BDC Capital and CoolIT Systems Win 2024 VC Regional Impact Award for Western Canada

CVCA Awards presented at Invest Canada ​’24 in Montreal on May 29, 2024. In 2024, CVCA’s regional impact awards were proudly sponsored by CIBC Innovation Banking.

Calgary-based CoolIT Systems is the leading liquid cooling solution provider for high-performance computing (HPC), cloud, and enterprise markets worldwide. Founded in 2001, the company is the de facto solution for preventing modern data centres from overheating at a time when traditional approaches like pumping in cold air no longer suffice. Instead, CoolIT deploys its scalable liquid cooling solutions, which feature its modular, rack-based direct liquid cooling technology, to individual servers. As a result, not only do data centres remain cool, they also benefit from dramatic increases in rack density, component performance, and power efficiency, all while driving considerable environmental benefits. 

“Semiconductors and graphics processor units have always given off a tremendous amount of heat,” explains CoolIT CEO Steven Walton. ​“With the advent of artificial intelligence and machine learning, and the amount of computing power required to support those technologies, keeping data centres cool has become a much bigger challenge.” CoolIT’s devices solve that problem by extracting heat from individual servers and converting it into cooler air. 

While CoolIT has been a successful business for more than two decades, much of its growth has occurred over the past couple of years. By 2021, the company had reached a point where it was ready to recapitalize its balance sheet. ​“Up until that time we had largely relied on a diverse investor pool and were ready to professionalize the business by bringing on a much more sophisticated partner.”

That partner was BDC Capital, the venture arm of BDC with multiple funds focused on early-stage Canadian companies, including one specifically aimed at climate tech. ​“The BDC Capital team was the perfect choice,” recalls Walton. ​“They got our vision, were fast and flexible, and brought the expertise we were looking for.” 

CoolIT had long been on the radar of Calgary-based BDC Capital Partner and Team Lead, Cheri Corbett. ​“I first met them in 2015 and got to see their tech while doing a walk through of their facilities,” she says. ​“At the time, they were focused on the personal computer market and weren’t quite a fit for us. Still, I was intrigued and decided to keep tabs on their progress over the years. By 2020 their business had evolved to focus on data centres and had experienced a significant uptick in revenue. It had also become clear that they were poised to make a real impact on reducing greenhouse gas emissions, which dovetailed perfectly with the goals of our Cleantech Practice.”

In March 2021, BDC Capital closed a financing round with CoolIT and Corbett took a seat on the board. She and the BDC team immediately began to play an active role in helping to scale the company, paying particular attention to the data centre side of the business. 

“BDC was a fantastic and highly collaborative partner that really helped us grow our operations,” says Walton. ​“They rolled up their sleeves and worked with us on a variety of strategic initiatives, including developing value creation plans and realigning our financial structure. They also made many valuable introductions for us, including to Christine McGinley, who joined as an independent board member and ultimately played a key role in facilitating our exit.”

During the investment period, CoolIT experienced dramatic growth, with sales skyrocketing from $60 million to $155 million per year. The company also saw its headcount expand from just over 100 to more than 350 employees and grew its manufacturing and office space in Calgary by 100,000 square feet.

“As we continued to grow, we knew we’d need additional capital,” says Walton. In 2023, the company was approached by KKR and Mubadala Investment Company, a sovereign wealth fund from the Emirate of Abu Dhabi, that could help drive that next phase of growth. CoolIT was ultimately acquired for US$270 million in what was a terrific outcome for all stakeholders and a key step toward positioning the company for global expansion.

“Without our technology, it would be impossible for companies to deploy artificial intelligence,” notes Walton. ​“Over the next 18 months, we anticipate that our products will go from being in 5 percent of the world’s data centres to being in over 80 percent of them. We’re excited for what’s to come and very grateful to BDC Capital, and to Cheri in particular. She took a chance on a Canadian company that had an incredible vision but needed considerable professional support. She gave us that support on a weekly basis and always went above and beyond for us.”

Corbett and the BDC Capital team couldn’t be happier with the outcome. Although they were only invested in the company for less than two-and-a-half years, the exit presented an opportunity to deliver exceptional returns to many of CoolIT’s seed and early-stage investors, BDC’s shareholder, and other stakeholders. The deal generated great returns, and BDC Capital ultimately earned the Regional Impact Award in Western Canada for its work with CoolIT Systems. 

“It’s a real honor to win, particularly as this is my first exit from our initial fund,” says Corbett. ​“It’s also wonderful to have been a part of a business that has made such an economic impact on Calgary. CoolIT has a bright future ahead of it — one that will be very beneficial to the well-being of both the province and the planet.”