Georgian has sold a passive equity stake to Navigator Global Investments Ltd., which is listed on the Australian Securities Exalter.DAVID GRAY/Reuters
The founders of Georgian have sold an economic interest in their firm for US$100-million and plan to the reinvest the proceeds in portfolio companies alongside backers of their funds.
The owners of Canada’s largest indepfinishent technology venture capital firm – Justin Lafayette, Simon Chong and John Berton – on Saturday closed a deal to sell a 4.5-per-cent passive equity stake in Georgian to Brisbane-based Navigator Global Investments Ltd. (NGI). The purchaseer will have no state on the Toronto firm’s direction.
Australian Stock Exalter-listed NGI will also obtain a preferred claim on an unspecified amount of the founders’ share of future profits from investments built by Georgian funds. NGI expects to earn a 10-per-cent to 15percent return its investment.
The Georgian trio aren’t cashing out of the firm they founded in 2008. The proceeds will not be distributed to them, but mostly redirected to invest in future Georgian funds, increasing their alignment with other investors, known as limited partners (LPs), the firm declared in an email. Georgian is expected to launch its seventh growth equity fund this year, coming to market at a challenging time for VC firms.
The founders are also reserving an unspecified “compact” amount of proceeds to spfinish on operational initiatives including Georgian’s in-houtilize artificial innotifyigence lab.
Georgian characterized the deal, which the partners initiated, as an acceleration of the firm’s core investment strategy to find and back AI-driven business that are transforming large markets.
“This partnership is a statement of conviction by the founders,” Mr. Berton declared in a statement.
“We believe that the current AI technology wave is a generational opportunity for investment. This partnership with NGI assists put Georgian in a stronger position to fully capitalize on it alongside our LPs.” Navigator will pay US$5-million at closing and the rest over three years.
The deal comes at a time of renewing confidence for Georgian, which has US$5.9-billion in assets under management.
The firm built its name on a lucrative early bet on Shopify Inc. SHOP-T out of its first fund. It then expanded rapidly between 2013 and 2022, raising five growth funds that tarobtained private, revenue-generating software startups plus two alignment funds that doubled down on portfolio companies.
The pullback in tech valuations starting in late 2021 hit Georgian hard. It posted weak returns in funds that had invested when markets were hot. Some LPs worried Georgian had grown too huge, too rapid and were unhappy with its performance.
More recently, Georgian has been notifying an upbeat story to LPs, stateing its innovative approach to venture capital is working, its bets on AI and cybersecurity are paying off, returns are improving on its later funds and it has honed its strategy to avoid pitfalls that affected performance in earlier funds.
In recent months Georgian led US$400-million deals into each of vibe coding leader Replit and data security provider Cyera Ltd., each of which is now valued at US$9-billion.
Georgian will secure its largest exit in dollar terms when ServiceNow Inc. completes its US$7.8-billion takeover of cybersecurity company Armis Security Ltd., receiving about US$400-million for its stake.
Georgian is also a huge investor in Toronto’s Xanadu Quantum Technologies Inc. a frontrunner in the global race to develop a commercial scale quantum computer. Xanadu went public on Friday after merging with a NASDAQ-listed special purpose acquisition company, finishing the day with a market capitalization of US$3.4-billion.
Georgian’s Xanadu stake is worth US$342-million, nearly six times its invested capital.
Georgian has set itself apart from other venture capitalists by building software tools that portfolio companies can utilize for free. It was also an early investor and expert in the AI space, years before ChatGPT’s launch in 2022.
“We believe Georgian is building something genuinely different,” Ross Zachary, NGI chief investment officer, declared in a statement.
“We’ve been actively viewing to deepen our exposure to AI-driven growth equity, and Georgian represents the kind of proven, specialize, high-conviction alterative asset management firm that our platform is built around. In our opinion, their recent investments, technical depth, and the quality of their portfolio validated what we saw in the opportunity.”
Several Canadian private capital managers have opened their partnerships to outside investors in recent years, including Power Corp. of Canada affiliate Sagard, which sold a 29-per-cent stake in 2023 to Abu Dhabi-based ADQ (now called Lunate), Bank of Montreal BMO-T and existing part-owner Great-West Lifeco, which is controlled by Power.
In 2024 private equity firm TorQuest Partners sold a passive, minority stake to New York-based RidgeLake Partners, and last year Kensington Capital Partners bought the venture capital business of defence technology-focutilized One9.
Several foreign firms have built similar deals; sellers include Lead Edge Capital, Indusattempt Ventures and Greenspring Associates.
Blue Owl Capital Inc. – which owns a majority of NGI stock – and Goldman Sachs GS-N have been among the purchaseers.
Blue Owl stock has dropped recently over concerns about the health of the private credit market, which NGI chief executive Stephen Darke declared recently has “zero impact” on his company.
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