Data & Analysis

CVCA Q3 2017 Quarterly Exclusive: Yaletown’s Knockout 2017

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This article is part of a new series, CVCA Quarterly Exclusive, written and published by the Canadian Venture Capital and Private Equity Association. This series provides an analysis of the CVCA’s most recently published VC & PE Canadian Market Overview through expert commentary and perspectives.

When Yaletown Partners was founded in 2001, it was to fill a gap its founders saw in the pre-revenue and pre-product market in British Columbia. Within two years, Vancouver-based Yaletown had launched a $30M fund, becoming one of the few managers of its kind in the country to successfully finance in the aftermath of the dot-com bubble.

Then, in 2009, on the heels of another market meltdown — the much broader global financial crisis — Yaletown unveiled a second, $100M fund to support promising startups with revenues of between $5M-$8M. That second fund has produced some high-profile exits, including artificial intelligence machine learning technology company, BitStew Systems, which was bought by General Electric for $205M in late 2016.

Yaletown, which made 7x its initial capital on the BitStew and was awarded the CVCA’s 2017 Venture Capital Deal of the Year Award for the transaction, hasn’t rested on its laurels. So far in 2017, the company has made three significant investments in Canadian-based software and database management companies — PHEMI Systems Corp., Passportal and Tasktop Technologies Inc. — and recently closed its third fund. Details about the new, multi-million dollar Yaletown Innovation Growth Fund are expected to be announced in the coming weeks, but it includes predominantly Canadian institutional investors, including a large pension fund, as well as one foreign investor, so far.

Most Active Venture Capital Firms in Canada – YTD Q3 2017

Yes, it has been a very good year for Yaletown.

We feel we are in a really attractive investment zone right now, where the skill set of our team and the Canadian emerging growth investment opportunities fit naturally,” says Hans Knapp, Yaletown’s co-founder and partner.

PHEMI, a Vancouver-based big data warehouse vendor that helps companies with data management, privacy and governance, is a follow-on investment for Yaletown. It was part of a $10M venture financing announced in June alongside new investor Quark Venture Inc. and GF Securities, through the Global Health Sciences Fund, as well as other existing investors CTI Life Sciences Fund (CTI) and the BDC Capital Healthcare Venture Fund.

Accelerate Fund II, an early-stage angel co-investment fund in Alberta, managed by Yaletown Partners and The A100, also invested earlier this year in Calgary-based Passportal, which provides password security services and documentation management services.

Yaletown also participated in an $11.3M second-round funding of Vancouver-based Tasktop Technologies Inc., a software development and delivery company. The funding, announced in April, was led by AVX Partners, with participation from Austin Ventures.

Canadian Tech Companies Are Growing Up

Knapp says these 2017 deals to-date demonstrate how far along Canadian tech companies have come in recent years — and how the fund ecosystem is evolving.

Canadian tech companies are growing up and standing on their own,” says Knapp. It’s a good story. It means they’re hiring, getting more customers and all of the other things that happen with growth.”

That brings us to Yaletown’s new emerging growth fund. While the details are still under wraps, Knapp says the initial closing was completed a couple of weeks ago and the participants are an impressive crew.

We are thrilled about the strong level of participation,” Knapp says, which includes entrepreneurs from companies Yaletown has invested in over the years. They’re coming back after having a good experience with us – as well as members of the broader Canadian tech community.”

Salil Munjal, Yaletown’s managing partner, says the fund will be focused on enhancing sustainability and productivity in the intelligent enterprise sectors such as machine learning and the industrial internet of things.

For us, it was hugely gratifying,” Munjal says of the results of the third Yaletown fund. We are thrilled to have large, sophisticated institutional-grade, blue-chip type investors at the table, deciding they want to be participants in what happens in this sector over the next five-to-10 years.”

Knapp says the success of the new fund also shines a greater spotlight on what he sees as an emerging Canadian opportunity” in the tech sector.

It’s a good way to have investors provide a missing piece of this key part of the growth economy,” Knapp says.“At Yaletown, we feel we have been doing our share to help advance the Canadian venture ecosystem.”

To read more about Canadian venture capital activity YTD in 2017, read the full CVCA Q32017 VC & PE Canadian Market Overview here.