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The financing push comes amid growing calls for action on climate change.

Brent Lewin/Bloomberg

Canada’s fledgling cleantech industry is getting another financial boost after Montreal-based Ecofuel closed its inaugural venture-capital fund, raising $40.6-million from Quebec funders including the government of Quebec, Desjardins and the venture arms of labour funds Fonds de solidarité FTQ and Fondaction.

The seed-stage fund is part of an effort hatched by one of Canada’s premier cleantech venture-capital firms, Cycle Capital, earlier this decade, to help young cleantech companies evolve into compelling opportunities for risk capital investors. Cycle first helped create the Ecofuel accelerator in 2015 to host and support young firms, which was followed by the launch of the Ecofuel fund in 2017 to fund promising early-stage firms across the spectrum of clean technology, ranging from firms that help reduce energy consumption to plastic recyclers.

The fund, co-managed by industry veterans Richard Cloutier and Johanne Sévigny, provides upwards of $75,000 per investment in companies from Eastern Canada across the clean-technology spectrum. It has backed 12 firms to date, including seven that came out of the Ecofuel accelerator. That’s out of a total of more than 300 firms that have pitched Ecofuel, a number that suggests there is a need for early-stage capital in the sector, Mr. Cloutier said.

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Leah Lawrence, CEO of Sustainable Development Technology Canada (SDTC), a federal Crown corporation that funds cleantech firms, said Ecofuel’s work with cleantech startups “is key to the success of the ecosystem. This new money will more than double down on the opportunity for the next generation of entrepreneurs.”

In addition to Ecofuel, three other Canadian cleantech venture funds including Cycle are attempting to raise $700-million amid calls for more capital to boost the underfunded sector focused on the environment and climate change.

Toronto-based ArcTern Ventures said last fall it had raised $60-million of the $150-million target for its second cleantech fund, while veteran Vancouver-based cleantech investor Chrysalix Venture Capital said it had raised more than a third of the minimum $120-million goal for its fourth fund, with a maximum target of $250-million. Cycle is in the process of raising a cleantech fund ranging between $150-million and $300-million in size, anchored by $50-million from the Quebec government.

The financing push comes amid growing calls for action on climate change, as denizens of the cleantech sector try to bring momentum to a domestic industry that has been relatively underfunded compared to other countries and has struggled to sell their goods and services to risk-averse corporate customers at home.

The new funds are a welcome addition to a sector composed of 850-plus companies with combined revenues of $13.3-billion and $6.7-billion in exports in 2015, according to Ottawa market-research firm Analytica Advisors – but which has suffered from “relatively weak” private financing options domestically, according to a 2016 study by Cycle and SDTC.

Other backers of the Ecofuel fund include the Business Development Bank of Canada and the Consortium de Recherche et Innovations en Bioprocédés Industriels du Québec.

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