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500 Startups’s first Canadian fund on track to exceed $30-million target

Startup 500’s Canadian fund has already invested more than $1-million combined in 10 Canadian companies.

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Global seed-capital financier 500 Startups has hit the midway point in raising its inaugural Canadian fund and says it will likely blow past its $30-million target.

The Silicon Valley-based venture-capital firm, which set up shop in Canada this past April to finance early-stage ventures in this country's teeming tech sector, has hit its first closing at the $15-million mark in its fundraising, said Sanjay Singhal, the fund's Toronto-based Canadian venture partner. Investors so far include past Wind Mobile chief executive officer Anthony Lacavera, Justin LaFrance – co-founder of Web discovery engine StumbleUpon, bought by eBay in 2007 – and Montreal serial tech entrepreneur Martin-Luc Archambault, a past "dragon" on the French-language version of CBC's Dragons' Den, Dans l'œil du dragon.

"The response [from Canadian investors] has been fantastic," said Mr. Singhal, a veteran tech entrepreneur (he founded who says on his LinkedIn page that he's "started and destroyed companies, gone bankrupt and lately done quite well." He added the 500 Startups Canada fund already has further soft commitments from several undisclosed institutional and corporate investors that should bring total funding to well north of its $30-million target by April. The fund has a hard cap of $70-million, and "we're pretty confident we'll get a good part of the way there," he said.

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The funding news follows one of the strongest years for the Canadian venture-investing scene since the dot-com boom, in terms of number of deals and total amounts invested.

U.S. venture capitalist and startup mentor Dave McClure started 500 Startups in Mountain View, Calif., seven years ago to both fund early-stage tech companies and assist them through a San Francisco-based accelerator. The venture firm is working on raising its fourth main fund and has launched another 10 micro-funds in 10 other regions, including Japan, Turkey and Latin America. Those regional funds are typically $10-million (U.S.) to $50-million in size – giving the firm a global reach that it uses to help companies across its various portfolios, Mr. McClure said. 500 Startups has $300-million under management and has invested in more than 1,600 companies in 60 countries. Three of its early companies have achieved "unicorn" status – achieving a valuation of $1-billion or more – and one of them, Twilio Inc., went public last year.

The venture firm is "sector agnostic," meaning it will invest across a range of technology sub-sectors. 500 Startups typically writes cheques up to $150,000, investing when companies are valued at less than $6-million, preferring companies that have either amassed large numbers of users or have started generating revenues. The fund had already invested in dozens of companies in Canada before setting up a dedicated Canadian fund, including Breather Products Inc., Influitive Corp. and CareGuide Inc.

The Canadian fund has already invested more than $1-million (Canadian) combined in 10 Canadian companies, including Montreal indoor-agriculture technology startup Motorleaf; Avidbots, a Waterloo-based maker of robot floor cleaners; and Element AI, a Montreal artificial-intelligence firm incubator co-founded by renowned deep-learning expert Yoshua Bengio that has also been backed by Microsoft Corp.

In addition to Mr. Singhal, 500 Startups's Canadian team includes iStockphoto co-founder Patrick Lor, leading Canadian angel investor Mike Cegelski, tech entrepreneur and venture capitalist David Dufresne and Neha Khera, a former senior investment manager with MaRS' seed-venture fund. Under the arrangement, 500 Startups earns an undisclosed share of both the Canadian fund's management fee and its 20-per-cent share of investment profits.

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