Halifax’s Cluster of Venture Capital Funds Is Evolving

Posted: December 7, 2022

When Ozge Yeloglu started her IT startup TopLog in Halifax in 2012, there were precious few investment groups she could go tap for funding.

The startup managed to receive funding from BDC Capital and Innovacorp, but there weren’t a lot of other investment shops. So Yeloglu, now a Vice-President of Advanced Analytics and Artificial Intelligence at CIBC, is delighted to see the evolution of the venture capital industry in Halifax and Atlantic Canada.

“I was a founder myself a long time ago, and it’s great to see all the changes, from the founders’ perspective,” said the graduate of the Dalhousie University Faculty of Computer Science.

She made the comment during a panel discussion at the recent InnovateNB celebration on the changing face of venture capital in Atlantic Canada. That panel drove home an important trend in the Halifax innovation space: the Nova Scotian capital is developing a really interesting venture capital cluster. There’s a growing variety of VC funds, from pre-seed to seed-stage, and several targeting specialized markets. What’s more, Saint Mary’s University is offering courses in VC investing, and oversees Canada’s only student-led VC fund.

Students not only manage but also raise funds for the university’s Venture Grade VC fund, which has invested in startups in Atlantic Canada and beyond. While the aim is to provide education for the students working on the fund, its participants are also determined to make a profit for its backers. SMU also hosts the Canadian portion of the international Venture Capital Investment Competition, and is the only Canadian university to compete in the U.S. VCIC program. “Saint Mary’s University is the most comprehensive venture capital program in Canada and the U.S.,” concludes Prof. Ellen Farrell, who oversees the program.

The SMU program stands as a symbol of how the VC community has changed in the Nova Scotia capital.

Time was when Halifax was home to only two VC funds – Innovacorp and the now defunct GrowthWorks Atlantic. Innovacorp has been integrated into Invest Nova Scotia, the new provincial economic development agency, and this entity is expected to continue Innovacorp’s pre-seed venture capital activity. The group averaged $5.9 million over the past two fiscal years, according to the most recent accountability report.

The city’s VC industry began to change about a decade ago, when the provincial government recognized that there was no Atlantic Canadian VC fund that was making investments in the $1.5 million to $4 million band. (Today, this band is loosely referred to as seed-stage funding, though the definitions of “seed stage” tend to change depending on who you’re talking to.)

Investment veterans Patrick Keefe and Rob Barbara were chosen to lead the fund, which is based in Halifax but invests largely in startups based across Atlantic Canada. Build has now raised two funds and invested in 20 companies.

In 2019, Concrete Ventures got off the ground, looking very much like Build in that the focus of its investment is Atlantic Canadian companies. The difference is that Patrick Hankinson, the managing partner of Concrete, focuses on pre-seed companies. Still in its first fund, Concrete has built up a portfolio of 18 companies.

Though the number of investment funds was increasing, Atlantic Canada was plagued by a problem that crops up in startup communities around North America: the underfunding of startups headed by women. Like other parts of the world, startups led by women in our region customarily attract about 8 percent of the total VC and angel funding. So, a group of Atlantic Canadian business women – including Halifax residents Rhiannon Davies and Sarah Young – launched Sandpiper Ventures, a $20 million fund managed by women to invest in female-led ventures, mainly in Atlantic Canada.

This year, Halifax-based Tidal Venture Partners has come into being and is making its first investments. In November, the fund announced its first investment, in TheProgram.AI, which is developing a white-label app that distributes sports-related augmented reality content to children.

These funds are all up and running, and now a new wave of funds with specific goals are either raising capital or in the planning stages.

Halifax-based Last40 Ventures, whose partners include some Innovacorp veterans, is raising money to back companies that aim to reduce greenhouse gases in the atmosphere through carbon capture. One interesting facet of this fund is that the partners are agreeing that their final payment will be based not only on financial returns but also on how much carbon their portfolio companies actually capture.

Another environment-focused fund that has been raising capital is the Charlottetown-based NPC Ventures, which will be managed by former Innovacorp CEO Malcolm Fraser. It will back companies that are making products out of natural materials, or improving processes that involve substances found in nature. Fraser said he expects to make investments in 2023.

And finally, Tribe Network is considering starting its own VC fund. Tribe helps and supports idea- and early-stage venture capital owned by entrepreneurs who identify as Black, Indigenous or People of Colour. The group is considering whether to launch a VC fund because its more successful startups will need capital to grow.

The financiers and former founders who are developing these funds speak with optimism about their prospects. Even if there is a recession next year, said one, the period when VC funds statistically perform the best is in the three years after a recession. And Halifax and the region are going through a renaissance in entrepreneurship.

“People are changing their attitudes,” said Jonathan Saari of Last40. “Instead of being obsessed about being a big fish in a small pond, people are talking about making the pond bigger.”

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