Whitecap IV hits $110 million CAD first close as VC firm adds new partners

Toronto-based VC firm Whitecap Venture Partners has announced a $110 million CAD first close of its Whitecap IV fund.

LP commitments to the fund include Whitecap III investors Kensington Capital Partners and BMO, as well as Inuvialuit Investment Corporation and unnamed institutional and family office investors. Whitecap hopes to hit a finale close size of $125 million within the first half of 2019.

In addition to the funding, Whitecap also announced the addition of new partners to the firm. Principals Shayn Diamond and Russell Samuels, who joined Whitecap just prior to Fund III, have been named as partners, while Uber’s VP for Americas Operations and Global Business Development, Andrew Macdonald, will join Whitecap’s advisory board.

“Steve has the combination of private markets deep institutional investing experience with being the CEO of a high-growth SaaS company where he took it all the way to exit.”

Steve Lau also joins as partner after a co-CEO run at field management software provider FieldEdge, which sold to Advent International. Previously, Lau spent five years with the CPP Investment Board, managing $11 billion in private equity transactions. Samuels indicated that Lau’s experience on both sides of the table would make him “the perfect fit” for Whitecap.

“Steve has the combination of private markets deep institutional investing experience with being the CEO of a high-growth SaaS company where he took it all the way to exit,” he said.

Whitecap’s investment thesis hasn’t changed much from Fund III. The firm will continue to primarily invest in Series A rounds (although Whitecap says it has established a small seed investment program for the new fund) in sectors like ICT, healthtech, and food/food tech. Whitecap expects around 8-10 portfolio companies at the end of the fund, with cheque size increasing approximately 25 percent per investment (keen eyes will also note that Whitecap IV’s target size is a 25 percent increase on Whitecap III).

“Fund sizes tend to be a little bit higher now,” said Carey Diamond, Whitecap Managing Partner. “The Canadian dollar, relative to the US, has depreciated somewhat. In Series A [funding] generally, companies are raising a little more than they used to be. I think that’s a function of the fact that there is more capital available, but also that companies are looking to extend their ramp and in some cases move quicker. So it made sense to increase the fund by 25 percent to compensate.”

Whitecap will also hold to its rule of investing in companies it can reach via a short flight from Toronto (the firm has invested as far as Halifax and Winnipeg), ensuring it can maintain a hands-on approach to mentorship, or quickly hop on a Porter flight when the founder hits the fan. For a firm that makes a relatively small number of investments per fund, Diamond indicated that close proximity is key.

“We want to be there and back and in a day because if there are challenges or opportunities, we want to be able to help, and we want to be able to do it on a face-to-face basis if necessary,” he said.

Whitecap’s approach has worked well to date, particularly in the healthtech space. Clearwater Clinical, a Whitecap III investment, was acquired by global hearing aid manufacturer Sivantos just before the holidays. Clearwater, which produces a mobile cloud-connected hearing testing platform, delivered Whitecap an 80 percent IRR, and 3x return of capital.

“We’re looking for companies that we believe are operating in a white space, where they don’t have many competitors because they’re doing something truly new and unique,” said Samuels. “Often in medtech, that will require a hardware component combined with a software platform, but the thing we’re really looking for is the net new idea.”