Toronto-based investment firm McRock Capital has launched its third fund with an initial $111-million CAD ($81 million USD) close for Industrial Internet of Things (IoT) companies.
McRock’s Fund III investors include anchor Limited Partner Export Development Canada (EDC), returning partners BDC Capital, Alberta Enterprise Corporation (AEC), Fonds de solidarité FTQ, and Aspen Technology. Venture Ontario, Bell Ventures, and CIBC Innovation Banking also invested as first-time backers.
McRock was co-founded by managing partners Whitney Rockley and Scott MacDonald in 2012 to invest exclusively in industrial Internet of Things (IoT) companies in Canada, the United States, and Europe. The firm closed its first fund with more than $65 million in 2015 and went on to secure $112 million for its second fund in June 2020.
Fund II, which made its final investment this week in Montréal’s Prevu3D, sought to invest in high-growth companies combining data analytics through artificial intelligence (AI) with data from field devices, machines, and equipment in industrial and urban environments.
Fund III stands to continue the trend, but MacDonald told BetaKit it will focus more on software over hardware, since McRock has “seen great results” with its Canadian software investments. In a statement, Rockley declared, “The next frontier is industrial software.”
“The sector, supercharged by rapid advancements in AI, is a promising area of growth. AI-enabled software’s ability to generate efficiency and productivity in industrial and smart city applications is seriously exciting,” Rockley added.
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McRock appointed Ha Nguyen, the venture firm’s long-time Western Canada lead, as its third partner in 2022. Nguyen, the first partner addition to the McRock team outside of the founding partners, was described as key to helping shape the strategy for the third fund, which was set to start raising its $200 million target in the first quarter of 2023.
MacDonald told BetaKit that McRock aims to raise a total of $150 million USD for Fund III, hasn’t made any investments yet, and will lead investments with initial cheque sizes ranging from $5 million to $10 million.
For its part, three-time backer AEC invested $10 million USD into the fund, saying “McRock will provide further growth opportunities to Alberta industrial software businesses through their expertise and network of industrial companies seeking acquisitions.” AEC noted that McRock had previously backed Alberta-based companies such as soil analysis and geographic mapping startup Decisive Farming, which was acquired by Telus in 2019, and crisis monitoring platform Samdesk.
UPDATE (06/05/2024): This story has been updated with additional information and commentary shared by McRock Capital founding partner Scott MacDonald.
Feature image courtesy McRock Capital via LinkedIn.