OMERS Ventures backs social media company

OMERS Ventures’ C$20m investment in social media company HootSuite is one of the largest Canadian venture capital transactions during the past 10 years.

OMERS Ventures, the venture capital arm of the Ontario Municipal Employees’ Retirement System, has invested C$20 million (€15 million; $20 million) in social media management business HootSuite via a secondary purchase from the company’s shareholders.

Vancouver-based HootSuite provides a web-based social media platform that companies use to execute social media campaigns across multiple social networks.

“Enterprises are becoming aware very fast that they need to be properly integrated and completely integrated across their businesses into the social web,” OMERS Ventures managing director Derek Smyth told Private Equity International. “As we went out to look for companies in this space, HootSuite rose to the top as one of the leading players with almost 4 million users today and growing extremely rapidly.”

The investment marks OMERS Ventures’ third and largest investment to date and is one of the largest Canadian venture capital transactions in the past 10 years, according to a statement.

“Over the course of the last 10 years the [Canadian] venture capital industry has shrunk pretty considerably,” Smyth said. “In 2002 there were 56 active tech VC firms in the country with $50 million or more to invest [and] today there are less than 10.”

Venture capital investment in Canada last year rose 34 percent compared to 2010, reaching C$1.5 billion, with investment in IT sectors up 41 percent. Fundraising, however, was virtually flat year-over-year, with just C$ 1 billion raised in both 2010 and 2011.

Canada’s federal government is working to address the fundraising challenges facing the country’s venture capital industry, including in its 2012 budget released Thursday a C$500 million commitment to the Canadian venture capital industry over five years.

“This is a significant injection of capital into the system,” CVCA executive director Richard Remillard told Private Equity International. It is unclear exactly how the capital will be dispersed into the industry.

“We expect and hope that we’ll have a process underway to discuss with the responsible authorities how to actually activate this,” Remillard said. “[In the past] Canada’s federal government has mostly acted in the venture capital space via two crown corporations: Business Development Bank of Canada and Export Development Canada, both of which have direct and indirect – or fund of funds – operations in venture capital.”

The announcement of a significant capital injection comes at a time OMERS’ Smyth calls one of the greatest periods for venture capital investment in the country in recent years.

“The quality of opportunities throughout the country is extremely high right now,” he said. “I’ve been in the venture industry for eight years and it’s the highest that I’ve ever seen in terms of quality of opportunities.”

Smyth, who joined OMERS Ventures in November 2011, was previously a partner at Toronto-based private equity firm Edgestone Capital Partners, prior to which he was president and chief executive officer of Ottawa-based broadband controls company Bridgewater Systems.

OMERS Ventures officially launched in October 2011 and previously has invested in online accounting company Wave Accounting and Extreme Startups, a Canadian startup accelerator programme.

The group invests between C$500,000 to C$30 million per transaction in sectors including technology, media, telecommunications, clean tech and life sciences. It will invest only in North America.