Inovia Capital raises $200 million first close for its sixth venture fund, targeting AI-exposed sectors

Inovia Capital, a 19-year-old Montreal venture capital firm, has raised a $200 million first close for its sixth venture fund. The fund will target 25 to 30 startups in sectors where artificial intelligence adoption is still early but poised to have a meaningful economic impact.

The first close matters for Canadian venture capital because it shows that one of the country's best-known firms is raising a new early-stage vehicle with a defined AI thesis. It is also the first step of a wider fundraising effort, and the Inovia sixth fund will be watched as a gauge of investor appetite for Canadian early-stage funds.

What happened

Inovia Capital announced a $200 million first close for its sixth fund. A first close is an initial closing of commitments, so the final size of the fund is not given in the material available here.

The firm said the vehicle will concentrate on 25 to 30 startups. It will focus on sectors where AI adoption remains at an early stage but is expected to have a meaningful economic impact.

Key figures on the raise and the firm's earlier funds:

• $200 million: first close of the sixth fund.
• 25 to 30: number of startups the fund is expected to back.
• 19 years: age of the Montreal-based firm.
• $600 million: raised for two new funds, reported in February 2019.
• $334 million: continuation fund raised in October 2021.
• US$1.9 billion: capital Inovia managed as of October 2021, according to reporting at the time.

What is Inovia's track record in fundraising?

Inovia has raised capital repeatedly over the past several years. In February 2019 it raised $600 million for two new funds, including a US$500 million growth fund designed for large rounds of US$50 million to US$100 million in fast-growing software companies.

At the time, the 2019 raise was described as one of the only private-sector funds in Canada geared toward large investments in fast-growing "scale-up" technology firms, and it was hailed as a significant step for Canada's tech sector.

In October 2021 the firm raised $334 million for its first multi-asset continuation fund. The round was led by new investor BlackRock and existing investor HarbourVest Partners, and included Northleaf Capital Partners, Hollyport Capital and Kensington Capital Partners.

That fund brought together nine of Inovia's highest-performing portfolio companies: Bench Accounting, Clearco, Top Hat, TrackTik, TripleLift, Vidyard, AlayaCare, AppDirect and Snapcommerce. Inovia had backed many of them for almost a decade.

A continuation fund lets a firm and its backers keep investing in fast-growing companies as they scale, rather than exiting once they outgrow the original fund. According to the 2021 reporting, this type of vehicle had gained popularity with venture capital and private equity firms as valuations surged, including at Toronto's Golden Ventures and Georgian Partners.

How has Inovia described its approach?

Inovia started as a funder of early-stage ventures and later expanded across growth stages. In 2021 the firm said it wanted to support entrepreneurs from early stage through to IPO, citing Lightspeed's initial public offering in 2020 as an example.

Co-founder and partner Chris Arsenault set out the ambition at the time of the 2021 raise.

“If you want to build giants, you need to have the means,”

Chris Arsenault, Inovia co-founder and partner, in an interview published on 14 October 2021.

He also pointed to Canadian public-market successes. According to Arsenault, “We have Nuvei, Lightspeed and Shopify, and that’s only the beginning.”

Arsenault also said the companies in the continuation fund were high-growth, high-potential businesses with strong management teams that Inovia had supported for a number of years. In his words in 2021, they had strong potential of doubling or tripling in size in the short term.

What did investors see in earlier Inovia vehicles?

BlackRock was drawn to the 2021 continuation fund by its mix of technology companies, according to Veena Isaac, managing director of BlackRock's Secondaries and Liquidity Solutions division.

In an email statement quoted in 2021, Isaac said the fund's diversified mix of high-growth, well-performing technology assets addressed a range of end markets, with meaningful remaining runway for growth.

The portfolio had also seen notable moves that year. Toronto fintech lender Clearco reached unicorn status with US$1 billion in April 2021 and became the first Canadian startup backed by SoftBank. Montreal healthcare software provider AlayaCare raised $225 million in a round led by Al Gore's investment firm to continue its U.S. expansion.

Why it matters

The Inovia sixth fund matters because it ties a Canadian early-stage fundraising to artificial intelligence adoption in sectors that are not yet heavily transformed. The stated focus is on areas where AI is early, rather than on AI infrastructure itself.

The size of the first close is smaller than the 2019 and 2021 raises, although those were growth and continuation vehicles rather than early-stage funds, so the figures are not like-for-like. The portfolio of 25 to 30 companies implies a concentrated approach.

For Canada, the raise adds to the supply of domestic venture capital at a time when the sources describe a firm positioning itself for the next wave of company building. Arsenault argued in 2021 that backing companies as they scale sends the message that Canada can build massive companies.

What are the risks and open questions?

The first close is not the final close, so the total capital the fund will gather remains open. The material available also does not state the fund's target size, its investor base, or the timetable for deploying capital.

Investing in sectors where AI adoption is early carries uncertainty by definition. The expected economic impact is the firm's view, and the pace of adoption in individual industries could differ from that view.

Earlier Inovia raises also show that the firm's strategy has shifted over time, from early-stage investing to growth and continuation capital. The sixth fund returns to an early-stage focus, and its results will depend on the startups selected.

What to watch next

The main catalysts are further closes of the sixth fund and the first investments it announces. The material available here does not name dated next steps, so no date can be given.

• Whether Inovia announces additional closes and the final size of the sixth fund.
• The identity of the first startups backed from the 25 to 30 planned.
• Which sectors the firm names as having early AI adoption.
• How the existing portfolio, including companies such as Top Hat, AlayaCare and Vidyard, develops.