Vistara Capital’s third tech debt fund raises $100 mln in second close

Vistara Capital Partners held the second close of its third technology debt fund, bringing the total raised to more than $100 million (US$75 million).

Vistara Technology Growth Fund III, launched last October with a target of $130 million (US$100 million), is expected to reach its goal later this year, Managing Partner Randy Garg and Partner Noah Shipman told PE Hub Canada. “We’re feeling optimistic,” Garg said.

Current commitments to Fund III are well in excess of the total secured by Vistara Technology Growth Fund II in 2016.

The second close was anchored by two new institutions: the investment program of federal agency Export Development Canada and Nicola Wealth, a Canadian wealth management firm.

In all, more than 50 new and existing limited partners have signed on to Fund III. They include family offices, foundations and tech executives.

Fund III will maintain Vistara’s strategy of providing flexible debt and equity financing for mid- to late-stage companies looking to fuel growth without giving up control, resetting valuations or diluting ownership.

It will focus on bootstrapped and venture-backed tech companies across North America. Preferred sectors include enterprise software and such verticals as fintech, security and health tech.

The fund’s deeper capital pool will allow it to “do more and slightly larger deals,” Garg said. Fund II, now fully invested, backed six companies. Its successor will target up to a dozen.

Fund III will commit US$5 million to US$15 million per investment but can go higher by tapping into the co-investment resources of LPs, Shipman said.

The fund will be Vistara’s vehicle for ramping up exposure to deal flow in Ontario’s hot tech ecosystem. The Vancouver-based firm plans to do this by opening an office in Toronto later this year.

The location will give Vistara “feet on the street,” Garg said, and put it in “more conversations about growth financings.” The firm is on the lookout for new Toronto-based personnel, including a principal and senior associate.

Left to right: John O’Donoghue, Randy Garg, Noah Shipman and Kathleen Reaume.

More opportunities

When Vistara began investing four years ago, well-capitalized late-stage firms operating in Canada’s innovation space were relatively few, something that is now being addressed in fundraising trends.

There remains, however, a key gap between senior debt and VC that Vistara helps fill, Garg and Shipman said. They see more opportunities emerging as a result of increasingly active bank lending arms and growth equity funds.

Opportunities are also being spurred by other factors, Shipman said, such as companies deciding to “stay private longer” and preferring a debt solution to “accomplish certain objectives.”

For example, while Vistara most often backs organic expansion, it is investing in more secondary transactions that extend a company’s growth runway by buying out early VCs, he said.

Fund III has already made three investments, among them BitTitan, a Bellevue, Washington-based managed services automation company, which this month secured undisclosed financing.

In addition, Vistara this year led a $16 million (US$12 million) financing of FinCAD, a Vancouver-based solutions provider for derivative and fixed-income portfolios, and invested in CoolIT Systems, a Calgary-based liquid cooling tech platform.

Vistara means expansion

Vistara, which is Sanskrit for “expansion,” was founded by Garg in 2015. Before then, he was a managing partner of Beedie Capital, the private equity arm of Canadian real estate developer Beedie Development Group.

Shipman joined in 2015 from Canadian mid-market tech advisor Garibaldi Capital Advisors, where he was a principal.

Other investment team members include Senior Associate John O’Donoghue, who joined two years ago from Ireland Strategic Investment Fund, where he was a PE analyst.

And in February, Vistara recruited a second senior associate, Kathleen Reaume, a former tech executive who most recently served with MealPal, a New York-based subscription lunch service.

(This story was corrected to note that current commitments to Fund III are well in excess of the total secured by Fund II in 2016.)