Behind The Fundraise With Vistara Growth
In our latest “Behind the Fundraise” feature, we’re excited to delve into the story of Vistara Growth’s recent fundraising success. Just yesterday, the Vancouver-based firm announced a significant milestone for its latest Fund V, having raised over CAD $200M.
Fund V’s initial closing stands out not just for the amount raised but also for how it was achieved. The fund garnered substantial support, primarily through increased commitments from existing limited partners, reflecting the strong confidence and trust in Vistara Growth’s strategy and vision.
Since inception in 2015, Vistara has raised over US$500 million, primarily from non-institutional sources such as family offices, entrepreneurs, and private foundations, predominantly based in British Columbia. With the ongoing growth of its platform, Vistara is now seeking to broaden its investor base by targeting pension funds and other institutional investors, and geographically by launching vehicles for both US and international investors. Vistara is targeting completion of its fundraise during the first half of 2024.
In this article, we’ll explore the nuances of their latest fundraise, offering insights into the current investment climate. Join us as we uncover the strategies, challenges, and triumphs behind Vistara Growth’s Fund V.
Could you provide an overview of Vistara Growth, including its formation, primary role in the investment ecosystem, and its vision?
At Vistara, we provide flexible growth capital solutions to mid-later stage technology companies across North America comprised of debt, convertible debt, structured equity, and combinations thereof to solve for a variety of growth capital needs. Having recently launched our fifth fund (target USD$400M), we are seeking to deploy $10M to $30M per investment. Founded, managed, and funded by seasoned technology, finance and operating executives, “Vistara” (Sanskrit for “expansion”) is focused on enabling growth for the ambitious entrepreneurs we invest in, our investors, our people, and the communities we operate in.
Founded in early 2015 by Randy Garg, we have raised four funds to date. Noah Shipman, who joined Vistara in 2015 has been involved in the formation and management of all investments made to date. Headquartered in Vancouver, we currently maintain a full-time team of fourteen individuals, including six based in our Toronto office. To date, Vistara has deployed over US$330M into 34 companies, with 15 exits and zero losses.
We participate in the tech financing ecosystem where our flexible capital solutions fill gaps between traditional technology bank lenders and VC / growth equity funds. As the venture capital landscape adapts to new market realities post-SVB, we are seeing an ever-increasing demand for flexible capital solutions to continue to support the growth ambitions of the companies we invest in.
What are your primary objectives and strategies for utilizing the funds raised?
- First Close (Completed November 2023): USD $150M
- Target Size: USD $400M
- Typical Investment Size: USD $10M-$30M
- Target Number of Investments: 18 – 24
Vistara targets investments in technology companies that possess the following characteristics:
- Maturity and Scale of Business: Targeting growth stage companies that range between $10-$100M in annual recurring revenues (“ARR”) with attractive gross margin profiles and other financial metrics.
- Nature of Business: Primarily invest in B2B Enterprise Software as a Service (“SaaS”) companies, including those companies that are horizontal in nature and those that are vertically focused on industries such as fintech, AI, cybersecurity, cloud / IT infrastructure, networking, and healthcare IT.
- Shareholder Considerations: Invests in both “sponsored” companies with institutional venture capital involvement, and founder-controlled companies, that have raised limited outside capital or “bootstrapped” through cash flows.
- Geography: US and Canadian-based companies, but will selectively consider companies with headquarters and operations in other geographies to the extent they have existing material operations or intend to focus expansion efforts in the US and Canada.
We are uniquely able to invest across the capital structure as debt, or in selective cases, as equity (typically via debt conversion) which we believe is another key differentiator, as this flexibility allows us to solve funding needs as compared to funds with more narrowly focused strategies.
We also differentiate ourselves as a “growth capital” or “growth debt” provider, distinct from “Venture Debt” as our investment thesis is not typically reliant on companies needing to raise additional venture funding to get to becoming cash flow positive.
Can you describe how the fundraising environment has evolved during your latest fundraise? What changes or trends did you observe, and how did they impact your approach?
As noted by Preqin, the global Private Credit market is currently estimated at USD $1.5T and is considered one of the most attractive asset classes as historical returns indicate similar or better returns with less volatility to public debt and equity strategies, while offering shorter duration compared to private equity and VC funds. The growth in demand for Private Credit has also been fuelled by the higher interest rate environment and ongoing challenges for regulated bank lenders.
Within Private Credit, Vistara has further established a differentiated strategy that offers the benefits of Private Credit coupled with the ability to participate in the upside of investing in the technology sector through equity features such as warrants or conversion.
Can you highlight some exciting portfolio companies or notable exits that exemplify Vistara Growth’s approach?
Select Examples of Portfolio Companies:
- Brim – Digital platform for the launch and management of credit cards (current)
- Kore.ai – AI-powered platform for Customer and Employee experiences (current)
- Zafin – Product and pricing software platform for global banks (current)
- Integral – Cloud platform for foreign currency exchange workflows (current)
- D3 Security – Cybersecurity “SOAR” platform (current)
Select Examples of Exits:
- Illusive Networks acquired Dec 2022 by Proofpoint
- Backstop Solutions acquired February 2021 by ION Analytics
- BitTitan acquired October 2021 by Idera Inc
- Investedge acquired September 2020 by US PE fund
- You.i TV acquired December 2020 by WarnerMedia (NYSE:T)
- Mobify: acquired October 2020 by Salesforce (NYSE: CRM)
How do you envision the future growth and evolution of Vistara Growth, especially considering the evolving landscape of growth capital solutions for mid-later stage technology companies?
We anticipate a sustained, vibrant market for flexible growth capital solutions, such as those offered by Vistara. As mid-later stage companies assess their needs, in many cases now under more capital efficient cost structures, there could be a greater demand for credit-oriented solutions with fewer companies making larger spending commitments that were historically funded by large successive equity rounds.
As the regulatory environment continues to tighten for bank lenders, it creates opportunities for private market funds to fill the gaps in providing longer-term growth capital. We partner closely with all the major bank tech lenders in Canada providing integrated solutions to meet the needs of growing tech companies.
What aspects of Vistara Growth’s future, the Canadian investment community, or specific technology sectors are you most enthusiastic about?
We continue to be excited about the opportunity at hand and the ability to deploy our latest Fund V across 18 – 24 growth-stage companies. Our hope is that at least 1/3rd of Fund V could be deployed into Canadian tech companies that meet our criteria to continue to support the Canadian tech ecosystem by filling an important gap in the market for growth stage companies. We have also invested in growing our team and establishing focus areas in key sectors (e.g. fintech, AI, cybersecurity, cloud/IT infrastructure, healthcare IT) as a way to look to add value and further differentiate ourselves as growth capital providers.