Bridgescale Is Hot for Canada, Leads Series A for Toronto’s Rypple

Bridgescale Partners, which is known more for its growth stage investments, is making some waves in Canada.

The Menlo Park, Calif.-based firm, which has an office in Toronto, announced earlier today it led a $7 million Series A for Toronto-based Rypple, which develops HR software that makes it easier for employees and managers to share feedback about each other’s performances within their organizations.

The investment is Bridgescale’s third deal in Canada this year, and the firm plans to announce a fourth Canadian investment “in the next few weeks,” said Toronto-based Partner Howard Gwin, a former senior executive with PeopleSoft, who is joining the Rypple board.

Bridgescale appears to be taking advantage of a major investment lull in Canada. The market has been shrinking, and investors there are pessimistic, according to the 2010 Global Venture Capital Survey conducted by Deloitte and Canada’s Venture Capital & Private Equity Association. The survey reported earlier this month that two-thirds of Canadian respondents expect the number of venture firms to decrease between now and 2015.

Given that climate, it’s not a stretch to assume Bridgescale is finding some good valuations up north.

Venture Capital Journal , an affiliate of PeHUB, recently reported that now is a particularly good time for U.S. firms to scout for Canadian deals, with very little competition to contend with and a significant change in the country’s tax code that eliminates restrictions that made it onerous for U.S. VCs to invest in Canadian companies. VCJ subscribers can read that in-depth story, “D’oh! Canada,” here.

Besides Bridgescale, the investors in Rypple’s Series A included previous investors Edgestone Capital Ventures, Extreme Venture Partners and individual investors Peter Thiel (an early Facebook investor), Seymour Schulich, Joe Sigelman and Roger Martin (who also serves as director of Thomson Reuters, publisher of peHUB.com).

To date, Rypple has raised $13 million, including a large $6 million “seed” round from angels in late 2008. The Series A was an up round, according to Daniel Debow, the company’s co-chief executive.

Thanks to Rypple’s simplistic approach to HR software — which managers use to provide feeback to employees on an ongoing basis — the company boasts thousands of customers, including Mozilla, Rackspace, Digg and others, according to Debow.

“Facebook makes your social life easier, and we help to make your company’s HR more efficient,” Debow said.

Rypple is keeping its headquarters in Canada while it beefs up its presence in San Francisco, Debow told me earlier today. Debow added that it made a big difference to him to work with Bridgescale, which has offices in both countries. He said he has no plans to relocate headquarters from Toronto and that Bridgescale supports that decision.

“The propensity for many U.S. firms when investing across the border is to say, ‘Come on down’ to the U.S.'” said Bridgescale’s Gwin. “Our value proposition is that you don’t have to move to the U.S. if you’re a Canadian company. You can reach the U.S. market and take advantages of the opportunities there while staying in Canada.”