Malcolm Fraser is categorizing 2021 as an “unbelievable” year for Innovacorp, highlighted by the $104 million exit from Meta Materials Inc., the largest exit in the venture capital agency’s history.

In a year-end interview, the CEO of the Nova Scotia government’s VC agency said 2021 was a transformational year for the provincial and regional startup community because of large exits and funding and a continuing evolution of the ecosystem.

He added that that evolution needs to continue, and should include an ocean-focused early-stage VC fund based in Atlantic Canada. 

“The message here is the seeds that have been planted over the last 10 years by Innovacorp are bearing fruit,” said Fraser, a former entrepreneur who took the helm of Innovacorp in 2017. “The way we leverage our investments is increasingly effective at building strong companies and a strong ecosystem.”

The biggest story of 2021 was Meta Material’s listing on the NASDAQ in New York, which drove its market value to more than US$2 billion. (The value later settled at about US$800 million, which still makes it a unicorn in Canadian dollars.)

Innovacorp capitalized on the surging share price. It had invested $3 million in META and sold its shares for $104 million last summer, for a return of about 35 times. The provincial government, which is Innovacorp’s lone shareholder, then moved the $101 million windfall to general revenue, though some in the startup community had hoped the funds would be used to further develop the ecosystem.

Fraser said Innovacorp and officials from the government continue to discuss the matter, and are especially concerned with what the Crown corporation can expect to happen with returns from future exits. The good news, he said, is that the META exit (along with other transactions, like St. John’s-based Verafin’s US$2.8 billion exit) has convinced government officials and others of the wisdom of supporting the startup ecosystem.

“The return on that exit in the province’s eyes fully demonstrates that we’re great at what we do,” said Fraser. He admitted however that discussing “the process around how the money will be managed in the future will be a challenge.”

Overall, even after $101 million was removed, Innovacorp’s First Nova Scotia Fund is performing well, with several companies raising follow-on funding in 2021 or announcing exits. (The interview took place, for example, the day after Innovacorp portfolio company LeadSift announced it had been acquired by Boston-based media company IDG Communications.)

Fraser said that since 2010, Innovacorp has invested $62 million in 89 companies. The fund has received $111 million in returns from META, Leadsift and other exits. The fund is currently valued at $82 million, even after the money from the META exit was moved to the province.

Fraser highlighted the advances made in the oceantech ecosystem. He said the Ocean Startup Project has now distributed more than $2 million in non-dilutive financing, and that the Creative Destruction Lab-Oceans has assembled a unique mix of business people experienced in ocean industries and willing to invest in oceans startups.

When Fraser appeared at Entrevestor Live in October, he said what’s needed now is a VC fund based in the region that targets oceantech startups. He reiterated that need during the interview, saying investing in oceantech is different from investing in a sector like Software-as-a-Service. Most oceans products are both hardware and software, deployed in harsh environments and getting them to market can be tricky.

These fund managers “need to be leaders in understanding how to invest in this growth sector. So they need to have an understanding of how to commercialize products in this sector. . . .  Capital becomes an important piece of the puzzle, and we already have many of the other pieces in place.”

Frasier, whose five-year term with Innovacorp ends in September, said he hopes to remain at his post as he is excited about the developments in the startup space. He noted that someone had mentioned to him just that day that Canada has produced 17 new unicorns this year and two of them were Nova Scotian: Meta, and battery material company Novonix. (Novonix Ltd., is a publicly listed company based in Australia and valued at about C$4 billion, and it’s the parent of Bedford-based Novonix Battery Testing Solutions.)

“People are looking at what globally relevant companies we are developing here and we have to be proud of that,” he said. “That impact is being felt now and will be felt for years as the ecosystem grows.”

Disclosure: Innovacorp is a client of Entrevestor.