With competition for venture capital funding heating up across the country, Canadian Imperial Bank of Commerce is aiming to expand its business in the United States, earmarking $300-million to invest mostly in U.S.-based venture capital and growth equity funds.
The bank announced a total capital commitment of $450-million on Wednesday, extending a strategy that has already seen CIBC Innovation Banking – the unit catering to tech and life-sciences companies, including startups – invest about $150-million as a limited partner in a dozen Canadian funds over the past few years.
The Toronto-based bank started making similar investments in U.S. venture capital funds this summer. And as Canada gets more crowded, CIBC Innovation Banking president and executive managing director Mark McQueen said he believes his unit has the potential to break into the top five U.S. financiers of tech and life-sciences companies.
“Dominating in Canada is impossible with, obviously, so many banks sharing a desire to focus on the early-stage economy,” he said in an interview. “But the U.S. is a much more mature and larger market, and a much bigger pie.”
Domestic competition has increased in technology banking since CIBC’s 2018 acquisition of Wellington Financial, which was led by Mr. McQueen. Rival banks have responded as demand for equity financing and venture debt from the burgeoning tech sector has exploded, fuelled by low interest rates and surging use of e-commerce, software services and health care technologies during the COVID-19 pandemic.
CIBC’s new envelope of capital is targeted mostly at funds in the United States that provide later-stage growth equity funding and participate in Series C funding rounds raised by maturing companies. As CIBC makes a broader push into the U.S. market through its CIBC Bank USA arm, after its 2017 acquisition of Chicago-based PrivateBancorp, its innovation banking unit sees a chance to grab a larger share of the highly competitive U.S. market.
“This next envelope will largely go to our best U.S. venture capital relationships,” Mr. McQueen said. “The last 24 months, we’ve certainly made lots of inroads in Canada ... but our next push is to deepen the U.S. relationships.”
The bank’s strategy to invest in venture capital funds is one way CIBC aims to strengthen its ties to venture capital firms that can refer companies in need of growth capital to the bank. CIBC intends to make further investments in Canadian-led funds, but by doubling its capital commitment to venture fund investing it is aiming squarely at the U.S. market.
“Investing in the funds themselves, which is a five- or 10-year commitment, is a great way to tighten that relationship over a generation,” he said. “It’s a different way of embracing the ecosystem.”
In the past two years, CIBC Innovation Banking has invested twice in Toronto-based venture capital firm StandUp Ventures, which focuses on backing startups run by women and is led by Michelle McBane. The bank has also put money into Maverix Private Equity, which was launched by Bay Street financier John Ruffolo months after he was nearly killed in a traffic accident.
The unit has been expanding rapidly, increasing its roster of clients to 275 from 85 in 2019. It has added offices in cities such as Boston, Chicago, Atlanta and Austin, Tex., for a total of 11 outposts in North America. Most recently, the unit hired a managing director in London to serve clients abroad, bringing its employees to 52, with six more joining this month and plans to nearly double its staffing levels to 95 over the next year.
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