BDC Capital has added to its team and refined the strategy for its $250 million Industrial Innovation Venture Fund as managing partner Joe Regan tells Venture Capital Journal the Canadian firm is ready to ratchet up its pace of investing.
“Even as we enter the summer, we’re seeing good-quality dealflow,” Regan said.
To help invest, Regan told VCJ the firm has brought on a number of people in its different offices in Montreal, Toronto and Calgary.
The new hires include Guillaume Mercier as partner. Mercier, who started in mid-March as covid-19 escalated into a pandemic, comes to the firm with years of operating experience. He previously was CMO of Vention and vice-president of marketing at SSENSE before that. Both companies are in Montreal, where Mercier is based.
The fund has also added principals Aditya Aggarwal and Jonathan Goodkey, as well as David Berkowitz in Vancouver and Juan Benitez in Calgary as venture partners.
Regan said the firm would like to add two more people to the fund, including another partner, but the firm has no target date to make another hire. “We’re being selective and want to find people who are the right cultural fit,” he said.
A year after launch
BDC Capital, the investment arm of the Canadian bank BDC, launched its Industrial Innovation Venture Fund in June 2019 to invest in tech companies that aim to modernize traditional Canadian industries. The firm intends to invest in early- and late-stage companies focused on advanced manufacturing, agriculture and food technology, drones, energy technology, mining technology, robotics and targeted artificial intelligence.
Regan says that since the launch last year, the firm has closed on two deals and is nearing a third. The announced investments include Precision NanoSystems, a Vancouver company that has the ability to manufacture vaccines and therapeutics locally at a lower cost, and MineSense, a sustainable mining company which is also in Vancouver. Regan said the third investment is in a foodtech company.
All three of the initial investments are late stage, but Regan said he expects that to change as the fund builds out its portfolio. He said he expects the first fund, backed entirely by BDC, will have about 20 portfolio companies.
Prior to the coronavirus, Regan said he was traveling every week, but that has since stopped with the national lockdown in Canada.
With three offices, he said the firm has relied on plenty of video conferences for the team to stay in touch. For the third as-of-yet unannounced deal for the fund, about 90 percent of the due diligence was completed before the lockdown started, so the coronavirus didn’t impact that deal as much. Regan admitted it may take a while to source new deals and to get a sense of what entrepreneurs are all about without in-person meetings, but said they are getting used to the changes of working from home.
Entering the pandemic, he said most companies were armed with about 18 months of runway. “Working backwards from that, I expect in nine to 12 months, we’ll see a slew of companies coming to market and looking to raise capital,” Regan said.
He also said that opportunities for BDC Capital’s Industrial Innovation Venture Fund are likely to grow as the economy enters a post-pandemic recovery. This will happen in part as traditional companies internalize the lessons of the down-cycle and begin turning to innovation to “build resiliency” in their operations.
Regan cited the example of bio-manufacturers, which, because of the pandemic, are looking for opportunities to build new supply-chain modular solutions. These solutions, he said, include such tech start-ups as the mining company MineSense.
“Following the health crisis, mining companies will be looking for profit recovery and digital tools to increase the precision of their operations.”
He added: “The coronavirus created a lot of uncertainty, but there will also be opportunities for us in VC.”
Kirk Falconer of affiliate publication Buyouts contributed to this story.