Georgian Partners has raised the largest independent venture capital fund in Canadian history, closing its fourth fund after reaching its US$550-million target.
“This fund has given us added resources to help accelerate great software companies around disruptive trends, such as artificial intelligence, in a really significant way," said Georgian co-founder and managing partner John Berton.
The Toronto-based firm, which has backed some of Canada’s hottest startups, including Shopify Inc., Vision Critical Communications Inc. and Ritual Technologies Inc., has distinguished itself in a number of ways since its launch a decade ago.
Georgian was one of the first of a new class of Canadian venture capital firms founded in the late 2000s to be led by former tech entrepreneurs (co-founders Justin LaFayette and Simon Chong sold their software firm DWL Inc. to IBM Corp. in 2005), helping to revitalize a sector that was hampered by poor returns following the dot-com bust and the credit crisis in the 2000s.
Georgian focused on being a North America-wide player from the outset, closing its first $70-million fund in 2010. It started out backing firms that developed data-driven analytical software tools for large corporate and government customers, putting it at the vanguard of broader trends in technology.
Georgian specializes in large “growth capital” financing deals amounting to tens of millions of dollars for fast-growing startups that have achieved initial market success and generate millions of dollars in annual revenue. Thanks to the partners' connections (Mr. Berton is a veteran financier), Georgian was able to get in on competitive financing deals led by U.S. funds from the start, including a 2011 US$15-million deal for Shopify led by Boston’s Bessemer Venture Partners that produced bonanza returns for Georgian.
Georgian further set itself apart by establishing an “impact team” of seasoned executives the firm parachuted in to help its portfolio companies. More recently, Georgian has taken a lead among VC firms by creating software tools to assist its investee companies in the artificial intelligence space by bolstering their ability to anonymize client data and explain how their algorithms make decisions.
That comprehensive approach to helping young firms has won Georgian the lead role in some high profile-growth financings. That includes Ritual’s US$70-million growth financing this year and a 2016 financing of U.S. fintech company PrecisionLender. Georgian’s earlier funds have ranked among the top performing VC funds across North America.
“They’ve taken a very strong and successful entrepreneurial approach to the VC business… and they’re winning deals because of their strategy, their team and their reputation,” said Rick Nathan, managing partner with Toronto’s Kensington Capital Partners, which has invested about $50-million across Georgian’s funds.
Georgian raised $200-million for its second fund in 2013 and US$375-million for its third, in 2016.
According to Thomson Reuters data, the new Georgian fund would rank fourth-largest, adjusting for inflation, among all Canadian venture funds on record. However, the three larger funds were launched by large institutions – all before 2001 – namely the Business Development Bank of Canada, the QFL Solidarity Fund and Desjardins Capital, whereas Georgian had to raise its money from outside investors.
Montreal’s iNovia Capital is also attempting to raise a $500-million growth fund led by former big-league tech chief financial officers Dennis Kavelman (Research in Motion) and Patrick Pichette (Google).
Canada’s tech and venture capital sectors have been surging in recent years, while Canadian financial institutions have moved back into the venture investing space, led by OMERS and Caisse de dépot et placement du Québec. Venture capitalists invested $3.5-billion in Canadian firms last year, double the level from five years earlier, according to the Canadian Venture Capital and Private Equity Association.