Taking issue with the notion that Atlantic Canadian startups face a major funding problem, Andrew Ray says the companies in the Innovacorp portfolio have raised $71 million in the last six months alone.

Innovacorp, the Nova Scotia government’s early-stage venture capital agency, did not participate in all those funding rounds, but it did invest more in the first six months of the 2010-21 fiscal year than it did in all the previous 12 months.

Ray is Vice-President of Investment at Innovacorp and he has a glass-half-full view of the current state of funding in Nova Scotia, possibly the region overall. He was speaking in an interview after Entrevestor reported that angel funding and early-stage investment fell in calendar 2019.

“When COVID struck, it was all about going through our portfolio and making sure they [the portfolio companies] had enough runway to get through about 18 months,” said Ray. Referring to the startup community in general, he added: “By and large, we haven’t had many companies shut down. COVID hasn’t hit our companies hard.”

He admits 2019 was a down year for Innovacorp but added that funding by the Innovacorp portfolio companies amounted to $71 million from April 1 to Sept 30. That figure includes the $16.9 million private placement of shares by Halifax-based Appili Therapeutics in June on the TSX Venture Exchange, but not the company’s earlier $10 million placement, which took place last winter.

It also includes a round by CarbonCure Technologies, which raised money from Amazon’s Climate Pledge Fund, Breakthrough, Microsoft, and other blue chip investors in September. CarbonCure didn’t release the size of the round, and Ray wouldn’t comment on it, but his $71 million total suggests it was a huge round.

See Also: Innovacorp Funding Dipped in 2019-20 as Big Deals Delayed.  

In the interview, Ray chronicled Innovacorp’s recent investment history without naming the companies that received the funding.

Innovacorp, whose fiscal year ends March 31, did seven investments between New Year and the end of March, said Ray, all of them worth $100,000 or less.

Then in the new fiscal year, it accelerated its funding. From April 1 to Sept. 30, Innovacorp made 15 investments worth a total of $3 million. As of today, it has six more deals approved worth $3 million, and Ray expects these to close this quarter.  

That means that Innovacorp so far this fiscal year has signed off on 21 investments worth $6 million, which is already more than the $2.5 million it invested in the 2019-20 fiscal year. 

“We still have a pretty strong pipeline,” said Ray. “We have another $3 million to $3.5 million that we will probably close in the next year.”

He added all these investments, especially the smaller ones, usually involve particpation by other investors, including angels.

“If we do [an investment of] $100,000 or less, usually the company is raising about $250,000,” said Ray. “We’re rarely going in those deals by ourselves.”

Ray also revealed, for the first time, data that showed the Innovacorp investment portfolio has improved in the past few years, and that the valuation of the portfolio has not been adversely affected by the pandemic.

For example, Innovacorp tracks the value of the paid-in capital on investments it made on the fund opened in 2010, and it is now worth 1.19 times the original investment.

For the fund opened in 2015, which Ray refers to as “Vintage 2015”, the multiple had improved to 1.52, better than the North American median of 1.42.

“[A multiple of] 1.19 is not good,” said Ray. “Historically, the bar for Innovacorp has not been as high as it should be, and the goal was that we could be an evergreen fund. With the Vintage 2015 fund, the idea was to be a top-tier venture fund. . . . [The current multiple] is not where we want to get to but it’s better than it was. It’s above average for Canada but it’s not the end goal yet.”


Editor's note: By coincidence, Innovacorp released its annual Accountability Report near the same date on which we had arranged an interview with its Investment VP Andrew Ray. The two subjects complement one another, but are two separate stories, so we decided to run them side by side. Innovacorp is a client of Entrevestor.