The MaRS Cleantech Fund: Early-stage funding for the Canadian cleantech ecosystem

I’m pleased to announce the first closing, and formal launch, of the $30-million MaRS Cleantech Fund LP, which is a new model of collaboration between MaRS and the private sector. The privately backed fund will focus on early-stage cleantech companies in the MaRS Cleantech Practice, providing somewhere near $1 million as an initial investment, as well as possible follow-on funding. The strategic relationship with MaRS was the key to getting the private sector involved.

During my time here at MaRS, starting back in April 2009 when I founded the Cleantech Practice, I’ve seen a lot of fantastic early-stage cleantech companies. And there are a lot more coming down the pipe. I’ve also learned that, no matter how great the company, it’s difficult to get that first bit of institutional capital. Friends and family are tapped out, and $1 million or so is needed to really get the value proposition lined up, build a top-notch team, develop a strong patent portfolio and nail that first customer or strategic partner.

Great companies will go where they can find the capital, and we want those companies to stay right here in Ontario.

Early-stage investing from angels is one way to go. But it’s tough for angels to go it alone, particularly in a new sector like cleantech. Ontario simply doesn’t have the depth of early-stage, sector-specialized, private risk capital that a place like Silicon Valley has. Yet MaRS has great companies, and is part of one of the most effective global networks in the world. So the Fund is letting MaRS do what it does best: act as a catalyst to foster and encourage the private sector to grow great technology companies.

With the first close of the $30-million goal already secured, the Fund is pleased to announce its first two investments (others are already in the pipeline):

• GreenMantra, which has developed a proprietary technology platform to convert plastics into chemicals and other fuels through a low-cost process.
• Smart Energy Instruments (SEI), which is on track to create low-cost energy sensors that form the backbone of a smarter grid by providing real-time, highly granular data measurements.

Here are some highlights of this new funding model:

• The partnership with MaRS will result in our donating back to MaRS a portion of our profits.
• The Fund does not have exclusive access: anyone can still invest in any MaRS client.
• We’re looking to co-invest with private partners, the IAF, and anyone else prepared to step up to the plate – but we’re happy to take the lead.
• The Fund will pay MaRS all hard costs; there’s no free ride here!
• We have secured about half of the $30-million target with this first close, and we welcome additional individuals or corporate partners to join this exciting and important adventure.

We’ll be focused on companies that are capital efficient, have strong Intellectual Property, great (or very coachable!) management teams, global opportunities, minimal policy risk and a rational valuation.

My fund co-manager, Murray McCaig, and I look forward to unblocking what I’ve consistently seen as a significant log-jam in an otherwise fast-flowing Canadian cleantech ecosystem. If we can unlock early-stage funding and get companies accelerated into the market, there are lots of later stage partners who will then be able to participate. But someone’s got to make the first move. At MaRS Cleantech, it’s the MaRS Cleantech Fund.