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Chris Arsenault, right, founding partner of the venture capital firm iNovia, along with Patrick Pichette, left, former CFO of Google, and Dennis Kavelman, centre, former CFO of Blackberry, at the iNovia offices in Montreal in 2018.Dario Ayala/For The Globe and Mail

Inovia Capital, one of Canada’s largest venture capital firms, has raised its largest early-stage fund to date, fuelled by strong demand from institutional investors despite the sharp recent devaluation of tech companies.

Inovia said Wednesday it had raised US$325-million for its fifth fund to back young technology companies at early stages in their growth. That’s up from the US$200-million it raised for its fourth such fund in 2019. Inovia has steadily increased the size of its funds since raising its first, at $110-million, in 2007.

Inovia partner Karamdeep Nijjar said commitments for the new fund arrived briskly from past backers after the Montreal-based firm went to market in February. These include Canadian fund-of-funds HarbourVest Partners, Kensington Capital Partners, Northleaf Capital Partners and Teralys Capital, as well as Bank of Nova Scotia, Calgary’s AVAC Group, Alberta Enterprise Corp., and Quebec investors Fonds de solidarité FTQ, Fondaction, Caisse de dépôt et placement du Québec and Investissement Québec.

Inovia has also added three new institutional investors: Trans-Canada Capital, Air Canada’s pension fund manager; British Columbia Investment Management Corp.; and IA Financial Group IAG-T. “It’s the fastest fund we’ve ever raised” and demand exceeded funds raised, Mr. Nijjar said.

Inovia is one of Canada’s leading entrepreneur-led venture capital firms that have helped revive the sector’s tarnished reputation for delivering poor returns in the 2000s. It was co-founded by veteran entrepreneurs and venture investors Chris Arsenault and Shawn Abbott in 2007. That proved to be ideal timing to back young companies, at the dawn of a period of digital disruption owing to the proliferation of smartphones, cloud computing and widespread adoption of data analytics and machine learning.

Some of Inovia’s more prominent investments include Lightspeed Commerce Inc. LSPD-T, Michele Romanow’s Clear Finance Technology Corp., Hopper Inc. and Clearpath Robotics Inc. It was an early backer of Luxury Retreats International Inc., purchased by Airbnb Inc. ABNB-Q in 2017 for $400-million.

Along the way, Inovia has expanded its team and investment scope. The firm moved into “growth” investing in 2018, providing large-scale financings to more established software companies such as Sonder Holdings Inc. and Wealthsimple Technologies Inc. It hired the former chief financial officers of BlackBerry Ltd. BB-T and Google parent Alphabet Inc. GOOGL-Q – Dennis Kavelman and Patrick Pichette, respectively – to co-lead the effort with Mr. Arsenault. Inovia raised its first, US$400-million growth fund in 2019 and a second, for US$450-million, in 2021. Last year it also launched a $334-million “continuity” fund to reinvest in top-performing portfolio companies and buy out earlier investors that wanted to sell their stakes.

Inovia has also expanded its talent, recruiting two high-profile partners last year: chief talent officer Krista Skalde, who previously led talent management for sovereign wealth fund Abu Dhabi Investment Authority, and chief technology officer Steven Woods, a Google engineering executive.

“They’ve built their team with a lot of intelligence,” said Teralys managing partner Jacques Bernier, adding that they’re “one of the few” technology-focused private capital firms in Canada to evolve the way they have over the past two decades. Mr. Bernier said it was too early to assess the success of Innovia’s growth funds, which made several bets during a period of inflated valuations in 2020 and 2021.

Mr. Nijjar said Inovia’s latest early-stage fund will continue the same investing strategy as its predecessors, focusing mostly on Canadian-based business-to-business cloud software companies, marketplaces and consumer-oriented technology, in retail, travel, digital, manufacturing logistics and financial services. “We’ve proven we can execute on that,” he said.

Asked whether this was a precarious time to be investing with the recent crash in tech valuations and worsening economic picture, Mr. Nijjar said Inovia has been consistent in how it paces its investments. “There will be times when we’re deploying capital in hot markets at high valuations and times when we’re deploying capital into markets where there are relatively lower valuations. We don’t try to time the market. We just have to focus on finding quality businesses with great unit economics and solid founding teams.”

Mr. Bernier said this could prove to be a good time to back startups, as was the case during the 2008-09 recession. “Prices will be lower, with less competitors. Odds are you will do much better.”

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