Graphite Ventures closes $110-million Fund IV as firm builds its national presence

Graphite Ventures general partners and Alberta principal
Graphite has added Albertan LPs and VCs, and recently invested in Montréal-based Maxa.

Toronto-based Graphite Ventures has reached $110 million CAD in the final close of its Fund IV as the firm continues to expand its reach beyond Ontario to startups Canada-wide.

In an interview with BetaKit, Graphite general partner Aaron Bast said the fund reached the $110-million milestone when it received the $10-million contribution from Alberta Enterprise Corporation (AEC) in July.

Other backers of Graphite’s Fund IV include public pension fund OMERS, MaRS, and CIBC Innovation Banking; private equity funds; as well as undisclosed high-net worth individuals, including founders from portfolio companies at the MaRS Investment Accelerator, CEOs, and ecosystem partners that the VC firm has co-invested with, according to Bast.

“We’re right in the prime period of our investment and deployment time horizons.”
– Aaron Bast, Graphite Ventures

In partnership with private sector investors, MaRS’s Investment Accelerator Fund (IAF) and the Province of Ontario launched Graphite in 2021, with the initial target of raising $100 million to focus on seed and Series A investments. It was established to predominantly focus on Ontario deals, but with a broader mandate to search for promising companies across Canada.

Though Graphite’s roots are largely in Ontario, with the majority of its team based in the province, Bast explained that Graphite planned to focus on companies across Canada from the start.

In addition to Bast, who is based in Waterloo, Graphite is also led by general partners Lance Laking and Craig Leonard, who are located in Ottawa and Toronto, respectively.

“We took a lot of time, when we got out the gates, to understand the different markets across Canada, which ones we felt best positioned to serve, which ones were most aligned for the type of seed investing that we do and aligned with our philosophy,” said Bast.

In its search for new markets, Graphite made several trips to Alberta in October and found a “really nice fit,” Bast noted. That’s when Graphite appointed Omi Velasco as a principal based in Calgary to focus on Alberta and other deals in Western Canada.

Despite a decline in venture funding in most other Canadian tech ecosystems in the past year, Alberta has remained resilient and maintained an upward trend.

RELATED: Graphite Ventures appoints Omi Velasco as principal to lead Western Canada deals

Alberta has several factors that keep the dollars flowing to local companies. Among them is AEC, a provincial fund of funds. Every dollar it invests results in more than $5.50 of investment back into Alberta businesses, according to Catherine Warren, CEO of city-supported innovation organization Edmonton Unlimited, in a past interview.

“We’re also part of a low-tax regime, which means investors can keep more money in their pockets, they can take a chance, they can take risks, and they can focus on helping these companies build a dream, while at the same time mitigating risks,” Warren said. “All of this is contributing to a super-climate of investable companies.”

As it took the time to understand the market in Alberta, Bast said that Graphite later developed a relationship with AEC. “That ultimately led to their support and our first announced investment there in WaitWell,” Bast said.

Calgary-based WaitWell, which sells queue management and service-delivery software, secured $1.5 million in seed funding in July with participation from Graphite and Edmonton’s Accelerate Fund III.

Graphite said it has now invested in more than 25 Canadian startups with seed and follow-on rounds. Bast told BetaKit that the firm has deployed about 25 percent of the entire $110-million fund.

As part of its national scope, Graphite has also invested in Montréal-based AI analytics software provider Maxa in its $2.9-million CAD round announced last year. Most recently, Graphite also took part in Toronto-based Part3’s $2.8-million CAD seed round that was revealed at the end of July.

RELATED: Alberta tech is on track to outpace 2022 with lively Q2 2023

While Graphite is industry agnostic, it concentrates investments in B2B SaaS, FinTech, digital health, and “capital-efficient hardware” with many companies using AI and machine learning.

Bast said Graphite is continuing to explore other markets across Canada and expects the majority of its portfolio companies to be added by 2025. “We’re right in the prime period of our investment and deployment time horizons right now,” Bast said.

Generally, Graphite disburses cheques from $250,000 up to $1 million to early-stage companies, with follow-on cheques from $1 million to $3 million.

As capital has dried up for many startups through the macroeconomic downturn, Bast said companies in the seed stage have been underserved.

However, Bast also pointed out that the ecosystem has since evolved with a number of funds created that focus on early-stage companies. Two of the most active Canadian early-stage funds include Golden Ventures and Panache Ventures, while other emerging funding specializing in early-stage companies are currently fundraising: Tribe Network, which launched a $20-million fund in June for racialized founders, and CMD Capital, led by long-time Canadian tech startup investors Matt Roberts and David Dufresne.

“There’s a number of additional funds that we can collaborate with and work with in the ecosystem to fund these companies,” said Bast. “We’re seeing the committed Canadian players in the market here and those are largely the folks that we collaborate with on seed deals.”

Featured image courtesy Graphite Ventures.

Charlize Alcaraz

Charlize Alcaraz

Charlize Alcaraz is a staff writer for BetaKit.

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