Bruce Croxon’s Round 13 Capital launches fresh take on late-stage tech fund

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One of Canada’s top technology investment bankers has joined Bruce Croxon’s Round 13 Capital Inc. to lead a new fund focused on giving maturing tech companies a final cash infusion as they prepare for a sale or to go public.

Sanjiv Samant, who most recently led National Bank of Canada’s tech underwriting practice and helped take Lightspeed POS public last year, will join Mr. Croxon, the Lavalife Corp. co-founder and Dragon’s Den Dragon, and Round 13 co-founder John Eckert in the hunt for investments for the fund. The trio finished raising $100-million for the Round 13 Growth Fund earlier this month. Round 13 will also announce a new $125-million early-stage fund Wednesday, after its original early-stage fund that first closed in 2017, bringing its total capital under management to more than $325-million.

Though many U.S. funds and Canadian investors such as Georgian Partners Inc., Ontario Municipal Employees Retirement System and Inovia Capital Inc. have emerged to fund later-stage private ventures in recent years, they traditionally invest in companies for five to seven years. The new Round 13 Growth Fund is aiming for much shorter hold periods.

The fund will target late-stage private companies, typically but not exclusively in software, one to three years away from going public or being sold, plus smaller public companies that need short-term financing. The founders believe those slices of the market are under-served for financing options in Canada.

“I look at the ecosystem here and I look at how many great companies there are, but we’re missing key components to help those companies along,” Mr. Samant said in an interview. “Nobody else in the market can really play that role of funding that illiquidity gap."

The founders believe their combined experience should serve their target market well. Mr. Samant spent more than two decades as a technology underwriter, leading Canaccord Genuity’s practice before joining National Bank in 2016. Mr. Eckert worked in M&A and public financing before spending more than 25 years as a tech investor. Mr. Croxon built and ran dating website Lavalife before selling it in 2004 for $176-million, then co-founded Round 13 in 2012 to focus on earlier growth-stage funding.

Round 13 wants to hold up to eight investments in its Growth Fund – Mr. Samant says there’s “more than enough” companies that would fit the portfolio. The founders hope to write cheques from the Growth Fund between $15-million and $25-million to co-invest in rounds totalling between $25-million and $100-million in size. They hope to make two to three investments over the next year.

While the Toronto Stock Exchange has had a dearth of tech IPOs in recent years, Round 13 says the timing of the fund is also aligned with the recent maturity of Canada’s tech sector. Even among smaller-capitalization companies on the junior TSX Venture Exchange, cash for short-term needs can be hard to come by – creating even more investment possibilities for the new fund, Mr. Croxon said.

“I don’t think it was nearly as big an opportunity five years ago," he continued.

Brent Layton, a former colleague of Mr. Samant at National Bank who is now managing director of CIBC’s capital-markets tech banking division, said the Growth Fund’s openness to a range opportunities could be beneficial in keeping Canadian companies from selling large pieces to U.S. interests.

“They have great flexibility to find companies and management teams that are onto something great, and supporting them with Canadian capital, which can keep the interest in the business in Canada,” Mr. Layton said.

One of the groups backing the new fund is the Central and Eastern Canadian pension fund of the Laborers’ International Union of North America, or LiUNA – a long-time Round 13 investor. Joseph Mancinelli, the LiUNA pension fund’s chair, said he’s received double-digit returns from Round 13′s earlier-stage investments. He said he was excited for the Growth Fund’s new angle on Canadian tech investment: “We feel very confident in the next five to 10 years, there will be a lot of other folks involved in Canadian technology-based companies that will be exiting.”