Kensington Adds to Canadian Venture Pool With $228 Million Fund

  • Canadian venture capital funding grew 12 percent in 2016
  • Kensington draws investments from RBC, BMO, TD and Open Text

Kensington Capital Partners closed a C$306 million ($228 million) fund to invest in Canadian venture capital firms and startups, adding to the growing pool of cash available for early stage technology companies in the country.

The Toronto-based firm raised the money from Canada’s five largest banks, software company Open Text Corp. and the government of Canada, which put in a third of the funds.

Kensington joins a parade of venture capital firms that have announced new funds this year, including iNovia Capital Inc., Leaders Fund and Globalive Capital. U.S. venture capital firms including Sequoia Capital and Andreessen Horowitz have been increasing their presence north of the border too. Still, there are more than enough startups for everyone to invest in, Kensington Managing Director Rick Nathan said.

“The amount of activity has been growing at a much greater pace than the amount of capital,” Nathan said. “Of course if you’re the only one in town you’re going to be able to get better deals, but that’s not realistic anyway.”

In the past, Canadian entrepreneurs often blamed a lack of venture capital funding for forcing them to sell their companies early or relocate to Silicon Valley. A new wave of startups including Shopify, Kik and Hootsuite and venture capital firms including OMERS Ventures, iNovia and Version One Ventures have helped make it easier to grow companies in Canada.

Venture capital funding in Canada rose 12 percent to C$2.3 billion in 2015, approaching the growth rate in the U.S., where funding increased 16 percent to $58.5 billion in 2015, according to data from the Canadian Venture Capital Association and the National Venture Capital Association.

About half of Kensington’s fund has already been invested in other venture capital firms, but only 15 percent of the money has found its way to companies, Nathan said. The remaining half of Kensington’s fund will primarily go to direct investments in Canadian startups. The banks that backed the fund are the Royal Bank of Canada, Toronto-Dominion Bank, Bank of Montreal, Canadian Imperial Bank of Commerce and the Bank of Nova Scotia.

Kensington plans to invest about C$5 million in each of its portfolio companies over several funding rounds, Nathan said. He’s especially interested in cybersecurity, technology for the oil and gas sector, clean tech and digital media.

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