Entrevestor’s Wrap-Up Of The Year
January 02nd, 2014
Robert Niven walked into the CarbonCure Technologies holiday party earlier this month with an expression that was equal parts elation and weariness. Not only had the company’s Founder and CEO spent the week closing a few sales deals, he had also announced a $3.5 million round of financing led by BDC Venture Capital to fund R&D and expand its sales team.
The Halifax cleantech company, which is pioneering a low-carbon process of manufacturing concrete products, was part of a healthy trend that developed in the Atlantic Canada startup community in 2013 – a growing flow of institutional money coming into the region from elsewhere.
This trend is no accident. The Atlantic Canadian ecosystem has been improving since two companies founded in New Brunswick, Radian6 and Q1 Labs, announced exits in 2011. In fact, there was a succession of new programs and events unveiled in 2013 alone that are focused on attracting capital from institutional investors.
“There are three reasons this funding has happened this year, and I think it started with Radian6 and Q1 Labs winning the CVCA Deal of the Year awards back to back in 2011 and 2012,” said Gerry Pond, Chairman of East Valley Ventures investment and mentorship group in Saint John.
Pond also said that the Atlantic Canadian ecosystem now features more incubators, accelerators and support organizations than ever before, and they are nurturing the quality of company that attracts capital. Finally, he said the “next generation” of angel investors in the region, such as GoInstant Co-Founder Jevon MacDonald and Clarity Founder Dan Martell, has excellent ties with funders outside the region and are helping to develop these links.
Most institutional investment in Atlantic Canada has traditionally come from by local VC institutions, such as provincially backed Innovacorp, Nova Scotia Business Inc. and the New Brunswick Innovation Foundation, or the labour-sponsored GrowthWorks Atlantic. In 2012, for example, there were no announcements of institutional financings of more than $1 million from outside the region.
This year, the biggest investment deal was actually a buy-in from a private equity firm – Toronto-based Imperial Capital’s $17 million investment in Halifax pharmaceutical services company STI Technologies Ltd. That was followed by Karma Gaming of Halifax, which raised a total of $5 million from: Rho Ventures, a leading VC fund based in New York, Silicon Valley and Montreal; Vanedge of Vancouver; and Halifax’s Innovacorp.
Neurodyn Inc., the Charlottetown biotech developing early treatments for neurological diseases, raised $1.5 million, mainly from the Regis Duffy BioScience Fund Inc. of Charlottetown and Mertz Holdings, a family-owned investment fund based in Houston, Texas. Analyze Re, a Halifax company that provides risk assessment for reinsurers, raised almost $1.4 million from Innovacorp, BDC Venture Capital of Montreal and Rho.
BDC first invested in Analyze Re by offering $150,000 convertible notes to select graduates of the Launch36 accelerator, one of several Canadian accelerators to benefit from the program. Other Launch36 grads that received the notes were R17, formerly RUMAnalytics, of Saint John, Eigen Innovations of Fredericton, FoodTender of Moncton and topLog of Halifax.
Another development this year that is helping with follow-on funding is the launch of Build Ventures, the regional VC backed by the three Maritime provinces, BDC and private investors. The fund made two investments this year, $1.5 million each in Introhive of Washington and Fredericton, and Affinio of Halifax.
Finally, the development of growing Atlantic Canadian companies got a boost from the opening of the incubators Volta Labs in Halifax in May and Planet Hatch in Fredericton in September. Between them, they have graduated four companies that have reached milestones forcing them to find other accommodations. The growth of Startup St. John’s in Newfoundland and Labrador complements the establishment of these startup houses.
CarbonCure’s Niven warns that recent exits have not quite created the recognition for Atlantic Canadian startups that you might expect. “However, our tech startups are emboldened with unprecedented confidence, access to capital and experience,” he said. “While the threshold is the same, our startup communities are just much better equipped to close the deals. Success breeds more success.”