Whitecap Venture Partners closes $140 million Fund V to invest across Canada

Whitecap Venture Partners has secured $140 million CAD for its fifth fund, which will invest in early-stage B2B SaaS and medtech startups.

For Whitecap’s previous two funds, the Toronto-based venture capital (VC) firm focused on backing early-stage companies within a short flight of Toronto, like Toronto-based Bolt Logistics and Montréal-based Silofit.

With Fund V, Whitecap plans to start making early-stage tech investments across Canada at the seed and Series A stages.

With its new fund, Whitecap plans to bring its Series A-focused approach to the rest of the country, and allocate more capital towards seed-stage rounds as the firm looks to capture more potential investment opportunities.

Whitecap initially had a $125 million target for Fund V, but ended up raising $15 million more after seeing strong support from existing investors. The new capital brings Whitecap’s total assets under management to $365 million CAD.

“When we hit $140 [million], we said, let’s spend our time focusing on companies and less time focusing on bringing in net-new investors,” Whitecap Partner Shayn Diamond told BetaKit.

Return investors in Whitecap’s fifth fund include Kensington Capital Partners, BMO Capital Partners, Inuvialuit Investment Corporation, and several other institutional investors and high-net-worth family offices. Whitecap has also secured the support of The Ontario Capital Growth Corporation, one of several new LPs to join Whitecap V alongside a group of other undisclosed individuals and family offices.

Founded in 1993, Whitecap invests across Canada and the Northeastern United States, specializing in early-stage information and communication technologies (ICT) and medtech companies.

Amid an increasingly competitive VC landscape, Whitecap Partner Russell Samuels argues that what differentiates Whitecap is its focus on quality over quantity.

“Our core investment thesis is that we invest in fewer companies, but we put more capital, more time and attention, and more conviction into those companies,” Samuels told BetaKit.

Samuels added that the firm sees a lot of value in building close and collaborative relationships with the startups and founders it backs.

Whitecap typically targets seven to 10 core Series A deals per fund, investing as lead or co-lead investor. The firm writes first cheques of $3 million to $10 million, towards a goal of investing a total of between $15 million and $20 million in each of its portfolio companies. “We reserve a lot of capital for follow-on investments,” said Diamond.

“We like to get involved early … [and] focusing on that relationship with the founder and the CEO is critical,” said Samuels. “And the earlier you get involved, there tends to be more opportunity to do it. Series A has been where we’ve invested for a long time now, we’ve had a lot of success, we join the board of nearly every company we’ve invested in, and so we like that zone.”

With Fund V, Whitecap plans to stick to this strategy, building on the approach it took with its $100 million third fund and $125 million fourth fund.

“We’ve had very moderate fund size increases because we want to stay focused on the same thesis and strategy, and if you dramatically increase the fund size, that will tend to require shifting the strategy, which is something we would like to avoid,” said Samuels.

With Fund III and Fund IV, Samuels said that the firm invested “within a two-and-a-half to three hour flight radius of Toronto,” as the idea was to spend “a lot of time,” in-person, with Whitecap-backed founders.

Amid the shift to virtual during COVID-19, Samuels said Whitecap started getting to know companies from afar by spending a lot of time on video, adding that the firm has found this approach effective. “We decided that in Fund V, we’ll cover all of Canada, which means adding everything west of Manitoba, and a Vancouver focus, probably,” he said.

As Whitecap looks to expand west, fellow early-stage, tech-focused Canadian investor Rhino Ventures has begun investing beyond Western Canada with its $120 million third fund.

The launch of Whitecap’s latest fund follows some success of Whitecap III and IV, which invested in 18 companies. Through its third fund, Whitecap has seen exits from Real Matters, which went public on the Toronto Stock Exchange in 2017, Clearwater Clinical, which was acquired in 2018 by Sivantos, and Affinio, which was acquired by NowVertical Group last month.

Whitecap closed its fourth fund in 2019, and made its last investment through Fund IV in PartnerStack earlier this year. In addition to Bolt Logistics and Silofit, the firm’s Fund IV portfolio also includes Toronto-based Felix Health and Winnipeg’s Bold Commerce.

“We invest in fewer companies, but we put more capital, more time and attention … into those companies.”

With Fund V, on top of expanding its geographic focus, Whitecap has also allocated some more capital towards seed and pre-seed rounds.

The move comes as VC investment at the Series A stage and later stages has risen and become increasingly competitive, while seed stage funding has lagged.

“There’s tons of deals at the early stage,” said Diamond. “As a fund, what we started to see was we were working really closely with a lot of these companies, not writing cheques in, and then missing the A because, this is 500-600 deals a year and you never follow up at the right time.”

Whitecap started writing small seed cheques as part of Fund IV to remedy this, investing $500,000 to $1.5 million per company, making five seed investments. Two of the companies the firm backed at the seed level have since grown to the Series A stage, raising Whitecap-led rounds: Silofit and Toronto-based Vetster.

Given these results, Diamond said Whitecap views the program as “a huge success.”

Amid these shifts in stage and geographic focus, Whitecap has also expanded its team to support its growth over the past two years, adding Melissa Belbeck as senior associate, Sarah Hartkorn as associate, and Swetha Thommandram as controller. The startup has also added former #MoveTheDial founder and current Vetster’s Chief Growth Officer Jodi Kovitz to its advisory board.

Diamond said Whitecap expects Fund V to deploy capital on a similar timeline as the firm’s previous two funds, across a three to four-year commitment period, and a traditional 10-year lifecycle, but noted that this timing depends on the market.

In the meantime, Whitecap has already begun investing through Fund V, participating in Detroit-based real estate investment management platform InvestNext’s $4.3 million October seed round.

Feature image courtesy of Whitecap Venture Partners