Brightspark Ventures thinks now is the right time to be investing in early-stage Canadian tech companies as it holds the first close for its latest fund, which has a target size of $120 million CAD.
In this initial close, Brightspark has raised $60 million CAD and has “firm commitments” for an additional $15 million CAD. Brightspark expects to close around $90 million by June with a final close before the end of this year. This latest fund is called Brightspark Canadian Opportunities Fund (BCOF) II, and follows BCOF I, which launched in 2020 with $60 million.
The firm saw early wins when IBM bought data-centre management software company Think Dynamics in 2003.
In its 24 years, Brightspark has seen many evolutions of the Canadian tech ecosystem. Managing partner Sophie Forest told BetaKit now is the right time to be investing in early-stage companies, despite the downturn in the sector.
Brightspark’s journey since its launch in 1999 has not been linear. When the Montréal firm was created by fellow managing partner Mark Skapinker, it debuted with a traditional, institutional venture fund of $65 million in 2000, which was followed by a $60 million fund six years later.
The firm saw early wins when IBM bought data-centre management software company Think Dynamics in 2003, and when Salesforce purchased social-media monitoring company Radian6 for $326 million USD in 2011.
According to Forest, Brightspark made a $80-million return on its Radian6 investment, and more recently saw a $50-million return on Hopper after the venture firm was an early, seed-stage investor with $500,000 for 25 percent of the company (Brightspark also still holds equity in Hopper).
But that focus on traditional venture funds changed in 2010. Forest explained in a recent interview that when it came time for Brightspark to raise its next fund, it looked at its usual focus area —the Canadian tech market—and didn’t see a mature enough ecosystem with enough deal flow.
Brightspark concluded, “We can’t see how we’re gonna replicate what we just did — two home runs in a fund,” Forest said, referring to Radian6 and Think Dynamics.
Brightspark decided it wanted to help create that deal flow. It shifted to helping launch and incubate a few companies. That led to interest from private individual investors who wanted to invest alongside Brightspark in those companies.
Ultimately, the firm changed its investment model. Between 2011 and 2020, Brightspark focused on special purpose vehicles (SPVs) that allow individual investors to take part on a deal-by-deal basis.
Even after launching an institutional fund (BCOF I) in 2020, Brightspark has continued with SPVs, which invest alongside its institutional funds. To date, the SPV network includes over 500 active Canadian investors with more than $50 million injected into 21 companies.
Forest explained that Brightspark made its return to institutional funds with BCOF I in 2020 because of the maturation in the Canadian tech ecosystem in the few years prior. The firm saw the deal flow that it felt was lacking in the early 2010s. Forest highlighted an increase in accelerator programs and repeat founders driving the creation of more companies.
BCOF I marked Brightspark’s third institutional fund, and launched in the fall of 2020 with $60 million of a targeted $75 million. Last year, Brightspark’s head of growth, Emilie Jones, told BetaKit that the fund closed shy of its target, at $66.5 million in 2021.
Brightspark’s venture fund portfolio includes around 20 active company investments and around 10 exits. In addition to early wins with Think Dynamics and Radian6, Brightspark has more recently seen Nudge exit to Axonify in 2022, and made a 35X return on its investment in Jewlr after Kensington Private Equity Fund bought into the company.
With its latest close for BCOF II, Brightspark now holds around $500 million in assets under management.
Limited partners (LPs) in this latest fund include a mix of new and return investors. Desjardins, which led the first close LP syndicate, is a first-time investor in Brightspark alongside Fonds de solidarité FTQ. Forest said Brightspark also expects to see a handful of new investors in future closes of this fund.
Brightspark’s return LPs include Fondaction, Fonds québécois d’amorçage Teralys (backed by CDPQ), Royal Bank of Canada, and individual investors and family offices from the Brightspark network.
The venture firm remains bullish on early-stage investing, and its thesis of investing in tech companies from seed to Series A stages remains the same. Through this latest fund, Brightspark plans to invest in around 15 companies with first cheques ranging from $2.5 to $3 million CAD.