Raymond Fitzpatrick was positively giddy about the last deal he signed in 2018 – the US$18.5 million ($24.6 million) financing of Fredericton cybersecurity company Sonrai Security.
Fitzpatrick is the Director of Investment for the New Brunswick Innovation Foundation, the not-for-profit organization that oversees the provincial government’s innovation policy. It invested US$246,000 in the funding round, which was led by two Boston-area funds, Polaris Partners and TenEleven Ventures.
In an interview last week, Fitzpatrick wasn’t focused on the numbers so much as what the deal means to NBIF, the Fredericton tech sector, and the province overall.
“This deal from an NBIF perspective is huge,” said Fitzpatrick. “It’s the most experienced team that I have ever invested with . . . and the fact that it’s in cybersecurity, a strategic priority for this province, it really ticks all the boxes.”
Last year was a year of ups and downs for NBIF. In February, news broke that one of its portfolio companies, Fredericton-based KnowCharge, was suing the organization and the First Angel Network. Then NBIF’s small team suffered a few departures, most notably CEO Calvin Milbury in May. When I ran into Fitzpatrick at an event in July, he noted that NBIF continued to participate in funding rounds throughout it all. “We’re still writing cheques,” he said.
Indeed, as the year progressed, it became obvious that 2018 would be a year of record venture capital investment in New Brunswick, with NBIF participating in many of the largest deals. In the first six months alone, the organization had joined the US$15.2 million equity and debt round announced by Introhive and Resson’s C$14 million raise.
Morale at NBIF improved in October when the organization named Jeff White, an accountant with a world of experience in the tech space, as its new CEO.
Somewhere along the line, Fitzpatrick heard that Sandy Bird, the former CTO of IBM’s global cybersecurity operations, was developing a new cybersecurity company in Fredericton. The two had never met. So Fitzpatrick did something he hadn’t done since joining NBIF three years earlier: he sought out an entrepreneur with a view to a possible investment.
Fitzpatrick was blown away by Sonrai’s vision, team and technology, and hoped NBIF could join its first VC round. In mid-December he heard the company would be closing its round Dec. 28 and there was an opportunity for NBIF to participate if it moved quickly. The NBIF staff, lawyers and board all signed off on the deal speedily enough that it was in when the deal closed between Christmas and New Year. Fitzpatrick said the deal is helping to develop relationships with investors outside the region, which could benefit other New Brunswick companies.
The deal meant that New Brunswick companies raised about $75 million to $80 million in VC funding last year – a jump of about 400 percent from the previous year. The Canadian Venture Capital and Private Equity Association data for 2018 hasn’t been released yet, but it will probably show that Fredericton was the fifth hottest VC market in the country last year.
Beyond the numbers, Sonrai was the perfect deal for New Brunswick because the government has targeted cybersecurity as a key strategic industry in its economic development plans. Bird mentioned in a separate interview that he has been working with the Fredericton-based Canadian Institute for Cybersecurity, which already has about 50 to 60 people.
Fitzpatrick was jazzed to join eight-figure deals with Introhive, Resson and now Sonrai after a disappointing year of funding in 2017.
“With all the challenges we went through [last year], we look at this investment and it shows that companies can attract historic investment around here,” said Fitzpatrick. “To have three fairly massive deals shows that we may be bucking that trend.”
Disclosure: NBIF is a client of Entrevestor.