Vertu Capital, Canada’s first private equity firm founded by a woman, has closed its inaugural fund, raising $300-million to buy software companies.
Lisa Melchior, managing partner and founder of Vertu, said the firm completed fundraising on International Women’s Day on March 8, which “was symbolic and meaningful for me, being the first woman in Canada to start a private equity fund.”
Vertu’s investors include New York State Common Retirement Fund, BMO Capital Partners and funds managed by BMO Global Asset Management, Canadian Imperial Bank of Commerce, Business Development Bank of Canada and Export Development Corp.
Ms. Melchior previously spent 17 years with the Ontario Municipal Employees Retirement System overseeing the pension giant’s private capital investments in the technology sector. Her claim to fame was leading OMERS’ investment into Constellation Software Inc., now Canada’s second-most valuable software company. She also led the privatization of Quebec software company Logibec in 2010 and subsequent spinout of its U.S. subsidiary MatrixCare. OMERS sold the Canadian operations of Logibec in 2015.
She left to start Vertu Capital in 2017 and recruited partners Kim Davis, former chief financial officer with TorQuest Partners, and Gil Nayot, previously a senior principal with Canada Pension Plan Investment Board’s private equity group. Ms. Melchior believed there was a lack of capital to help Canadian technology companies that had achieved initial success and faced a shortage of funding options domestically.
“We’re pleased to be involved in Vertu’s ongoing growth story,” said Colin Ryan, managing director and head of tech technology and innovation investment banking with CIBC. “Vertu has a strong track record for productive investments in the technology sector and a high-quality management team, and we look forward to continuing our relationship with them.”
Vertu bought two companies in 2019 in partnership with BDC Capital funded by special purpose vehicles: virtual data room provider Firmex and digital payments company Carta Solutions Holding Corp. They sold both companies in 2021, the same year Vertu began raising its fund.
Ms. Melchior said Vertu is looking to buy software or software-enabled companies focused on enterprise customers with around $20-million of annual revenue and which are breaking even or profitable. Vertu aims to invest $25-million to $75-million per deal for companies worth up to $500 million and double or triple the size of businesses before selling them. Vertu aims to do six to eight deals through the fund
Alison Nankivell, senior vice-president of fund investments with BDC Capital, said Vertu fills an “interesting market niche that hasn’t been well addressed.” “It’s a great achievement that she’s found a core of investors who are prepared to support her as a new franchise and meet a significant market need.”
Vertu operating adviser Jason Smith praised Ms. Melchior, who he recruited to the board of Real Matters prior to its 2017 initial public offering when he was chief executive officer. He described her as a low-key, intelligent but modest investor with integrity and who “understands entrepreneurs. She’s a kindred spirit with incredible instincts who knows what it takes to build a pragmatic, Canadian-style growth company.”
Ms. Melchior said this is an ideal time to be launching a fund, 16 months after the start of a sharp downturn in the technology space spurred on by rising inflation and interest rates, which has resulted in a crash in valuations for software and other technology companies.
“We are excited about having fresh capital at this time,” she said. “As the market has corrected, the deal-making environment has been slow to adjust. But it will, it’s inevitable, and the fallout of the collapse of Silicon Valley Bank will accelerate it from here forward.”
Editor’s note: Vertu Capital invests between $25-million and $75-million per company in enterprises worth $500-million or less. Incorrect figures in an earlier version of this story have been corrected.