With an explosion in capital entering Canadian tech, CIBC Innovation Banking has emerged as a sophisticated player in the space.
Long active in the Canadian tech ecosystem as a startup backer and limited partner in venture capital firms, the bank has ramped up its fund banking services in recent months.
The bank announced a flurry of capital call lines of credit for several VCs between March and May, starting with co-leading a line of credit for Baltimore- and San Diego-based growth equity firm JMI Equity’s latest fund, JMI Equity Fund X. JMI has backed several Canadian companies, including Benevity, PointClickCare, and Clio.
Over that time, the bank also reported providing financing solutions, including capital call lines of credit, to software, data and device technologies-focused VC Yaletown Partners; John Ruffolo’s new fund, Maverix Private Equity; early-stage venture capital fund Vanedge Capital III LP; and Vertu Capital’s private equity fund Vertu Fund I.
“It’s just another indicator that our Canadian ecosystem is healthy, remains healthy, and is getting healthier.”
“I think what you’ve seen just in [a couple of] weeks alone…speaks to what we’re doing across the continent,” Mark McQueen, president and executive managing director at CIBC Innovation Banking, said in an interview with BetaKit. “CIBC is taking a holistic approach to the innovation ecosystem. While funding a company’s growth has been our team’s specialty over the past 20-plus years, we know that venture funds have their own needs.”
The announcements were part of a busy year for CIBC. While some banks “pulled back” during the pandemic, McQueen said CIBC doubled down and closed 40 new company financings in the last year. “Our business, in essence, doubled between January 2020 and January 2021,” he said. “And here we are in May and there’s no end in sight. Some transactions are $2 million, some are $100 million, but they’re all important and it really speaks to just how quickly the sector is flourishing in North America.”
The bank was the most active firm in VC debt deals in 2020, according to the Canadian Venture Capital Association’s (CVCA) year in review, providing $146 million in debt funding across 17 rounds during the year. In the first quarter of 2021, the bank provided $65 million in debt funding across four rounds.
“The CIBC Innovation Banking team is a strategic partner for Maverix Private Equity as they not only anticipate our needs, but the needs of our portfolio companies,” Ruffolo told BetaKit.
According to Christian Lassonde, managing partner at Impression Ventures, the spate of announcements is reflective of the amount of action in the tech ecosystem in spite of the pandemic. “It’s just another indicator that our Canadian ecosystem is healthy, remains healthy, and is getting healthier.”
Capital call lines of credit are a relatively new offering for most of Canada’s big five banks, said Matt Roberts, partner at ScaleUP Ventures. “The majority [of capital call lines of credit] were done by Comerica 10 to 15 years ago, but the Big Five [banks] all turned on lines of credit…in the last 18 to 24 months.” It’s unclear where CIBC ranks amongst other banks for this type of lending, but Roberts noted that CIBC has been particularly “vigilant” in announcing its transactions.
Innovation Banking reported its first spate of capital call lines of credit in 2019 to Whitecap Venture Partners IV LP, an early-stage VC fund focused on information and communications technology, medtech and food tech; White Star Capital, a multinational investment firm with Canadian offices in Montreal and Toronto; and First Ascent Ventures, which focuses on Canadian tech companies focused on enterprise B2B software.
Roberts said CIBC has made a substantial effort to take itself from “non-player” status to “probably first or second place” among the big five banks when it comes to innovation banking. “They’ve been building up their innovation practice quite extensively over the past five years, ever since they picked up Wellington [Financial].”
“There’s a level of sophistication there that we’ve not seen with the other banks.”
Founded in 2000, Wellington Financial was acquired by CIBC in 2018 with McQueen at the helm as CEO. With offices in Toronto and Menlo Park, Wellington targeted early and mid-stage technology companies, which CIBC noted as an opportunity for the bank at time of acquisition.
“We’re committed to becoming one of North America’s leading client-focused banks in the innovation ecosystem,” said managing director and head of global investment banking at CIBC, Roman Dubczak, at the time.
One VC investor, who asked not to be named to speak freely about the differences between financial institutions, said that while other banks offer fund banking services, CIBC has been “far more savvy about VC, and that’s 100 percent attributable to the fact that they purchased Wellington Financial. There’s a level of sophistication there that we’ve not seen with the other banks — they do capital call lines of credit, but they’re much more by the book, if you will, less savvy about the venture capital space [and] who the players are.”
While the bank has been active in the U.S. market for years, it recently announced high-profile appointments south of the border. Tej Sahi joined the firm in November as a managing director based in New York, having left Silicon Valley Bank, where he was a director.
CIBC also poached Silicon Valley Bank’s former managing director of the bank’s life sciences and healthcare corporate banking practice, Joe Hammer, who was appointed managing director and head of east coast U.S. life sciences and healthcare on May 3, operating out of the bank’s newly opened Boston office.
On May 4, Boulder, Colo.-based Charlie Kelly and Atlanta-based Alan Spurgin were named co-heads of CIBC’s U.S. technology banking team.
Three years after joining CIBC, McQueen now has the team in play to fully support both the U.S. and Canadian markets, backed by a Big Five bank.
“While we’ll never take our attention off of our own backyard, U.S.-based venture funds relish the experience, creativity, and competition that CIBC has brought to their market over the past three years,” McQueen said. “You’re going to see us continue to hire talented people to serve this endless opportunity.”
