Venture capital flows into B.C. fund

Yaletown raises $65m; market stalls other initiatives

 

Curt Cherewayko

Yaletown Venture Partners closed a $65 million round in its newest venture capital fund – a sign that the fog on the financial markets may be thinning.

Word, however, that Venture West Management, another Vancouver-based venture capital firm, has suspended attempts to raise new capital suggests that the fog has far from lifted.

Yaletown Venture, which invests in early stage clean tech and information technology companies in the Pacific Northwest, started raising capital for its second fund last February – it closed its first $42-million fund in 2003 – and will cap the new fund at $100 million in the next 12 months.

“It’s challenging economic times for everyone,” said Steve Hnatiuk, a partner at Yaletown Venture. “But our belief is that good opportunities – companies and venture funds – will attract solid investor support in bad times, not only good times.”

The fund is supported by the firm’s institutional and private investors along with two new partners who manage portfolios that include various investment funds.

About half of the $65 million in capital for the fund that Yaletown Venture has raised thus far is from U.S. investors. In comparison, only 25% of the capital in its first fund – which Hnatiuk said was closed during an equally challenging period in the equity markets – came from U.S.-based investors. At a time when there are a lot of questions about the future of venture capital investments in Canada, Hnatiuk said the fund’s closing shows that “good quality opportunities in Canada are on the radars of major investors in the United States.”

With the fund, Yaletown Venture will invest in up to a dozen companies in Western Canada and the U.S. northwest over the next three to five years. That would put its total investment in each company over its life cycle at roughly double the $3 million to $5 million that it invests in companies with its first fund.

Meanwhile, Ventures West has shelved attempts to raise capital for a new fund, despite having already identified roughly $100 million in capital from willing investors.

“It became apparent to us that we were not going to be able to raise the amount of money we needed,” said Ted Anderson, Ventures West’s managing partner. “Raising $100 million, or $120 million or $140 million, really doesn’t allow us to do what we need to do properly.”

The company typically raises roughly $250 million for its funds to support its multi-sector strategy of investing. In July and August, Ventures West closed its Montreal and Ottawa offices, consolidating its eastern operations in its Toronto location. Anderson said the company is waiting for the dust to settle in the markets before it re-examines starting a new fund. •