One reason that Atlantic Canada will boast record funding in startups this year is the evolution of the pre-seed investment groups in the region.
A back-of-the-envelope estimate of funding by venture capital funds and angel investors so far this year shows that we’re now up to about $120 million –surpassing the $116 million booked for all of 2017. The region will likely see about $150 million in funding this year – about three times the levels seen four to six years ago.
The big evolution in funding took place two or three years ago when large investors from outside the region began backing companies like Halifax’s Manifold and Kinduct and Fredericton’s Resson. Those $8 million-plus deals will continue to be the main factors in piling up investment totals. But there is something happening on the ground that is helping Atlantic Canadian companies access that first $500,000 to $1 million they need to get to market.
Every province now has at least one home-grown pre-seed fund, and they are about to get a boost. Serial entrepreneur Patrick Hankinson is launching Concrete Ventures, a fund that received $15 million from the Nova Scotia government this year. Though the fund – which will invest $100,000 to $750,000 at a time – is mainly funded by Nova Scotia, it will invest in companies in all four Atlantic Provinces.
In Nova Scotia proper, Innovacorp continues to do deals – lots of ’em. Vice-President of Investment Andrew Ray told Entrevestor last month that the provincial Crown corporation is on track to invest $10 million to $12 million this year. That’s double its annual investment levels in recent years.
Across the Bay of Fundy, the New Brunswick Innovation Foundation has continued to write cheques this year as it replaced its CEO. The non-profit backed by the provincial government has joined several funding deals, like those announced by Fredericton companies Eigen Innovations and Beauceron Securities. Its efforts are being complemented by two side-car funds (funds that add money to rounds arranged by other investors) overseen by Opportunities New Brunswick. Increasingly active, ONB joined the Eigen and Beauceron rounds, for example.
In P.E.I., the new Island Capital Partners has backed half a dozen companies, and has had a huge impact in terms of mentorship and community-building on the Island. In Newfoundland and Labrador, Killick Capital and Pelorus Ventures tend to invest in tandem, teaming up to ensure their portfolio companies have enough money to operate efficiently.
These are the early-stage institutions based in the region that usually invest less than $1 million a pop in companies that have a product and want to take it to market. This part of the ecosystem is stronger than it’s ever been. At the top, we have Toronto- and U.S.-based institutions making $8 million-plus investments, which are more active in the region now than ever before.
The piece that is in the works is the part in the middle. Halifax-based Build Ventures, which makes investments of $1.5 million to $3 million, is now raising its second fund, which will probably be about $60 million. It has commitments totaling $25 million from Nova Scotia and New Brunswick. Michelle Scarborough, BDC Capital’s Managing Director of Strategic Investments, said in a recent interview that BDC is in talks with Build about investing in its second fund. The cog in the funding machine to watch now is whether Build announces commitments from more backers.
Disclosure: Most of the funding agencies named in this column are clients of Entrevestor. They are Innovacorp, NBIF, Opportunities NB, ICP, Killick Capital, and Build Ventures.