma, Atless Clark, Lynsey Thornton and Alexandra Clark. Arsenault additionally pointed to Lightspeed’s choice to record first on the TSX earlier than the NYSE as an indication of newfound tech business maturity within the Canadian context.
Lastly, Arsenault credit an uncommon ‘X’ consider how Inovia has been capable of put collectively this second fund and handle deep involvement in its very lively portfolio corporations over the past 12 months: the largely distant situations introduced on by the requirements of the pandemic.
“It will have been unimaginable to do what we did throughout the portfolio, with the portfolio, fundraising a brand new fund, producing our greatest 12 months, by way of exits final 12 months, we had the New York Inventory Alternate IPO for Lightspeed, we had a dozen transactions of acquisitions the place our portfolio corporations are doing the buying,” he stated. “I don’t understand how we’d have finished what we’ve finished, had we been touring and had a traditional life.”