Nothing ventured, nothing gained

Robert Niven started pitching Pangaea Ventures two years before he secured funding from the Vancouver-based venture capital firm. Niven, the CEO and founder of CarbonCure Technologies Inc., regularly updated Pangaea investors on his company’s progress.

Based in Nova Scotia, CarbonCure has developed technology that injects waste carbon dioxide into concrete, making it stronger. The improved concrete enables concrete manufacturers to use less cement, thus cutting costs while allowing them to promote the use of a green product. CarbonCure has installed its technology in about 40 concrete plants, and Niven predicts that will grow to 110 plants by October 1.

In 2015, following two years of updates, Pangaea (which is focused on investments involving advanced materials) decided it was time to invest in CarbonCure, leading a $3-million Series C investment round that pushed CarbonCure’s total funding haul to $10 million. (Andrew Haughian, a partner at Pangaea, says his firm is eyeing a second Atlantic Canadian company for investment. “The main barrier [to further investment] would be availability of high-quality, entrepreneurial management talent,” he said.)

From Pangaea, Niven secured money and expertise that is difficult, if not impossible, to find in Atlantic Canada. Niven notes that Atlantic Canada is a good place to raise an initial round of funding. “But there are limits to how much funding you can raise here locally,” he said in an interview. “I would say all successful tech entrepreneurs in Atlantic Canada need to get their butts on a plane and go out and meet other investors.”

Atlantic Canada is not flush with venture capital, but the encouraging news for local entrepreneurs is that more venture capital firms are now hunting for deals in Canada generally. Last year, Alex Kolicich, a Canadian and partner at the San Francisco venture capital firm 8VC, said he is looking to invest in more Canadian companies. “We don’t [predetermine] what percentage of the fund is going to Canada, but there’s no limit to it,” he said in an interview. “It could be all of it. It could be none of it. It really depends on what opportunities we find.”

Similarly, Silicon Valley Bank, a long-time specialist in lending to startups and technology companies, is looking to increase its business in Canada. “We’re committed to growing on a global scale and Canada certainly is an important piece of that equation,” said Win Bear, a Silicon Valley Bank managing director based in Boston, who heads the bank’s Canadian growth effort.

A number of Atlantic Canadian companies have already secured funding from big name American backers.

Intel Capital was the lead investor in the US$9-million Series A round secured by Halifax’s Kinduct, whose athletic performance tracking and enhancement software is now used by 85 prominent professional and collegiate sports organizations, including 23 of the 30 teams in the National Basketball Association.

Travis McDonough, Kinduct’s founder and CEO, describes Intel (the California-based processor maker) as both an investor and partner. Intel invested shortly after Kinduct took part in the first-ever L.A. Dodgers Accelerator. McDonough moved to Palo Alto, Calif. last year and now regularly works out of Intel’s head office in Santa Clara.

“It really gives us a significant bubble wrap of credibility,” he said of securing investment cash from a Fortune 500 company. “You get instantly catapulted into the epicentre of the sports and technology space.”

McDonough noted that many employees from Intel’s sports business unit are now working on Kinduct projects. “That is just such an enormous benefit for a company like us, to get exposure to some of these great business and engineering and technical minds,” he said from Palo Alto. “It’s been a big coup for us.”

Patrick Keefe says such fund hauls are an encouraging indication that more money is clearly flowing into the region.

“It’s a very healthy sign for the ecosystem, that we are getting companies to milestones where they’re able to raise those significant rounds of financing from outside the region,” said Keefe, general partner at Build Ventures.

The $65-million Build Ventures account (funded by the four Atlantic Canadian provincial governments, other public sector entities, as well as private individuals, including Keefe) has invested in 13 Atlantic Canadian startups. Build now writes some of the biggest VC cheques in the region.

Keefe says the main funding sources in Atlantic Canada (such as the New Brunswick Innovation Foundation, Innovacorp, Pelorus Venture Capital, and East Valley Ventures) typically write cheques for less than $1 million and are often the “first money in”. Build Ventures typically invests after those entities, with cheques of between $1 million to $3 million. Atlantic Canadian entrepreneurs seeking larger funding amounts must seek outside investors.

“You would not find a single early-stage ecosystem in the world, whether it’s Halifax, Boston, New York, San Francisco, Toronto or Montreal, where there wasn’t a feeling that more capital was required,” Keefe noted in an interview. “There’s always more demand than supply.”

The Atlantic Canadian supply will increase if Keefe is successful in raising a second Build fund of roughly $65 million. He also notes that the interest of outside investors has been piqued by the sale of Halifax’s GoInstant, as well as by the exits of Radian6 and Q1 Labs, two New Brunswick-founded companies that were bought by Salesforce and IBM for a combined $1 billion. “Those exits caused people to sit up and take notice,” Keefe said.

Last June, agricultural giant Monsanto led a US$11-million Series B investment round in Resson, a Fredericton, N.B. company that is using drone technology and analytics to improve crop production.

Jeff Grammer, Resson’s executive chairman as well as a partner at Rho Canada Ventures, says Atlantic Canada’s ability to raise more venture capital lies in its strengths: ocean technology and agriculture. Grammer, who lives in San Jose, Calif. and commutes often to Canada, says centres of excellence in those two fields will create companies worthy of large funding deals.

“That will drive VCs to the region,” he said by phone. “Just like you have Monsanto come all the way to Fredericton, you’ll see more of these companies come to the region to invest in these hot sectors.”

The venture capital pool is growing in Atlantic Canada, but Robert Niven says it’s still essential for startup founders to look further afield.

“To me it would be a real sign of weakness if you did all of your fundraising here in the region. You really need to get out there into the larger, broader market,” said the CarbonCure CEO. “If you can show that you can raise capital from places like San Francisco or Boston or New York, you’re going and competing with the very best companies in the world.

“It really makes you stronger.”