Ottawa venture fund Mistral raising second round with $35M goal

Four years ago, a Silicon Valley venture capitalist returned to Canada to start something bold: An Ottawa-based fund with a focus on Canadian startups.

The goal was to capitalize on Ottawa’s expertise in creating successful companies, and to bring the money raised during the tech boom off the sidelines into play.

Code Cubitt did that. Now he’s looking to do it again.

Since its inception in 2012, Mistral Venture Partners has raised more than $10 million and invested in a portfolio of 15 companies, most of which are Canadian, including Ottawa-based companies such as Klipfolio and the Better Software Company.

Mistral targets companies that are part of the “next generation of smart enterprise.” Technological change has been massive in even the past half-decade, with the rise of mobile and cloud-computing as powerful forces in the industry.

“The promise of the Internet 20 years ago is the reality of the Internet today,” Mr. Cubitt says. 

“Every business on the planet is being fundamentally transformed … We looked for companies that were selling into that shift.”

Investors in the fund include Minto’s Greenberg family, the Westeinde family and BDC Capital, the sole institutional contributor.

Now, Mr. Cubitt says he’s close to launching a second round with hopes of raising between $25 million and $35 million by December. While he has thus far heard a great deal of interest from investors new and old, he says he won’t declare victory until he’s got the money in the bank.

 

Capital in the Capital

“Our mission in life is really to A, spur this ecosystem and B, make sure that our companies are well-funded,” Mr. Cubitt says.

The idea of an Ottawa-based VC fund can be traced back to Bruce Lazenby, head of business development at Regional Group who at the time was CEO of Invest Ottawa. Mr. Lazenby says he lamented the days when funds were headquartered in Ottawa, hungry to make investments.

“After the bust, they all kind of went away … I thought it’d be really valuable to have more investments here,” Mr. Lazenby says, landing hard on the last word.

He turned his attention south, with the intention of finding a particular profile to lead such a fund: An expat with Silicon Valley experience, as well as young kids and an inkling to raise a family north of the border. Mr. Cubitt, he says, “fit that profile almost to a T.”

Prior to Mistral, the Canadian-born Mr. Cubitt worked as chief operating officer for Zephyr, a vital-signs monitoring company in Maryland, and was a venture partner with various American firms.

When asked why he was convinced an Ottawa VC fund could work, Mr. Cubitt laughs.

“Pure naivety,” he says. “It’s a really important ingredient, actually. All entrepreneurs have it.”

Mr. Cubitt saw the same thing in Ottawa that Mr. Lazenby did: A plethora of successful execs with money earned in the boom and nowhere to put it and a tech sector with potential, but limited access to capital.

“I bought into the idea. There are no other funds in Ottawa. There are lots and lots of smart people, so given the right guidance and the right amount of seed capital, we could make something interesting happen,” Mr. Cubitt says.

It didn’t hurt, he adds, that his wife was won over immediately after their initial trip to the city.

 

Building on success

The goal wasn’t to have a firm that invested only in local companies though, Mr. Lazenby says. It was more important that the first round was successful so that investors would be willing to reinvest in second and third rounds.

Mr. Cubitt says that so far, none of the original investors have turned him away when he asked if they’d like to re-up in the fund.

“When I showed up, I had me and a business plan. Now, we have 15 examples of us executing on that business plan,” he says.

The strategy in the second round will be largely “rinse and repeat,” Mr. Cubitt says, with the exception that investments will likely go as high as $500,000 this time, compared to $250,000 in the first round.

 

Towards an “innovative society”

Mr. Cubitt says he’s seen a “fundamental shift” in Ottawa in the past four years, and it bodes well for the future of the tech community.

When he lectures at the two local universities, he says he finds students who actually want to be entrepreneurs. He credits successful startup examples, specifically Tobi Lutke and Shopify, as showing that it really can be done in the city.

“Once you break the barrier, show that it can be done, that’s no longer an excuse you can make,” he says.

Mr. Lazenby adds that Mistral’s presence has been “great for the local tech sector,” and that Mr. Cubitt’s commitment to meet with local companies and help them to improve has affected entrepreneurial spirit in the city.

“When people believe it’s possible, then people try. That’s really the best part of it all,” Mr. Cubitt says. “And that’s a big part of our goal here: I want to be an innovative society.”