VC firm raises $158m

Ventures West says close to half of its new fund will go toward B.C.-based investments

Glenn Drexhage

Despite gloom in the venture-capital industry, Ventures West Management Inc. has raised a record-setting fund that features a stellar lineup of Canadian investors.

Last week, the Vancouver investment firm announced the first closing of its eighth fund. Worth $158 million, Ventures West 8 marks the biggest Canadian venture capital fund raised this year.

It will be used to invest in early-stage biotechnology, communications, energy technology and information technology companies across Canada.

Many of those deals will be local. Robin Louis, Ventures West's president, said he expects the fund to invest in a couple of dozen companies.

"I would expect that close to half the investments will be here in B.C.," he added.

Ventures West 8 also features notable institutional investors, including most of the country's biggest pension funds.

Participants include the British Columbia Investment Management Corp., the Ontario Municipal Employees Retirement System, the private equity arm of the Ontario Teachers' Pension Plan, and the Business Development Bank of Canada. Other investors on board include the CPP Investment Board and Toronto's EdgeStone Capital Partners.

Kirk Falconer, director of research for Macdonald & Associates Ltd., which tracks venture investing in Canada, highlighted Ventures West's track record. "After three decades of...fundraising and investing in Canadian and American technology companies, it's small wonder that they've been successful, even in what is an extremely challenging fundraising environment," he said.

Richard Osborn, a partner at Vancouver's Greenstone Venture Partners, said the news was encouraging on a provincial and national basis. "Any time people close rounds, be it technology companies or venture funds, it's a good sign," he said. "More is more."

However, Steven Hnatiuk, a partner at local firm Yaletown Venture Partners, stressed that the venture capital climate remains cautious.

"I wouldn't extrapolate it to being a statement that limited partners are going to be rushing into venture funds across Canada," he said. "The purse strings are still very tight with institutional investors."

Louis, the current president of the Canadian Venture Capital Association, said Ventures West aims to commit about $8 million over a number of investment rounds into portfolio companies. Ventures West raised the latest batch of money due to the fact that its previous $235 million fund, Ventures West 7, was fully committed. That fund closed in November 2000.

Louis said there could be a second closing of the latest fund in upcoming months, noting that additional investors had expressed interest.

He didn't think this latest Ventures West fund would intensify competition in the local market.

Hnatiuk said the new fund didn't detract from Yaletown's opportunities, adding that he viewed Ventures West as a "highly complementary" investor. "Any time that there's more venture capital available to companies that are being built here in B.C., that has a positive impact on the future of the technology industry here."

Earlier this year Yaletown announced its debut $30-million fund, which was to remain open until the end of this year. When asked if the fund has raised additional capital, Hnatiuk replied: "We're still in active discussion with a limited number of institutional investors who are expressing interest in our focus."

Yaletown is targeting early-stage energy technology and information technology prospects in western Canada. Hnatiuk said Yaletown has looked at more than 300 companies since closing its fund in June. The firm should close one or possibly two deals by the end of 2003, he said.

Meanwhile, Osborn said Greenstone has not raised any new money this year, noting that the firm has lots of capital left to invest from its $40-million fund that closed in 2000.

He added that Greenstone had term sheets prepared for three new investments in B.C.

Business in Vancouver November 11-17, 2003 Issue 733