MaRS IAF and the Province of Ontario, in partnership with private sector investors, have launched a new $100 million fund that will focus on seed-stage investments and extensions, through to the rights for Series A rounds. The fund has already reached $77 million in a first close.
The province will invest $25 million of its returns on past MaRS IAF investments to help launch Graphite IAF IV (Graphite), the name of the new fund. The fund will also see a $25 million investment from Canadian pension fund OMERS, as well as contributions by entrepreneurs from past IAF investments.
Together with the new Graphite fund, the IAF will continue to operate and support pre-seed and seed-stage companies.
“Seed-stage financing for startups continues to be a critical need in Ontario,” said Laking.
Lance Laking, the former managing director of IAF, is now the general partner for Graphite Ventures Inc, as is Craig Leonard, the former senior investment director, and Aaron Bast, also a former senior investment director with IAF. The three will remain on contract with the IAF to help with the transition. There are still 105 active companies in the IAF’s portfolio.
With the overall team for the fund basically the previous IAF program team, MaRS CEO Yung Wu said MaRS has essentially launched a new private sector fund around that team.
Given that the new Graphite fund is based partially upon the past wins and track record of IAF investments, it’s important to note just how much IAF has changed over the years.
Michelle McBane, MaRS IAF’s former investment director, is focused on leading StandUp Ventures, which began in 2017. Neha Khera left MaRS in 2016, where she worked as a senior investment manager, to join 500 Canada, before ultimately landing at 2048 Ventures as a partner.
Also gone from MaRS is Mark Smith, who left his position as a venture capital investor at MaRS in 2018 to become the director of corporate venture capital at RBC. As is Rob Scully, MaRS’ former associate director, and currently the managing director of venture capital for Manulife Investment Management.
Barry Gekiere, the managing director of MaRS IAF, died in 2020, leaving a sizable legacy behind. He was managing director of MaRS IAF for more than nine years, and in 2017 also helped launch StandUp Ventures. At the time of his death, MaRS released a tribute, calling him “a titan in Canada’s tech community.”
Speaking to the creation of the Graphite IAF fund, one VC BetaKit spoke to posed the rhetorical question: “The question might be, what track record are they backing?”
Given that the new Graphite fund is based partially upon the past wins and track record of IAF investments, it’s important to note just how much IAF has changed over the years.
The MaRS charter allowed the IAF to invest $500,000 in seed rounds with $250,000 in follow-on. Wu said today’s seed rounds tend to be $1 to $2 million in size. “Graphite will be able to keep step with the current state of the ecosystem in terms of what seed rounds actually look like, and the IAF program…will instead focus on pre-seed categories,” he noted.
“Seed-stage financing for startups continues to be a critical need in Ontario,” said Laking.
Investments will be diversified, and include funding life sciences, software companies, and cleantech companies. “At the seed stage we’re really betting on great founders with strong addressable markets and some kind of unique capability from an IP perspective or from a customer traction perspective,” Wu said.
Graphite will be predominately Ontario-focused, but with a broader mandate, searching for promising companies across Canada.
Over the years, the IAF has managed the province’s seed-stage investments in Ontario’s early-stage companies. Notable portfolio companies include Mindbridge, ACTO, and Nicoya, creating more than 5,700 jobs and over $1.7 billion in follow-on investment. The IAF fund will continue to fund pre-seed companies, funding startups with rounds ranging from $500,000 to $1 million.
“Ontario’s innovation ecosystem has never been more vibrant – we have the brightest minds, world-class postsecondary institutions, and a high-potential startup community that needs access to capital in order to grow,” said Vic Fedeli, Ontario Minister of Economic Development, Job Creation and Trade. “This new fund will inject at least $100 million into our early-stage venture capital ecosystem and help to support domestic talent and businesses as they continue to contribute to Ontario’s economic recovery.”
MaRS IAF was created just over a decade ago as the Ontario provincial government was looking to create a seed fund that would “buffer the impact” of the 2008 financial crisis. The Ontario Centres of Excellence (OCE) was chosen to implement the fund, and Barry Gekiere, the former managing director for the MaRS IAF, worked as a volunteer to help launch it. In 2011, the fund was transferred to MaRS.
Since its creation, the IAF fund has made over 175 investments in startups over the past 14 years.
With files from Douglas Soltys.