Innovacorp has exited from an investment it made last century, booking a return of 12 times in the process.

The Nova Scotia government’s venture capital and innovation agency said Friday that its portfolio company Kivuto Solutions Inc. has been sold in a private equity deal. No information on the price was released, but Innovacorp Vice-President of Investment Charles Baxter said in an interview that the provincial agency made 12 times its money through capital gains and dividends.

“Within what we call the legacy portfolio, the companies we invested in before we changed our investment model in 2011, it’s the largest return that we got on any of those companies,” said Baxter.

CEO Ram Raju founded what was then known as e-Academy in Halifax in 1997 to simplify the management and distribution of software in higher education. Two years later, Innovacorp invested in the company, and not long after that Raju moved the company to Ottawa, changing its name to Kivuto.

The disappointment Innovacorp felt at losing the company to Ontario was softened by the fact that the company did well – so well, in fact, that for several years now it has paid dividends to its investors, including Innovacorp back in Halifax.

Now the company has been sold in an equity-and-debt buyout put together by Calgary-based Legado Capital and Roynat Equity Partners, which is a subsidiary of Scotiabank.

Kivuto is best-known for two products: OnTheHub, a network of custom school-branded online stores that provides students with discounted academic software; and Texidium, an eBook adoption, delivery and reader solution.

The company has worked with leading software publishers with the goal of developing academic programs that provide students with the tools and skills they need to be successful in the workforce. These programs are designed to give students and faculty low- to no-cost access to top-tier products provided by publishers.

“Kivuto has built a great team of professionals that has driven much of the company’s success over the years and we’re thrilled to be a part of this world-class organization,” Jeff Blacklock, managing partner of Legado Capital, said in a statement.

What the deal means for Innovacorp is money in the bank. It’s the Crown corporation’s first exit since Analyze Re sold out for US$9.5 million ($13 million) to Jersey City, N.J.-based data analytics company Verisk Analytics in October, 2016.

A return of 12 times looks good on paper, but the celebration is tempered by the fact that it took 19 years to cash out. VC funds assess their success on internal rate of return, or IRR, a measurement that considers not only the final return but also how long it took to get their money.

“If you told me I could make that [a 12-times return] in my RRSP back in 1999, I would have had a big smile on my face,” said Baxter. “Twelve times money is a good return. But the IRR is not what a VC firm would be looking for given the time involved.”

The exit is also a chance to make money from the legacy portfolio. Most of the companies in this group have failed (which is not uncommon in a VC portfolio) and it still includes three Halifax-area companies that are growing: SimplyCast, Medusa Medical Technologies, and DGI Clinical.

Oddly, the Kivuto news came out on the same day that the media were reporting on another EdTech company that began in Halifax during the dotcom boom -- the news that Knowledge House insiders were convicted of fraud. Baxter did not comment on Knowledge House, but he said it would have been better for the province if Kivuto had remained in Halifax. 

"Obviously, we want to see companies like this grow here and be a contributor to the Nova Scotia economy," said Baxter. "But the landscape today is a lot different than it would have been in 1999. I’m confident that if we had the same opportunity today that we would see that company grow here."


Disclosure: Innovacorp is a client of Entrevestor.