Win-win: Edmonton venture capital firm closes $10-million seed fund

‘There’s a lot of talent in this city, but you can’t do things alone, and you can’t do it without some sort of financing’

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A new venture capital fund could make Western Canada fertile ground for some growing tech startups.

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On Tuesday, Edmonton-based announced the first close of Sprout Fund II, a new seed fund that raised nearly $10 million in capital. Kristina Milke, a partner with the firm, told Postmedia the fund aims to invest in 30 to 40 early-stage startups in Western Canada that provide software as a service (SaaS) in a business-to-business (B2B) capacity.

Startups selected for investment stand to gain more than just capital, Milke added, but also advice to help accelerate their growth.

“We will mentor and help them in any way that we can,” she said, “because if they win, we win.”

Sprout Fund II follows a pilot fund the firm launched in 2019 (Sprout Fund I), Milke added, which raised $1 million and invested in 10 companies — one in Ontario’s Kitchener-Waterloo region, four in BC and five in Alberta.

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Dryrun, an Edmonton-based company offering financial Modeling Software, was among the handful of local startups to gain funding through the pilot. CEO and co-founder Blaine Bertsch said the investment gave the company the push it needed to start building momentum, while guidance from prepared the startup for subsequent and larger rounds of funding.

“It’s like a snowball rolling downhill,” he said. “I credit them a lot for stepping up to the plate, not only with funding but also with advice and mentorship that helped us rapidly grow as an Alberta company.”

Milke said the first fund was fully deployed in July 2021, and most companies in the firm’s portfolio have seen a three- to 10-times increase in value in less than three years.

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The team behind Dryrun has grown from about three to nine people since receiving a slice of the pilot fund — the first outside investment the company had seen since launching in 2016, Bertsch said.

“There’s a lot of talent in this city, but you can’t do things alone, and you can’t do it without some sort of financing,” he said. “It’s a challenging place to raise money and grow a tech business like this.”

According to the Canadian Venture Capital Association (CVCA), an advocacy group for the private capital industry, Canada saw $14.7 billion in venture capital investment in 2021. Alberta reported to record-breaking $561 million in venture capital investment over that period — up 15.7 per cent from the previous year — but still fell behind Ontario ($7.9 billion), BC ($2.9 billion) and Quebec ($2.8 billion).

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CVCA also reported fewer deals in Alberta (87), compared to Ontario (291), Quebec (189) and BC (105).

Since receiving support from the first fund, Dryrun managed to secure funding from some local angel investors, Bertsch added, but now the company has broadened its scope to connect with funds south of the border.

Unlike its predecessor, Sprout Fund II is prepared to provide “follow on” or subsequent investments in some of the selected companies, Milke said.

In the meantime, she added, the firm will continue raising capital and is aiming for a second close on the new fund later in the year.

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