Vancouver's venture capital community has taken a lot of knocks in recent years: The number of VC firms investing in tech startups has shrunk to 9 from 43 in 2002, and some entrepreneurs around town mutter that many of those still in business are small, lacklustre and not as supportive of local companies as they should be.
However, one of the biggest outfits still in operation, Vanedge Capital, is looking to breathe new life into the local financing scene by raising what would be the biggest VC fund in the province.
The Vancouver firm is looking to raise $200-million for its second fund after a handful of modest, but profitable, recent wins from the portfolio companies in its first fund, Vanedge principal Amy Rae says. Vanedge already has tentative commitments for the first $100-million tranche of the new fund and hopes to close in early fall, with a target of closing the second $100-million portion within the next few months.
"We're feeling pretty good about it," Ms. Rae said at the tech startup-focused Grow Conference in Whistler, B.C., last week. "It will be very similar to fund one" with a focus on North American firms in the digital media, enterprise infrastructure, and security and small enterprise subscription software sectors.
Vanedge has had some ups and downs since launching its first fund, a $138-million bounty, in May, 2010. Originally geared to invest in the province's bustling video game sector (managing partner Paul Lee used to be president of video gaming giant Electronic Arts), the firm subsequently shifted its investing focus and replaced most of its original team. Some of its earlier backers, including the BC Renaissance Fund, are not in the market any more.
But the firm is also riding on some solid exits, although nothing in the Shopify stratosphere. The biggest was the sale earlier this year of Vanedge-backed computerized sunglasses maker Recon Instruments to Intel for a reported $175-million. Another Vanedge-backed company, cybersecurity technology firm Wurldtech Security Technologies Inc., was sold to General Electric Co. last year, and, last month, San Francisco-based data company Splunk bought Vancouver-based Metafor Software, which Vanedge backed as part of a 2012 financing, for an undisclosed amount.
The recent exits "make it a bit easier" to raise funds, Ms. Rae said. "We've shown our investors some really good exits. … Once you have exits, it changes everybody's attitude." Vanedge, which is no longer investing in new companies from its first fund, had been planning a second fund since last year and began seeking commitments at the start of summer.
Ms. Rae said the fund's partners felt they may have been selling some of the companies a bit earlier than they would have preferred, "but the market is just so hot," she said, bringing bountiful valuations. "Bigger companies are sitting on cash and buying up what's around them," including early-stage companies.
Vanedge typically invests $2-million to $5-million in series A early-stage fundraising rounds of companies that are growing fast and generating between $500,000 and $1-million in annualized revenue a year, with an intention of eventually investing up to $20-million in cumulative venture finance rounds. Vanedge has backed a total 19 firms and had four profitable exits, three of which are based in Vancouver.