Yaletown Partners raises $100 million in first close for third Innovation Growth Fund

Vancouver-based venture capital (VC) firm Yaletown Partners has raised $100 million CAD in the first close of its third Innovation Growth Fund (IGF III), which will continue its thesis of investing in digital infrastructure technology companies.

“We brought IGF III together in record time amidst one of the more complex funding environments in the last decade.”
Salil Munjal
Yaletown Partners

Yaletown’s eighth fund overall, IGF III is aiming for a final close of $250 million, or about $50 million more than the 2023 final close of its predecessor.

Yaletown partner Michael Sfalcin told BetaKit in an email statement that BMO Capital Partners, provincial Crown corporation InBC, federal Crown corporations Export Development Canada and Farm Credit Canada Capital, an undisclosed Canadian pension fund, and undisclosed Canadian family offices have all invested in IGF III.

Sfalcin added that there are a number of existing limited partners (LPs) and new potential LPs in diligence for the second close. InBC investment principal Heather Tanaka said in a statement that IGF III marked her firm’s first-ever subsequent commitment to a venture fund after investing in IGF II in 2022.

“We brought IGF III together in record time amidst one of the more complex funding environments in the last decade,” Yaletown managing general partner Salil Munjal said in a statement. “Our conviction has never been stronger that investing in technologies enabling the digital transformation of asset heavy industries is the most scalable lever for accelerating industrial competitiveness and also positioned to deliver excellent returns.”

The “complex” funding environment Munjal referred to has been fuelled by a continually cool exit market, which has hindered the abilities of general partners to exit their investments and return cash to limited partners. Data from 2024 and 2025 has shown a five-year low for venture deals, a shrinking early-stage pipeline, and a bleak fundraising market for venture capital funds in Canada.

Sfalcin told BetaKit that IGF III’s first close was raised in roughly six months, and that Yaletown aims to hold its final close within the next year. He attributed the speedy raise to the performance of IGF II, which was “generating distributions on an ongoing basis back to LPs.”

IGF III will typically invest in Series A and B stage companies in North America with a “strong bias” to back Canadian companies, Sfalcin said, but other factors like cheque size and the fund’s timeline are “dependent on market conditions.”

Under what it calls an “intelligent industry thesis,” Yaletown IGF III will invest in digital infrastructure technologies such as advanced analytics, edge computing, networking, and physical AI, Yaletown said. The firm added that its fund is designed to back companies driving productivity, resiliency, and sustainability in the energy, manufacturing, logistics, agriculture, and transportation industries. The fund has yet to deploy capital, but it currently has “a couple opportunities in diligence,” Sfalcin said.

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, Montréal, and San Francisco.

Yaletown said this recent close brought its total active funds under management up to approximately $600 million. Some of its portfolio companies include Elevated Signals, Innerspace, and Inverted AI.

CORRECTION: A previous version of this story said the Canadian Pension Plan was a limited partner in IGF III. In fact, an undisclosed Canadian pension fund is a limited partner.

Feature image courtesy Yaletown Partners.