After four funds over more than 20 years, Belgium’s Theodorus is exiting European investing entirely to pursue North American life sciences companies from its new Montréal headquarters. Under the name Seido Capital, the venture capital (VC) firm will focus exclusively on early-stage life sciences startups in Canada and the United States (US) with its new fifth fund.
Seido has targeted Canada for the strength of the country’s academic institutions, its proximity to the large US market, and a lack of capital allocated to Canadian life sciences startups relative to the returns they have generated.
“This is the place to be,” Seido co-founder and partner Olivier Belenger told BetaKit in an interview. “This is the place to develop the new vision.”
“This is the place to be.”
Olivier Belenger,
Seido Capital
The now Canadian-headquartered VC firm has secured $45 million CAD in initial commitments for Fund V. The first close of its fifth fund, featuring a number of Canadian limited partners (LPs), brings Seido over halfway to its $70-million Fund V target, which it hopes to reach over the next 12 months.
Seido has been investing in early-stage life sciences startups for more than two decades. Founded in Belgium in 2003 under the name Theodorus, the then-European VC began investing in Canada through its fourth fund, which had a dual focus on Canada and Europe.
Following some positive early returns across the ocean, Seido decided to leave Belgium altogether to focus on North America and begin building what it hopes will become a lasting Canadian VC franchise. To reflect its shift in strategy, the firm adopted a new name in Seido, a Japanese word that typically translates to precision.
Belenger and Seido co-founder and partner Théo Risopoulos expressed confidence that Seido can replicate the kind of returns it has posted in Europe with funds dedicated to North America. Going forward, Seido will focus solely on North America, with 80 percent of its Fund V capital allocated to early-stage Canadian life sciences businesses and the remainder to US companies.
Seido’s Fund V limited partners (LPs) include returning backers Fonds de solidarité FTQ and Fonds d’investissement Eurêka, which both supported its fourth fund, and new investor Investissement Québec. LPs also include some undisclosed family offices from Canada and Belgium, as well as some life sciences entrepreneurs from Seido portfolio companies.
Recent research from RBCx on VC-backed exits in Canada since 2013 indicates that life sciences firms are responsible for an outsized proportion of value creation. RBCx reported that life sciences accounted for 11 of Canada’s top 50 exits and 44 percent of aggregate exit value during this time, despite only seven percent of all VC dollars flowing to life sciences funds.
Belenger acknowledged that Canada’s life sciences sector has produced some big success stories in recent years. This, coupled with the country’s life sciences research ecosystem and rate of company creation in the space made it an attractive base from which to build a life sciences-focused VC franchise.
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“The quality of the research inside the universities in Canada [is] totally outstanding,” Belenger said.
In an interview with BetaKit, Risopoulos described Canada as “excellent” when it comes to the research part of the equation, but noted that it has been lacking when it comes to commercialization. He argued that the country could use more life sciences-focused VC funds with more money. “That’s exactly why we came here five years ago,” he added.
“We recognize [Seido’s] unique expertise in valuing academic research and creating businesses,” Fonds de solidarité FTQ vice president of private investments and impact investments, life sciences, Maxime Pesant, said in a statement. “Over the past four years, we have seen in the Montréal-based team an invaluable partner.”
Under its former moniker, Seido, deployed its first two funds in Belgium—including its $6.8-million Fund I and its $8.1-million Fund II, which it began investing out of in 2006.
Around 2013, Seido raised a larger, $30.3-million third fund focused on investing across Europe, before expanding to Canada with its $62.9-million fourth fund in 2018. Fund IV saw the VC firm open an office in Montréal, while retaining its base of operations in Brussels.
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Risopoulos said that the VC firm invests across hardware, software, biotech, and biopharma, focusing on startups with strong intellectual property and an exit strategy. He claimed that Seido looks at VC differently than some of its Canadian peers thanks to its European roots. “We start by the end,” he said.
The Seido partner noted that Europe does not play host to as many Series B, C, or D funds, or initial public offerings compared to North America, forcing European VCs to sell a bit earlier. Given this, Seido tries its best to know what types of tech sell and how much acquirers will pay, an approach that he said has served the firm well over the past two decades.
Risopolous noting that the firm regularly consults with connections at buyers in the biopharma and medtech space to ensure it has a pulse on the industrial and strategic exit market.
To date, Seido has made 50 investments and exited 30 of them. The VC firm claims to have generated top decile distributed to paid-in capital (DPI) across its first and third funds (4.5x and 3.3x, respectively), and top quartile DPI through its second fund (1.9x), with a net internal rate of return (IRR) of 15 percent across its first three funds. Per a recent BDC report on Canada’s VC landscape, this places Seido beyond the upper quartile of Canadian VC funds from that timeframe in terms of median DPI but below gross 10-year IRR among life sciences investors.
Risopoulos said it is hard to provide meaningful DPI for Seido’s fourth fund given that the firm has just begun the divestment phase, but noted its total value to paid-in capital is 3x. So far, he expects the Canadian half of Fund IV—which includes DrugBank and Simmunome, among others—to generate greater returns than its European portion.
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To date, Seido has largely invested in European companies, many of which have been acquired by US buyers. But according to Risopoulos, it typically takes longer to build a company in Europe and sell it to a US buyer than it does to do so from Canada. “The dynamic of the market for value creation [in Canada] is … way faster than in Europe,” he said, noting that this was one of the factors that led Seido to shift its focus to Canada.
Seido aims to build a Fund V portfolio of 10 to 15 companies, cutting first cheques of between $500,000 and $2.5 million into firms at the pre-seed, seed, and Series A stages. The VC firm has reserved approximately half of Fund V for follow-on investments.
Risopoulos expects Seido to be particularly active in Québec while investing across Canada, with room to be opportunistic in the US. Risopolous said the VC firm aims to lead financings but noted that it may co-lead or support based on the size of the round. He also sees room for Seido to leverage its overseas network to help Canadian startups access the European market and potentially bring some foreign companies to Canada.
The initial close of Seido’s fifth fund puts the VC firm in some rare company by Canadian standards. Per recent research from RBCx, over the last 10 years, only 2.9 percent of Canadian VC firms have graduated to Fund V (excluding all opportunity, continuity, and alignment funds).
Feature image courtesy Seido Capital.
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