One of Canada’s few prominent “seed-stage” technology venture capital firms, Ottawa’s Mistral Venture Partners, is closing in on its goal of raising $50-million for its third fund to back startups hoping to reshape the postpandemic economy.
Mistral, led by veteran venture capitalist Code Cubitt, was set to start raising the fund last March, but delayed plans as the pandemic took hold. However, Mr. Cubitt said he went back out two months later at the behest of his anchor investor, Business Development Bank of Canada. So far, Mistral has raised $41-million for the fund – including backing from BDC and fund-of-funds investor HarbourVest Partners. That surpasses the $20-million and $33-million Mistral raised for its 2014 and 2017 funds, respectively.
“We’re thrilled where we are,” said Mr. Cubitt, an early investor in some of Canada’s most notable startups, including Calgary’s Symend Inc., Toronto-based Sensibill Inc. and Ritual Technologies Inc. “We have a good formula for seed investors that will be highly profitable.”
Mr. Cubitt said the economic dislocation caused by the pandemic, resulting in more rapid adoption of internet tools for e-commerce, education and workplace communications, has “shaken loose so many opportunities” for entrepreneurs. “I couldn’t be more thrilled to have a fresh bag of capital to invest after a pandemic because the whole world will change. There’s now a chance for renewal, a fresh look at everything, from digital identity to virtual reality to how we work and play and live.”
Mistral, the only active early stage capital firm based in Ottawa, had an unusual start. In 2012, Mr. Cubitt, who previously managed money in Silicon Valley for the venture capital arms of tech giants Ciena and Motorola, moved to Canada’s capital at the behest of Bruce Lazenby, then head of local economic development agency Invest Ottawa. Mr. Lazenby was keen to stimulate the local technology scene, which was reeling from the demise of Nortel Networks. Mr. Cubitt was sold on the pitch and the chance to have a more affordable and balanced family life away from the Valley and to back promising local companies that needed capital. The timing was good as Canada’s venture capital and innovation sectors were in the early stages of a revival.
Since then, Mistral has backed 31 companies, primarily enterprise software firms across Canada with a handful in the United States. Mr. Cubitt typically invests $250,000 to $500,000 to start in early stage companies, in the hopes the enterprises get their products to market, gain customers and attract interest from larger investors within 12 to 18 months. Mistral then typically invests $1-million to $1.5-million more for each company as part of larger venture capital financings; 17 Mistral-backed companies, more than half the portfolio, have made it to that level, winning backing from such prominent U.S. financiers as Sequoia Capital, Bessemer Venture Partners and Insight Partners, as well as Canada’s Georgian, Inovia Capital and Radical Ventures. Six Mistral-backed companies have been sold.
“They’ve had a whole pile of really good hits that were followed on by traditional venture capitalists,” said former Cognos chief executive Rob Ashe, one of 25 “executive fellows,” prominent tech executives primarily from Ottawa who have helped Mistral source deals, advise portfolio companies and invest in its funds.
Other Mistral fellows include Shopify vice-president Luc Levesque, Solace chief marketing officer Mychelle Mollot and lawyer Debbie Weinstein.
Nicolas Gravel, BDC’s director, fund investments, said Mistral’s “performance is good” to date, owing to the fund’s discipline and the fact its seed investments have had a much lower “mortality rate” after their initial investment than the 50 per cent that was originally anticipated.
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Sean Silcoff