Montreal-based Cycle Capital Management Inc. has raised more than $100-million for what it hopes will be Canada’s largest private sector venture capital fund in clean technology – giving a boost to a sector that still relies largely on government support.
Cycle Capital says it had amassed $109-million, with the goal of reaching between $150-million and $250-million for its fourth North American fund, targeting startups that specialize in areas such as green chemistry, biomass conversion, renewable energy, energy storage and efficiency and sustainable agriculture.
“That’s a super-good start, and who is in the fund is one of the most important signals we need to send to the market," said founder and managing partner Andrée-Lise Méthot, who is one of only a handful female leaders at Canadian venture funds.
The fund is anchored by $50-million from the Quebec government plus investments from provincially-owned utility Hydro-Quebec and two Quebec labour funds. But the fund also drew a range of private sector players including the Vancouver City Savings Credit Union, Innergex Renewable Energy, industrial giants Rio Tinto and Suez Group, as well as several family foundations, including the McConnell Foundation.
Craig Miller, chief product officer with Shopify Inc., whose family foundation backed the Cycle fund, is joining the firm’s investment committee.
Mr. Miller said he met the Cycle team while doing diligence on some cleantech investments of his own and was impressed by their “great mix of domain knowledge, business acumen and connections” as well as the firm’s commitment to gender equality and investing in Canadian companies.
“Cycle Capital is also one of the most experienced cleantech fund operators in Canada, so I think that their new fund will do well based on the [lessons] from the past funds they have managed. There’s little substitute in life for experience.”
Cycle has close to $500-million in assets under management invested in a range of cleantech subsectors. In addition to its four North American-focused funds, it oversees a $125-million fund focused on China.
Its latest launch follows the close last month of a $40.6-million seed-stage fund by Ecofuel, a Montreal fund co-founded by Cycle. Two other Canadian cleantech fund managers, Toronto-based ArcTern Ventures and Vancouver’s Crysalix Venture Capital, are also in the midst of raising $100-million-plus.
The new funds are a welcome addition to a sector that faces many challenges domestically. A recent report to Innovation Minister Navdeep Bains by cleantech sector experts warned Canadian companies are challenged at home by risk-averse corporate customers who are slow to adopt their technology, low access to capital and a disconnect between government environmental policy targets and regulations. Several cleantech firms say they have an easier time selling abroad than in Canada. The federal government has pledged to support the sector, committing $2.3-billion in new financing since 2015.
At the same time, the sector is seen as ripe for growth, with the expert panel forecasting cleantech exports will nearly triple to $20-billion annually by 2025 from 2016 levels. Ms. Méthot said the sector is heating up, with foreign industrial giants such as BASF getting on board. “We are seeing more and more oversubscribed rounds of financing" for young cleantech firms, she said.
But Ms. Méthot warned that if current trends continue, more and more Canadian firms could fall under foreign control. ”It’s very difficult to raise [money],” she said. “We’re working hard to be bigger, but our principal motivation is to lead deals and be at the table and make sure we’re not building champions for somebody else in the market. It’s what [Canada] did in the past. We need to make sure we build a very strong company that can stand up for cleantech in Canada.”