Vancouver-based venture capital firm Yaletown Partners has secured an additional $70 million CAD for Innovation Growth Fund II (IGF II), reaching its target of $200 million.
Yaletown held the final close in November, just over one year after it previously announced its first close for IGF II in August 2021, nabbing $130 million.
IGF II, Yaletown’s fourth fund to date, builds on the firm’s first Innovation Growth Fund, which closed in 2019 and totalled $130 million. With this final close of IGF II, Yaletown’s active funds under management now exceed $450 million.
With IGF II, Yaletown intends to back more Canadian tech startups modernizing traditional industries.
According to Yaletown, IGF II saw strong support from existing and new global institutional limited partners (LPs), including pension funds, asset managers, and family offices. PSP Investments, BDC Capital, Ontario Capital Growth Corporation, Alberta Enterprise Corporation, and InBC Investment Corp. are among IGF II’s investors.
Founded in 2001, Yaletown invests in emerging growth-stage North American technology startups that help traditional companies improve their operational efficiency, with the goal of driving strong financial returns while also achieving “climate-resilient growth.” Headquartered in Vancouver, Yaletown also has offices in Calgary, Edmonton, Toronto, and Montréal.
With IGF II, Yaletown intends to back more Canadian tech companies that are modernizing traditional industries, with a particular focus on firms that help reduce climate impact, and leverage data, software, machine learning, artificial intelligence, and industrial IoT.
To date, Yaletown has invested in over 75 tech-driven companies across North America with a total enterprise value exposure that exceeds $10 billion. The firm’s portfolio currently includes GoBolt, Zenhub, and Elastic Path. Last year, Yaletown saw four exits, including Tasktop Technologies, Circle Cardiovascular Imaging, and Finn AI.
Amid the market downturn, Munjal believes that Yaletown can offer existing and prospective portfolio companies “a steady hand” given its “deep experience” navigating both good and bad economic and technology cycles.
With its latest fund taking just over one year to close, Yaletown is far from the only venture firm finding it taking longer to secure capital amid the economic downturn. In its case, most of the commitments for Yaletown’s latest fund came soon after the first close except for one LP that needed to wait to have capital allocated to be able to invest, Yaletown principal Michael Sfalcin told BetaKit.
In the case of other Canadian venture firms: Pender Ventures, which recently closed the first half of its $100 million CAD fund, saw it take longer than expected to secure financing from LPs. Last fall, Real Ventures paused fundraising for its new fund as part of a managing partners swap. Meanwhile, GreenSky Capital managing partner Michael List told BetaKit that the fundraising process for the firm’s fifth fund was slower than usual as investors became more cautious.
When Framework Venture Partners closed its $100 million fund last year, Peter Misek told BetaKit that diligence from LPs had increased “50x” from years past.
The challenge goes beyond raising new capital. As reported by BetaKit, Canadian VCs are also struggling to receive already committed funds from their LPs, with capital calls not being honoured.
In the current market, LPs have been hit by equity market volatility that’s lowered their liquidity and devalued their portfolios. The result is an overexposure to venture capital, which is considered higher risk and tends to make up a small sliver of investor portfolios.
With files from Meagan Simpson.
UPDATE 09/03/2023: This article previously stated that Yaletown closed this latest fund almost two years after announcing its first close. Based on new details shared by the firm, this article has been updated to note that the fund closed in November 2022.
Feature image courtesy Unsplash. Photo by Lee Robinson.