In a significant achievement for the Canadian venture capital landscape, Toronto-based Northside Ventures has successfully closed its first fund, reaching its $15 million CAD ($11 million USD) target. This milestone, particularly notable given the current challenging fundraising environment, underscores the firm’s potential and the strong backing it has garnered from a diverse array of investors.

Founded by Alex McIsaac, Northside Ventures has managed to secure the support of institutional investors, family offices, and individual tech founders and operators. The fund’s LPs (Limited Partners) include a mix of notable names such as Inovia Capital, Bain Capital Ventures, Intact Ventures, and Golden Ventures. This diverse investor base also extends to over 50 individual backers from leading global tech companies including Google, Uber, Affirm, and Deel, showcasing the confidence the tech community has placed in Northside’s vision.

A Bold Venture in a Tough Climate

The success of Northside Ventures’ fundraising is particularly striking given the broader context of the venture capital industry. The past year has been marked by a significant downturn in VC fundraising, with many emerging managers struggling to close their funds. In Canada, the situation has been especially dire, with 2024 on track to be one of the worst years for venture capital fundraising in over a decade. This environment has forced many VCs to either scale back their fundraising targets or extend their timelines, with some unable to close their funds at all.

Despite these headwinds, Northside Ventures not only met its target but did so with a strategy that founder and general partner Alex McIsaac described as an “institutional angel investor” approach. McIsaac’s experience spans various roles in the tech and venture capital sectors, including significant tenures at Northwater Capital, BDC Capital, and Global Founders Capital, where he honed his investment philosophy and approach. His ability to navigate this challenging environment and still achieve his fundraising goals speaks volumes about his tenacity and the strong relationships he has built over the years.

A Unique Investment Strategy

Northside Ventures focuses on early-stage investments, particularly in the pre-seed and seed stages. The firm targets startups with at least one founder who has a strong connection to Canada, and it emphasizes sectors such as artificial intelligence, vertical SaaS, FinTech, and cleantech. This focus on Canadian founders, even those building companies in the United States, positions Northside as a crucial player in the Canadian startup ecosystem.

To date, Northside has already deployed around 40% of its fund across 15 investments, supporting companies like Datacurve, Switch, Terminal, and Veritree. The fund’s commitment to backing Canadian entrepreneurs is evident, with two-thirds of its portfolio companies based in Canada. The firm plans to make an additional 15 to 20 investments over the next couple of years, maintaining its focus on Canadian startups while also supporting Canadian founders operating abroad.

An Institutional Angel Investor Approach

McIsaac’s strategy for Northside Ventures is grounded in his extensive experience in the tech and investment sectors. His time at Global Founders Capital, where he was the first and only Canadian partner, provided him with a unique perspective on early-stage investing. There, he was responsible for deploying nearly $40 million across 30 Canadian startups, including notable names like AutoLeap, Aviron, and Clutch. This experience has deeply informed his approach at Northside, where he seeks to combine the agility and founder-friendly approach of an angel investor with the resources and structure of an institutional fund.

This “best of both worlds” approach has been a key differentiator for Northside. The firm operates with the speed and flexibility typically associated with angel investors, allowing it to make quick decisions and provide timely support to founders. At the same time, it offers the resources, support, and network of a larger, institutional-grade fund, which is particularly appealing to startups in the early stages of their development.

Challenges and Triumphs in Fundraising

The road to closing Northside’s inaugural fund was not without its challenges. The broader downturn in the venture capital market meant that McIsaac and his team had to work harder and longer to secure commitments. Over the course of 18 months, McIsaac engaged with more than 700 prospective LPs, ultimately securing 77 commitments. The firm also saw significant interest from around 200 potential investors who expressed a desire to invest in future Northside funds.

The tough fundraising environment also meant that Northside had to be particularly strategic in its approach. Many LPs passed on the fund not due to a lack of interest, but because they didn’t have the necessary liquidity, or they were hesitant to invest in early-stage VC as an asset class. Despite these obstacles, McIsaac’s disciplined approach and relentless drive paid off, allowing Northside to meet its fundraising target.

Family offices, in particular, played a crucial role in Northside’s final close. McIsaac noted that these investors were more willing to commit once the fund had secured substantial commitments from other institutional and individual backers. This cascading effect helped Northside to cross the finish line and fully close its $15 million fund.

Looking Ahead: A Bright Future for Northside Ventures

With its inaugural fund closed, Northside Ventures is now focused on the next phase of its journey: deploying capital and supporting the next generation of Canadian tech entrepreneurs. The firm’s commitment to backing founders at the earliest stages of their journey, particularly those with strong Canadian ties, positions it as a key player in the ecosystem.

Looking ahead, McIsaac and his team are optimistic about the future. They plan to continue building Northside into a scalable venture capital firm, leveraging their unique institutional angel investor approach to make a meaningful impact on the Canadian startup landscape. As they prepare to make another 15 to 20 investments from this fund, Northside is poised to become a significant force in early-stage venture capital, not just in Canada, but across North America.

The Broader Implications for Canadian Venture Capital

Northside’s successful fundraise is also a positive signal for the broader Canadian venture capital ecosystem. Amidst a challenging environment, this success story demonstrates that there is still strong interest and support for early-stage Canadian startups. It also highlights the potential for emerging managers to succeed, even in tough market conditions, provided they have a clear strategy, strong relationships, and a deep understanding of the market.

As Northside Ventures begins to deploy its capital and support its portfolio companies, its impact will likely extend beyond just the startups it backs. By filling a crucial gap in the early-stage funding landscape, Northside is helping to ensure that more Canadian entrepreneurs have the resources they need to build and scale their businesses, ultimately contributing to the growth and vibrancy of Canada’s tech ecosystem.

In a year that has seen many venture funds struggle, Northside Ventures’ success is a testament to the resilience and potential of Canadian venture capital. With its inaugural fund now closed, the firm is well-positioned to make a lasting impact on the Canadian and North American startup landscapes, supporting the next wave of tech innovation and entrepreneurship.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

6th September, 2024