Toronto’s Northleaf Capital Partners has closed its third Canadian venture-capital fund at $300-million, just less than a year after it was named as part of Ottawa’s Venture Capital Catalyst Initiative.
Northleaf, a private-markets fund manager with more than US$12-billion under management, was revealed last June as one of five “funds of funds” that would split $350-million to entice more private capital to support the maturing Canadian startup sector.
By last December, Northleaf said it surpassed the halfway mark of its $300-million goal for the Northleaf Venture Catalyst Fund II, with commitments from the Business Development Bank of Canada, Canada Pension Plan Investment Board (CPPIB), Sun Life Financial Inc. and Toronto-Dominion Bank. The firm said Monday that the fund now included additional commitments from new investors, including Bank of Montreal Capital Partners as well as high-net-worth investors.
“It's probably as bright a time in the Canadian venture ecosystem as we've ever seen,” said Northleaf director Ian Carew in a phone interview.
One new feature Mr. Carew highlighted that differentiated this fund from Northleaf’s previous two Canadian-backed funds in the past decade – which were part of Ottawa’s Venture Capital Action Plan and the Ontario Venture Capital Fund – is the broader base of investors, particularly from Asia. “Historically, international investors looked at North America, and Canada would get lost in the conversation,” Mr. Carew said. Today, he continued, “they really see it as a differentiated opportunity compared to the U.S.”
While three-quarters of Northleaf’s newest fund is expected to flow through to venture funds targeting various stages of companies, the remainder is expected to be directly invested into later-stage scaleup companies. Mr. Carew would not identify any individual companies the fund has invested in, although he said there was one approved deal he hopes will close soon. With its past Canadian funds, Northleaf has backed such heavyweights as Shopify Inc., Wattpad Corp. and ecobee Inc.
The new Ottawa-backed Northleaf fund has already committed investments to three funds run by Montreal’s iNovia Capital, San Francisco-based life-science-focused firm Versant Ventures and the women-focused StandUp Ventures, based at Toronto’s MaRS Discovery District.
Beyond requiring participating funds to raise $2.50 in private capital for every federal dollar invested, the Venture Capital Catalyst Initiative (VCCI) encourages participants to advance gender equity in the venture and startup worlds. “With StandUp, we’ve identified a group that both has potential to deliver attractive returns as well as supporting a very important and differentiated investment strategy,” Mr. Carew said, adding that Northleaf is evaluating future investments in other funds that support gender diversity and diversity more broadly.
The federal Ministry of Small Business oversees the VCCI program. “Northleaf is a strong player in Canada’s venture-capital ecosystem that is delivering exactly the kind of speed in fundraising that our government had hoped for when we first invested in them through the Venture Capital Catalyst Initiative,” said Mary Ng, the Minister of Small Business, in an e-mail.
The other VCCI fund-of-funds recipients were Kensington Capital Partners of Toronto; Teralys Capital of Montreal; Boston-based HarbourVest Partners LLC; and Pennsylvania’s Hamilton Lane Advisors LLC. The federal government has invested an additional $50-million in seven smaller “alternative” venture-capital firms, including the Waterloo, Ont., region’s Garage Capital and Halifax’s Build Ventures.
Josh O’Kane