After generating some strong early results with Fund I, Raven Indigenous Capital Partners (Raven Capital) has launched its second venture fund focused on innovative Indigenous-led enterprises.
Amid tough fundraising conditions, Raven Capital has closed an initial $46 million CAD for Fund II, towards its ultimate target of $75 million. Raven Capital has nabbed the support of limited partners (LPs) including anchor BDC Capital, Farm Credit Canada, the Telus Pollinator Fund for Good, Vancity, Bank of America, the MacArthur Foundation, and other undisclosed investors.
“We came through the pandemic with a really strong reaffirmation of the importance of reconciliation investing.”
Vancouver-based Raven Capital claims it is “North America’s only Indigenous-led and owned venture capital intermediary.” After focusing primarily on Canadian companies with its $25 million first fund, Raven Capital sees an opportunity to expand its presence south of the border and invest in more underserved Indigenous entrepreneurs in the United States (US) with Fund II.
“This is a really tough environment to raise [in], and a lot of investors are slowing down right now across the board,” Raven Capital managing partner Paul Lacerte told BetaKit in an interview. “What we’ve found is sort of a unique value proposition [as the] first to market, and a pretty significant untapped desire on the part of investors to find ways to deploy capital into the Indigenous space, both in Canada and in the US.”
When COVID-19 first hit, Lacerte was concerned that reconciliation-based investing and consumer behavior “would be relegated back to a nice-to have [rather] than a must-have,” as investors and consumers alike reduced their spending.
But since then, Lacerte said that as an Indigenous person, he has been “pleasantly surprised” by the amount of momentum Raven Capital and its portfolio companies have been able to generate. “We came through the pandemic with a really strong reaffirmation of the importance of reconciliation investing and the importance of the growth of the Indigenous economy,” he added.
BDC Capital senior VP of fund investments and global scaling Alison Nankivell noted that while Raven Capital’s Fund I portfolio is “still quite young, we see very promising and very differentiated companies in the portfolio who are showing real market traction.”
“As the only Indigenous-owned VC operating at scale in Canada (and perhaps in North America), Raven Capital is addressing a very critical need for early-stage capital amongst [the] fast-growing community of Indigenous-led startups,” said Nankivell.
Since securing its first close in July, Lacerte said Raven Capital is seeing “some very, very strong signals” from other prospective investors that he anticipates will help the firm “either meet or potentially exceed” its $75 million target by around November. With its final close, Raven Capital hopes to bring on some more American investors, in addition to Bank of America and the MacArthur Foundation.
Founded in 2017, Raven Capital provides “flexible patient capital” and support to early-stage, innovative, scalable, purpose-driven Indigenous enterprises, through an Indigenous impact framework. Raven Capital has made 20 investments in 11 companies to date through its first fund, amassing a portfolio that includes Animikii, PLATO Testing, Virtual Gurus, Social Awareness Group, Satya Organic, Ginew, and Salish Soils.
The Canadian Council for Aboriginal Businesses estimates there are 325,000 Indigenous-owned companies in North America, 50,000 of which are based in Canada.
However, most of these firms struggle to access the funding, support, and networks required to grow.
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Raven Capital aims to change that in a culturally-safe way. Vancity and the Telus Pollinator Fund have bought into the firm’s vision since Fund I. According to Telus Pollinator Fund managing partner Blair Miller, Raven Capital “has been incredibly successful in demonstrating the opportunity that exists to support Indigenous entrepreneurs” through its efforts to date.
“For the Telus Pollinator Fund, having the opportunity to complete a second investment in Raven is a testament to the potential we see, and our belief in these Indigenous-led organizations to create real economic growth and social change,” Miller told BetaKit.
Miller added that Raven Capital’s portfolio has also been “a source of high-quality deal flow” for the Telus Pollinator Fund, pointing to the fund’s investment in Virtual Gurus’ Series A round earlier this year as evidence of this.
Lacerte said Raven Capital has already begun to see an increase in the number of investors requesting side letters and the opportunity to co-invest alongside the firm. “It’s been really important,” he said. “This is still a relatively small ecosystem, and so, the support from our investors, for our portfolio companies, has been really significant.”
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“Raven Capital is part of a new generation of GPs who are building a more culturally-informed approach to meeting untapped opportunity in their business communities,” said Nankivell. “As an Indigenous-owned and led manager, Raven Capital brings a unique model to venture investing that supports a range of Indigenous entrepreneurs who are defining success on their own terms.”
In line with BDC Capital’s broader focus on “building a more diverse and equitable VC ecosystem in Canada,” Nankivell noted that in addition to investing in Raven Capital, the firm has also recently supported other funds focused on underrepresented entrepreneurs, from the Indigenous Growth Fund to BKR Capital.
With Fund II, Raven Capital aims to tackle the increase in deal flow the firm has seen from across North America. Lacerte anticipates that Raven, which has been working for the past year and a half to build relationships south of the border, will deploy half of the capital from its second fund in Canada and half in the US.
“Having the opportunity to complete a second investment in Raven is a testament to the potential we see, and our belief in these Indigenous-led organizations to create real economic growth and social change.”
-Blair Miller, Telus Pollinator Fund
According to Lacerte, Raven Capital’s $75 million Fund II target will enable the firm to invest a bit more at later stages, from the seed to Series A level and potentially beyond, while affording the firm the capacity to make larger investments. Raven Capital aims to invest in 20 to 25 startups through its second fund, writing $1.5 million to $2 million initial cheques and investing up to around $3 million per company.
Raven Capital, which aims to take an equity stake of 10 to 20 percent per startup, emphasizes maintaining majority Indigenous ownership. As market conditions have shifted and downward pressure on valuations has risen—which increases dilution for Indigenous founders—Lacerte anticipates having to work “pretty hard” with Fund II companies at the Series A stage to find “reasonably favourable valuations” in this environment.
Amid uncertain economic conditions, Lacerte noted that the Indigenous economy has benefitted from some unique drivers that are protected from market fluctuations, including a shift in the procurement policies of governments and corporations towards allocating a certain amounts or percentages to buying from Indigenous vendors.
These factors, combined with the groundwork that Raven Capital has laid up to this point, have manifested in the buy-in the firm is seeing today. “[What] is happening amongst our investors is an openness to the idea that a portfolio of Indigenous enterprises may in fact produce non-correlated returns,” said Lacerte.
Feature image courtesy Raven Indigenous Capital Partners.
