Toronto-based Kensington Capital Partners' Venture Fund said Monday it was making its first four investments in an effort to profit from the "surge" of technology IPOs it expects this year.
Kensington closed its initial round of funding for $160-million in November 2014 with a mandate to invest in other funds and sometimes in private companies. The Venture Fund is notable for being 33 per cent supported by the Canadian federal government's Venture Capital Action Plan (VCAP), which launched in 2013 and aims to boost private-sector venture capital investments primarily in Canadian companies.
"The markets are really ready, I think, for a shift to technology," said Rick Nathan, managing director at Kensington. "It's really all about critical mass. There's often a situation where you have one company that really stands out and everybody watches it, but… we see 10 or 20 of them. It's a significant quantity of emerging tech companies at the scale and growth rate to be preparing for the public market."
Amid that optimism, the Venture Fund made its four new investments including one in Toronto-based Georgian Partners II. This fund focuses on later-stage investments in software, information and internet companies, and puts money into businesses just before they go public or get sold. Georgian is an investor in Shopify and Vision Critical – two Canadian tech companies thought to be moving towards an IPO this year.
"These firms go to market every three or four years or so, and because they're in the market now, we have to decide now," said Mr. Nathan of the fund's latest investments. Kensington typically holds its investments for three to six years, but Mr. Nathan said he hopes positive market conditions will allow Kensington to hold these for longer than usual.
Kensington also bought into Montreal-based tech media and telecom fund Novacap TMT IV, and took a stake in media content creation and distribution company Blue Ant Media Inc. The final investment was made in San Francisco-based Walden Venture Capital VIII, which takes early stakes in cloud and digital media companies. It was a key investor in Pandora Media Inc., which went public in 2011.
"A large number of our portfolio companies need to have connectivity into Silicon Valley," Mr. Nathan said of this last investment.
The recent volatility created by oil's price drop has made Kensington reevaluate opportunities to invest in energy technology such as clean energy and extraction-type technology, Mr. Nathan said. But more importantly, the shift is giving Kensington and other tech companies a chance to persuade investors to allocate more capital set aside for higher-risk, speculative investments into technology instead of energy.
Kensington expects to raise more money in a second stage of fundraising by the end of the first quarter. The fund can grow up to $300-million in size.