A former Royal Bank of Canada venture capital firm specializing in fintech has raised its first fund since being spun out in late 2014 and rebranded as Information Venture Partners (IVP).
IVP has completed the initial close of what it calls Fund II (the first fund was started under RBC's ownership) with commitments of $72.5-million, with a target of eventually reaching $100-million. Investors include Northleaf Venture Catalyst Fund, Teralys Capital Innovation Fund, Permal Capital Management and DH Corp. Some of that money originates from the federal government's $400-million Venture Capital Action Plan program, launched by the previous Conservative government.
A lot of hot money has poured into the fintech space, but general partners Robert Antoniades and David Unsworth are playing off their long track record as investors in the space going back 15 years.
"We're here because we've always been here," Mr. Antoniades said.
IVP started in 2001 as RBC Venture Partners, a captive fund manager owned by the bank and managed by Messrs Antoniades and Unsworth, set up to invest equity in tech startups in the financial sector. Its first fund was seeded with $100-million and its second fund, launched in 2007, got $150-million. The group invested in 19 companies, 12 of which were eventually sold, including Varicent Software Inc.
But risk-tightening rules adopted after the credit crisis left big banks looking to shed risky assets. Though regulators were primarily targeting asset-backed securities, venture capital funds were also considered too risky for banks to hold. The two fund managers led a buyout from RBC of their firm – whose second fund held stakes in six startups – in October 2014 and stayed on as general partners of the renamed IVP.
IVP is looking to fill a gap in the Canadian venture financing market by targeting Series A investments in firms that provide enterprise software to corporate customers in the fintech space. They will target initial investments of between $2-million and $4-million in companies with recurring annual revenues of $1-million or more.
Though the fund will invest in both Canada and the United States, "we believe there's a greater opportunity in the Canadian marketplace," Mr. Antoniades said, because valuations are lower and there is relatively less venture capital in the market. Mr. Unsworth added he and his partner feel an obligation to support the best entrepreneurs in their sector. "Canada can't afford to lose VC funds right now," he said. With the economy reeling from a downdraft in oil and other commodity prices, "we have to diversify, we have to be investors in technology, and build great technology companies here, not just in the U.S.," he said.
Mr. Antoniades said there is a huge need for modern technology to be deployed across the vast operations of Canadian financial institutions.
"The nuts and bolts, back-office infrastructure that financial institutions run on is 30 to 40 years old," he said. "There's an entire generation of these technologies that are emerging that will help financial institutions" modernize.