Edmonton-based Sprout.vc has secured a first close of nearly $10 million CAD for its second seed-stage venture capital (VC) fund.
Sprout.vc, which focuses on early-stage B2B software startups in Western Canada, launched its first $1 million fund in 2019 to test the market for a seed VC fund built by B2B entrepreneurs. The firm invested in 10 companies, nine of which were based in Alberta and British Columbia (BC).
“The response has been incredible from Western Canadian investors.”
-Shaheel Hooda
The Fund II investors include undisclosed family offices and “successful” entrepreneurs from throughout Alberta and BC. According to Sprout.vc Partner Shaheel Hooda, approximately one-third of the first close was provided by Sprout.vc’s Fund I investors.
“The response has been incredible from Western Canadian investors looking to help grow this market further and we are happy to oblige,” Hooda told BetaKit.
Hooda said Sprout.vc sees “incredible opportunities in Western Canada at the seed stage,” adding that there is “a significant gap” at this level. While Western Canada—including Alberta and BC—have broken venture funding records recently, data suggests that seed investment continues to lag behind other stages.
Sprout.vc plans to raise additional capital for Fund II from family offices, strategic investors, and other funds, towards its larger target of $20 million.
“We expect to see even more growth in the quality and quantity of high-quality startups in [Western] Canada as a result of the maturing of our ecosystems and the launch of major accelerators in Alberta,” added Hooda, pointing towards 500 Global, Plug & Play and Alchemist—three of the four new provincially-funded Alberta tech accelerators.
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In addition to providing seed-stage capital, the Alberta-based firm offers mentorship and strategic advice, and makes investor introductions to help startups raise follow-on financing. In addition to Hooda, Sprout.vc’s leadership includes partners Mark Benning, Lindsay Dodd, and Kristina Milke.
“We believed that providing mentor capital, in addition to financial capital, at the early stage, would dramatically accelerate the growth of the startups we invest in,” said Milke. “Our portfolio companies have experienced valuation lifts of 3x to 10x, in less than three years, demonstrating the effectiveness of our model.”
Through Fund I, which is now fully deployed, Sprout.vc invested in 10 companies—four in BC, five in Alberta, and one in Ontario. The firm’s portfolio includes Waterloo-based Adaptive Pulse, Calgary’s Simplicity, Edmonton-based DiveThru, Dryrun, EZ Ops, and Smart Access, Victoria’s VitaminLab and MazumaGo, and Kelowna-based PLAYR.gg—which was acquired by Surf (formerly Trufan). As part of this deal, Sprout.vc now owns a stake in Surf.
Sprout.vc was business payments software startup MazumaGo’s first institutional investor. According to MazumaGo co-founder and CEO Matthew Smith, Sprout.vc’s team “was instrumental in helping us understand how to focus our limited resources to position us for our follow-on round.”
RELATED: Trufan acquires Kelowna-based PLAYR.gg
“This helped 10x the valuation of our company in eighteen months,” said Smith.
Hooda claimed that Sprout.vc’s first fund has also done “extremely well,” which he said led many of the firm’s investors to encourage Sprout.vc to launch Fund II.
Sprout.vc’s pool of investors includes entrepreneurs from industries ranging from crypto to real estate, edtech, and energy.
Through Fund II, Sprout.vc aims to invest in 20 to 30 companies total, writing first cheques of between $250,000 and $300,000, with follow-on capital reserved for its fastest-growing portfolio firms. Sprout.vc is currently in the process of finalizing its first investments through Fund II, which it plans to announce “in the next few weeks.”
Feature image of Shaheel Hooda, courtesy Sprout.vc.