Montreal-based venture capital firm Panache Ventures has struck a deal to buy Commonwealth Ventures, a San Francisco-based investment and mentorship firm that helps Canadian startups raise money in Silicon Valley. Panache is also launching its second venture fund, targeting an initial close of $75 million. It anticipates having $50 million raised by the end of the year.
The deal will give Panache’s 93 portfolio companies access to Commonwealth’s programming, which includes a fundraising bootcamp that coaches founders on how to pitch to Bay Area investors.
Talking Point
Panache Ventures is acquiring San Francisco-based Commonwealth Ventures, an investment and mentorship firm that helps startups raise money in Silicon Valley. The deal is part of a broader strategy Panache plans to carry out with its $75-million Fund II, which it also announced on Monday. The fund will include bigger cheques than its first, said managing partner Patrick Lor, amid a glut of capital in the Canadian venture capital ecosystem.
Panache did not disclose how much it paid for the company. As part of the acquisition, Panache will gain ownership of Commonwealth’s intellectual property, and the U.S. firm’s CEO and founder Chris Neumann will join Panache as a partner, working out of Vancouver.
“It basically changes the mindset for founders,” Panache managing partner Patrick Lor told The Logic. “When you talk to early-stage investors in Canada, they’re typically slightly more conservative, sometimes a lot more conservative on valuations. And then when you go down to the U.S. and you start raising money, you’re probably seeing 10 times the valuations.”
Lor said three Panache companies have already gone through Neumann’s program, including workplace-solutions firm Dooly. The Vancouver-based startup raised US$80 million in May from a string of American investors, including Tiger Global and San Francisco-based Spark Capital.
“We wanted to give our companies in the portfolio an unfair advantage,” Lor said of why Panache acquired Commonwealth.
Lor said his firm is leaning toward keeping Commonwealth’s programs available exclusively to Panache portfolio companies, at least in Canada (Commonwealth also offers its programs to startups in the U.K.), but said it’s open to different structures that could include, for example, partnerships with startup incubators that offer participants access to the Commonwealth resources.
The deal fits with a broader strategy that Panache—which typically invests at the seed and pre-seed stages—plans to carry out with its Fund II raise, including focusing on scaling smaller firms in its portfolio. “We’re going to write bigger cheques, we’re going to provide more intensive programming and we’re really going to amp up the community portion of Panache,” said Lor. That means helping facilitate mentorship between later-stage startups like Dooly and firms in the earliest stages of fundraising.
Panache’s ambitions for larger deal sizes coincides with a glut of capital in the Canadian venture capital ecosystem. Mid-year investment has already eclipsed 2020 deal activity, according to the Canadian Venture Capital & Private Equity Association (CVCA), with companies raising $8.3 billion across 394 deals in the first half of 2021, up from $4.4 billion in 509 deals for all of last year. Megadeals of at least $50 million are driving the record activity. “More than half of the VC dollars in the first half of the year have gone towards later-stage or growth opportunities,” said CVCA CEO Kim Furlong in a statement about the results last month.
Also on Monday, Panache announced it has hired Roxanne Leduc—a former management consultant and marketing director with Bell and Car2Go—as the firm’s operations manager. Leduc will lead Panache’s community development strategy, which includes launching a new platform and database for portfolio firms to communicate and access resources to help raise capital and grow their businesses. Scott Loong, a business lawyer who founded insurtech startup Covera, is also joining the firm.
The Commonwealth deal is Panache’s first acquisition, and Lor said the firm has no immediate plans for more.