Inovia Capital has launched a new fund, dubbed the Inovia Continuity Fund I, L.P, to extend support to several high-profile companies that possess the potential to go public.
The VC firm has hand-picked nine high-performing companies from its portfolio that it believes will be IPO-ready within the next five years to be part of its multi-asset continuation fund.
The continuation fund is meant to act as a bridge between late-stage growth and the public markets, allowing the VC firm an opportunity to work longer with startups of its choosing (and better reap the rewards of that investment).
The new fund, which closed in September, is worth approximately $334 million US ($415.5 million CAD). The companies joining the fund are Bench Accounting, Clearco, Top Hat, TrackTik, TripleLift, Vidyard, as well as AlayaCare, AppDirect, and Snapcommerce. The latter three are also co-investments as part of Inovia Growth Fund I in addition to older funds.
“It’s a new tool in our toolbox to better support our global Canadian leaders, and build bigger companies over the longer terms.”
– Chris Arsenault
“What we’ve done with Lightspeed, and AppDirect, and what we’re doing with Top Hat is going to be a bit more of a pattern you’re going to see across many of our Canadian leaders over the next short while and obviously this portfolio has that potential,” Inovia partner Chris Arsenault told BetaKit.
New limited partner, BlackRock’s Secondaries and Liquidity Solutions group, and existing investor HarbourVest Partners co-led the fund. Long-time investor Northleaf Capital Partners also participated in the fund, as did Hollyport Capital and Kensington Capital Partners.
The closing of Continuity Fund I brings Inovia’s total capital under management to over $1.9 billion USD ($2.3 billion CAD).
Arsenault explained that Inovia’s first continuation fund empowers the VC firm to continue to work with portfolio companies for a longer time frame than the traditional venture capital cycle of seven to 10 years. He highlighted the opportunity to support firms with a similar potential to Lightspeed.
Inovia was a longtime investor in Lightspeed, which listed on the New York Stock Exchange in 2020 after going public on the Toronto Stock Exchange in 2019.
In general, continuation funds are used by firms to take on the portfolio investments of a fund nearing its 10-year lifespan. The new vehicle allows the firm to cash out the old fund, stay invested in and supporting the portfolio companies, and stick around for a longer-term exit. While Inovia has raised almost $900 million in growth capital over the last three years, the continuation fund will be put towards purchasing Inovia’s 2008 and 2011 fund commitments.
“For us, it’s a new tool in our toolbox to better support our global Canadian leaders, and build bigger companies over the longer terms,” Arsenault said.
Arsenault said he believes Inovia can help get the startups ready for the public markets as the firm did with Lightspeed in 2017, participating in a round that bought out US VC Accel so the company could exit in its own preferred time and way.
“You’re using the public markets to accelerate your growth, and that goes beyond what the private markets, like what we do, can offer. The continuity fund is kind of like that stage in between,” Arsenault said.
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Inovia’s fund is also distinguished by the fact that it’s a multi-asset continuation fund, looking after a number of companies. “It’s not something we’ve seen much yet in VC, and I’m expecting we’re going to see more and more,” Arsenault said, adding that single continuation funds are beginning to appear.
The day before Inovia’s announcement, Novacap announced it had successfully closed what it claimed was the first major single-asset private equity continuation vehicle in Canada.
The private equity firm’s TMT VI Fund and the continuation vehicle, whose lead investor is the Vintage Funds within Goldman Sachs Asset Management, acquired a controlling interest in Montreal-based Syntax Systems Group Inc. from Novacap TMT IV and Novacap TMT V, along with other shareholders. Credit Suisse assisted in the private offering of the continuation vehicle. The terms of the deal were not disclosed.
“Inovia has been a trusted partner of ours from the beginning, and they’ve supported our growth,” said Andrew D’Souza, co-founder and CEO of Clearco. “The Inovia Continuity Fund allows us to extend that partnership as we scale our company.”
Clearco secured $125 million CAD of equity financing and $313 million CAD in debt to fuel its growth in its most recent round in April. Inovia participated in that round as well as in earlier funding rounds of the founder support startup.
The strategy to focus on its winners is an evolving one for Inovia. Earlier this year, the firm raised $450 million USD for its second growth stage fund as the Montréal-based venture firm aims to create more Canadian unicorns. The fund exceeded Inovia’s target raise of $400 million.
Growth Fund II came two years after Inovia raised its first growth fund of $400 million USD.
As well, Arsenault and Invoia’s Patrick Pichette were named as directors to a new “blank cheque” SPAC, which intends to acquire new technology companies. The Soar Technology Acquisitions Corp is targeting a company valued between approximately $1 billion and $5 billion USD ($1.2 billion to $6.4 billion CAD) that has a sizable market share and capacity to achieve a market-leading position.
In its H1 2021 Canadian Venture Capital Market Overview, the Canadian Venture and Private Equity Association noted total investment for the first half of the year reached $8.3 billion across 394 deals.
Inovia led in funding, investing nearly $2.1 billion in 28 deals, compared to BDC Capital’s $1.4 billion over 58 deals. The VC has 45 people spread across its offices in Montreal, Toronto, London, and San Francisco.
In terms of its newest fund, Arsenault pointed out that the presence of a strong, new investor like BlackRock sends a signal to the markets that “Canada is starting to be on the map of the global players, and that’s important because everybody is going to benefit from that.”