Georgian Partners the belle of the Canadian venture-capital ball

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Toronto's Georgian Partners is attempting to amass one of the biggest war chests of a Canadian venture-capital firm in years – a $300-million (U.S.) fund – on the strength of several recent big wins, including last year's initial public offering of Shopify Inc., which it first backed in 2011.

Sources in the Canadian venture-investing sector say that after just a few months of fundraising, Georgian hit its initial $100-million close on the fund – its third since the firm's inception in 2008 – around Christmas 2015. They say Georgian has secured initial commitments from past backers, including Terlays Capital, Kensington Capital Partners, Northleaf Capital Partners, Export Development Canada and Bank of Montreal, and is on track to easily raise the next $100-million largely from Canadian investors. Georgian is aiming to raise a significant chunk from U.S. investors, hoping for a fund close in the second quarter. "It's happening very quickly. They're in a state where everyone wants to marry them," a senior source in the Canadian venture-capital industry said. "It's very rare for a Canadian fund."

Georgian joins a slew of other Canadian VC firms that have raised funds recently, including Real Ventures, McRock Capital, Vanedge Capital Partners and OMERS Ventures. Venture funds were particularly active last year, investing $2.6-billion (Canadian) in 579 deals, representing the biggest year for deals in a decade and largest in terms of dollars invested since 2002, according to Thomson Reuters.

Speaking on a panel at last week's Cantech Investment Conference in Toronto, Georgian managing partner Simon Chong said his firm was raising a fund in U.S. dollars, with investments expected to be split between Canada and the United States. He declined a subsequent interview request. "We were very clear that we would support them again," after backing Georgian's previous two funds, said Jacques Bernier, managing partner of Montreal-based fund-of-funds investor Teralys. "Their success shows that at the VC level, we can have managers that are the same quality as the best out there in North America."

Industry sources say Georgian's returns on its first two funds – a $67-million pool that closed in 2010 and a $200-million fund that closed in 2013 – are the best in Canada, and among the top 10 per cent in North America. Georgian is one of the few late-stage VC firms in Canada, which means it invests in startups, typically in the data-analytics software space, that have started to generate significant sales and are looking for one of their last infusions of private capital before they are ready for an "exit."

Georgian was co-founded in 2008 by managing partners Justin Lafayette – a former professional hockey player who was drafted in 1988 by the Chicago Blackhawks – Mr. Chong and John Berton. They brought a heavy entrepreneurial focus to their fund: Mr. Lafayette and Mr. Chong are accomplished entrepreneurs in their own right, after selling their enterprise software firm DWL Inc. to IBM in 2005. Georgian also has an "impact team," a roster of accomplished executives, many formerly at IBM, who are parachuted into its investee companies to help grow revenues. Georgian was early to the data analytics space, and also to Shopify, investing in the retail software company's $15-million (U.S.) Series B financing in 2011 alongside accomplished U.S. VC firms Bessemer Venture Partners, FirstMark Capital and Felicis Ventures. Georgian's investment translated into 3.66 million shares or a 5.4-per-cent stake when Shopify went public last year, giving its stake a value of $94-million at the close of its first day of trading last May. Shopify wasn't the only Georgian portfolio company to exit last year. Vasco Data Security International Inc. bought Georgian-backed electronic signature firm Silanis Technology Inc. for U.S.$$85-million in October, while Synchross Tecnologies bought Georgian investment Razorsight for about U.S.$$40-million. In 2013, device identification firm 41st Parameter, also backed by Georgian, sold to Experian PLC for U.S.$$324-million.

Georgian backs several other prominent Canadian startups, including content marketing firm ScribbleLive, cloud-accounting provider FreshBooks, online education software provider Top Hat and marketing intelligence firm Vision Critical.

"It's an extremely high-quality portfolio," said one venture-capital industry veteran who asked not to be identified. "Georgian has a compelling strategy, a strong team and financial performance. Everyone wants into a fund like that."