Vertu Capital, one of the industry’s few private equity firms founded by a woman, closed its inaugural offering at more than C$300 million ($219 million).
Vertu Partners Fund I, launched in 2021, wrapped up above an original hard cap on March 8, International Women’s Day. “It was very meaningful for me to choose March 8 as our close date,” founder and managing partner Lisa Melchior, a former OMERS Private Equity executive, told Buyouts.
Since early 2022, emerging managers have faced a brutal fundraising environment. LPs, a large share of them cash-strapped, have tended to emphasize re-ups with incumbent GPs. They have for this reason often neglected new relationships, even pedigreed teams with attractive strategies.
Vertu was nonetheless able to “attract some high-quality institutional investors during that period,” Melchior said.
Fund I’s investors include New York State Common Retirement Fund, one of the largest US pension systems. Among the others are BDC Capital, BMO Capital Partners, BMO Global Asset Management, CIBC and Export Development Canada, as well as asset managers, business executives and family offices.
Melchior attributes this to “the quality of our thesis, the quality of our team and the market opportunity.”
Vertu was established in 2017 to invest in Canadian technology companies that are well-run, profitable and have revenue of C$15 million-plus and values below C$500 million, but which often lack the capital to leverage early commercial success.
Targets are software and software-enabled companies focused on enterprise customers, particularly those executing scale strategies in a large marketplace.
“I spent over 20 years on Bay Street in an institutional environment, much of it leading OMERS North American technology group,” Melchior told Buyouts in 2017. “When I left, I felt I wanted to work with entrepreneurial teams and tech companies seeking breakout growth and needing a partner to get there.”
Initially, Melchior had no plans to raise a fund. Vertu instead pursued a deal-by-deal strategy, with transactions capitalized by Melchior and co-investors, such as BDC and BMO.
The earliest deals were digital payments engine Carta Worldwide, backed in 2018, and virtual data rooms provider Firmex, acquired in 2019. Both were sold two years ago, Carta to Mogo and Firmex to Datasite, helping to validate Vertu’s approach and lay the groundwork for fundraising.
“I think it was incredibly helpful to show returns on these exits that were at or above the targets we set for them,” Melchior said.
Powered by digitalization
Fund I will make up to eight control or significant minority investments of C$25 million to C$75 million. It has already closed two deals: critical communications tech provider Dejero, backed in 2021 via a C$60 million minority recap led by Vertu, and B2B intelligent content platform PathFactory, which secured an investment the same year.
Technology sectors took an economic hit last year, driving down once lofty valuations. This, however, does not dampen the spirits of Melchior, who argues “there has never been as good a time to invest in the Canadian ecosystem.”
Her confidence derives in part from a belief in historic technology adoption, which is continuing to take place across the global economy despite the market correction. “I think we’re still in a multi-decade digital adoption trend,” she said. “The investable universe in tech is only growing.”
In fact, Fund I’s close will enable Vertu to take advantage of deal opportunities arising from the current turmoil. “As in any correction, some firms will retrench,” Melchior said. “Being a new firm with fresh capital puts us in a really good position.”
The importance of parity
Melchior was featured in Buyouts’ 2021 Women in PE, where she discussed the challenges of being a private equity mom as well as the mindset of many women professionals that they must be twice as productive as their male colleagues.
Reflecting on her remarks, she said: “My goal in my lifetime is for women not to have to work twice as hard. There needs to be parity in the efforts, recognition and career progress of women in the industry.”
Melchior leads a team of 10 professionals operating from Vertu’s Toronto office, supported by several operating advisers. Senior team members include COO and partner Kim Davis, hired in 2019 from TorQuest Partners, and partner Gil Nayot, brought on the same year from Canada Pension Plan Investment Board.