Thalmic Labs Inc. of Kitchener, Ont. has secured one of the largest venture-capital deals in Canadian history, vaulting the small startup into the big leagues of the country's technology innovators.
Thalmic, which specializes in biomechanical computer interfaces and classifies itself as a wearable technology company, is expected to announce Monday it has raised $158.6-million in funding led by Intel Capital, the Amazon Alexa Fund and Fidelity Investments Canada.
"This funding will enable the company to aggressively invest in products currently under development," said Mike Galbraith, chief financial officer of Thalmic Labs, though he wouldn't hint what those may be.
The company's first piece of wearable technology, the Myo armband, senses muscle movement in your arm in order to act like a hands-free controller for everything from prosthetic devices to power point slide shows. It has been used by a variety of researchers and developers in virtual reality, augmented reality, robotics and other new disciplines. The company doesn't disclose sales figures, but in 2013, preorders of the first $149 version collected $3.7-million.
Mr. Galbraith wouldn't confirm whether a new device from Thalmic will be released in 2016, but did say to expect something in the coming year: "We're not going to get into specifics, we're going to focus on the next generation of wearable computing … blurring the lines between real and digital worlds is what we do well." The company expects to hire 100 new people, double the existing team.
Nabeel Hyatt, a venture partner in Spark Capital and board member at Thalmic, on Monday offered more detail on the company's plans in a post on Medium.com. He wrote that work on Thalmic's next device began more than a year ago, and is not a follow-up to the Myo arm-band - nor is it specifically aimed at VR devices - but is something new that is "very risky, and quite possibly not technically feasible, but would be amazing if they could pull it off."
"A few months ago the founders embarked on showing a few people a working prototype, and Intel and Amazon immediately stepped up leading to today," he wrote.
Last week, the company opened a sales and marketing office in San Francisco and named Tara Kriese, formerly head of marketing at Samsung Electronics America, as the company's first chief marketing officer.
The company was co-founded in 2012 by University of Waterloo mechatronics engineers Stephen Lake (chief executive), Matthew Bailey and Aaron Grant. In 2013, it participated in Silicon Valley's best-known incubator Y Combinator, and in 2014 announced a $14.5-million Series A venture funding round led by Intel Capital and Spark Capital.
Monday's announcement could come as a welcome jolt after a somewhat tepid VC market in 2015 that has been slowly rebounding this year. According to data from the Canadian Venture Capital and Private Equity Association (CVCA), there were more deals per quarter than ever before in 2015, but the dollars invested stayed relatively flat year over year. In the first quarter of 2016, about $843-million was invested in 119 deals (twice the money for 14 fewer deals than the same period in 2015). While the so-called "dealflow" improved in the second quarter to 136, the dollars invested slumped to $683-million.
The largest VC round in recent Canadian history was $171-million for Hootsuite Media Inc. in the heady days of 2013 (Fidelity has since written down its stake in Hootsuite by 18 per cent). Medgate Inc.'s $150-million investment in March, 2016 is now the third largest deal, according to data from the CVCA.
"The fact that it's in Canada is fantastic in and of itself; it may have sectoral repercussions in that it catalyzes interest in the category for those looking to Canada as a place to invest," said Salil Munjal, a general partner at Yaletown Partners. The Vancouver-based venture firm has studied Canada's technology sector and issued a report in August that found the system underinvested in companies looking to convert from early stage development to globally scalable businesses. "A single financing or exit does not define a national ecosystem. We need a lot more of those outcomes," he said.
New investor Fidelity is known for betting on companies with big market potential. Steve Rabuchin, vice-president of Amazon's Alexa Fund, said the makers of the voice-controlled smart-home automation hub would be exploring product integrations with Thalmic.
"This is the end of the beginning, this is a phase on the way to get them to that next level," said Thalmic board member and Canadian serial investor and entrepreneur Dan Debow. Mr. Debow has been an angel investor in Thalmic since the startup was part of The University of Toronto's Creative Destruction Lab and said he has been won over from the beginning by Thalmic's belief that it could put itself in the centre of a new computer-human interface. "They are willing to do anything, bet it all, and go for this huge outcome."
Editor's note: An earlier online version of this story said Fidelity Canada Asset Management had invested in Thalmic Labs. In fact, the investor is Fidelity Investments Canada.