A Montreal private capital firm that has emerged as one of Canada’s top clean-technology financiers has raised $100-million for its second growth equity fund.
MacKinnon, Bennett & Co., or MKB, an early backer of traffic-management technology provider Miovision Technologies Inc. and solar energy company Potentia Renewables Inc., is now two-thirds of the way to its $150-million fundraising goal for its second fund.
Investors include Business Development Bank of Canada, Caisse de dépôt et placement du Québec, the Quebec government’s Investissement Québec arm, Fonds de solidarité FTQ, Fondaction and Vancouver City Savings Credit Union.
MKB started as a merchant bank co-founded by former investment bankers John Bennett, the chairman of eyewear retailer New Look Vision Group Inc. and managing partner Ken MacKinnon. Mr. Bennett’s son Patrick is also a partner.
The group decided, after the 2008-09 recession, to back companies looking to decarbonize the energy and transportation sectors, focusing on enterprises with disruptive technologies and “highly scalable business models” that were already achieving commercial success, Mr. MacKinnon said. “Our mission was to make a sustainable impact and earn a profit. ... We don’t think you have to sacrifice one for the other.”
That ran counter to the experience of investors in the clean-tech sector, which was notorious for delivering poor investment returns. From 2004 to 2012, clean-tech venture funds raised US$25-billion and then lost nearly half that as they encountered challenges, including the need to work with regulators to create favourable market conditions and heavy upfront costs.
Since then, the appetite for climate-focused ventures has improved markedly, thanks partly to Tesla Inc.’s success in popularizing electric cars and the growing acceptance for environmentally friendly products, from meat substitutes to smart thermostats. Deployment of internet-of-things technologies and artificial intelligence have helped many sectors achieve efficiencies, including lower energy use.
Venture investments in climate-tech startups hit US$16.1-billion in 2019, up from US$418-million in 2013, and corporations including Amazon.com Inc., Microsoft Corp., Unilever PLC and Nestlé SA have devoted billions of dollars to fund climate technologies.
Governments have earmarked US$150-billion-plus for climate initiatives to revive their economies. U.S. President Joe Biden has signalled his country’s renewed interest in combatting climate change, while investors such as fund giant BlackRock are stepping up pressure on portfolio companies to reduce their carbon footprint. General Motors Co. last week said it would roll out an all-electric vehicle lineup by 2035.
“MKB’s thesis hasn’t really changed in 10 years, but the world has changed,” said Miovision chief executive officer Kurtis McBride. “Their thesis was that next-generation energy and transportation was coming and would be a big part of the future of the economy. It was a wild idea at the time, but between electrification, solar, LED street lights and smart cities, [it] has largely played out [and] they’ve gained a lot of respect” from investors.
MKB started with two special-purpose investment vehicles to back Toronto-based Potentia and Miovision of Kitchener, Ont., which both delivered solid returns. Power Corp. bought control of Potentia in 2016 and Telus Corp. led a $120-million investment in Miovision last year.
On the strength of those deals, MKB raised its first, $52-million fund in 2017. “We saw that these guys can make money, and they have in the past” in contrast to other clean-tech funds, said Nicolas Gravel, director of fund investments with BDC.
He credited MKB for zeroing in on later-stage companies that are generating sales, for limiting the number of investments and for helping investee companies improve their financial structures and scale up in a capital-efficient way. “They’re very involved in their files, they put in a lot of time and will bring the whole [MKB] team” to help, he said.
Mr. MacKinnon said the new fund will aim to invest $10-million to $20-million per company, with about half of investments in Canada and the balance in the United States and Western Europe.
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