McRock Capital, a Toronto venture capital firm that funds startups focused on the “industrial internet of things” (IIOT) sector, secured the backing of energy giant Royal Dutch Shell PLC in raising $80-million for its second fund.
The venture firm, co-led by former power industry executives Whitney Rockley and Scott MacDonald, is targeting $100-million by the time fundraising is complete, exceeding the $70-million it raised for its first fund in 2015.
Shell’s lubricants marketing division, Shell Global Commercial, joins past McRock backers Cisco Systems Inc., BDC Capital, Export Development Canada, Alberta Enterprise Corp. and HarbourVest Partners, which invested in McRock’s first fund.
McRock was one of the first venture capital firms globally to focus solely on IIOT, a burgeoning area in which companies in oil and gas, agriculture, manufacturing, logistics and other sectors affix sensors to equipment that communicate data over the internet to the machines’ owners. The belief is that through such close monitoring, companies can get a better handle on operations – for example, doing “predictive maintenance” on machines before they break down, saving time and money.
“The market has developed the way we thought,” Ms. Rockley said, noting the number of connected industrial devices has increased by more than 250 per cent since 2012, to 31 billion last year.
Data collected by Pitchbook show IIOT companies raised US$4.8-billion in 456 deals last year, compared with US$450-million from 136 deals in 2012.
“You could have counted on two hands how many corporates were really focused on the digital transformation taking hold at these massive industries” when McRock began fundraising, she said. “Now we’re seeing it is pretty much pervasive everywhere,” with companies analyzing their collected data to drive greater operating efficiencies.
McRock’s co-founders invested in RuggedCom Inc., a Canadian IIOT pioneer, in the early 2000s on behalf of their employers, Epcor Utilities and Ontario Power Generation. RuggedCom, a communications network technology provider for industrial operations, grew to US$94-million in revenue before it was purchased by Siemens AG in 2012 for $440-million. (Former RuggedCom chief executive Marzio Pozzuoli is a McRock adviser.)
They set out with McRock to back similar firms, targeting startups in North America and Europe that have had initial commercial success, generating up to US$5-million dollars in annual revenue.
McRock has backed eight startups, including smart-cities sensor company Miovision Technologies of Kitchener, Ont., and Calgary-based Decisive Farming, which uses soil sensors and mapping technology to help farmers more efficiently seed and fertilize crops.
Two of those startups, Montreal’s Mnubo Inc. and RtTech Software Inc., were purchased by U.S. software firm Aspen Technology Inc. in the past two years. McRock plans to back one more startup out of the first fund, Ms. Rockley said.
Saskia Mureau, chief digital officer with Shell Global Commercial, said McRock “is definitely one of the first in this area … and we still think they are probably one of the best. They really have a speed advantage over other [IIOT-focused funds] because of their experience in this area.”
She added that McRock has “demonstrated they can create real value for their startups” while also championing diversity. Ms. Rockley is one of a handful of female venture capital general partners in Canada, while half of McRock’s six-person staff is female.
“I have a huge passion for diversity … and they take such a strong position on this,” Ms. Mureau said. “We felt that was something, on top of the fact that it makes financial sense [to invest], that really set them apart.”
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