Toymaker Spin Master, Latest Canadian Venture Capitalist, Launches $ 100 Million Fund

Toronto toy company behind Paw Patrol embarks on a new game: venture capital.

Spin Master Corp. announced Tuesday it has created a US $ 100 million venture capital fund to support start-ups that can help accelerate the growth of its toys, entertainment and digital games divisions. The company announced its first two investments, in Hoot Reading, a Winnipeg-based startup that offers online private lessons to children; and Stockholm-based Nordlight Games, a mobile game development company founded by a team that has led the technology and art for candy Crush Saga.

“Our business is built on partnerships” with inventors, Spin Master President Ronnen Harary said in an interview on Monday. “We see this as another leg on the stool in terms of the ability to partner with talented individuals who are super passionate about their business and have great ideas in a space that we are in. When you reach a certain size, your ability to stay innovative becomes more difficult. It was a way of continuing to tap into great ideas.

He added that the $ 100 million commitment “is to get us started. We will follow up with more capital.

Spin Master is the successor to toy giant Lego System A / S, which created a venture capital fund in 2018. It also marks an accelerated change in the Canadian business landscape: until recently, companies with their own businesses venture capital was relatively scarce in this country. The best-known national examples are Telus Corp. and Power Corp. of Canada. “Globally, Canada is below its weight,” BDC Capital partner Thomas Park said in a blog post last year.

Observers say this means the companies running the Canadian economy don’t have the same early look at potential disruptors – both to determine future challenges and to take advantage of investment opportunities – as their peers. In other countries.

“It doesn’t make sense” that more Canadian companies don’t have venture capital branches, said Chris Arsenault, partner at Canadian venture capital firm Inovia Capital. “The traditional corporate establishment in Canada has always been extremely conservative in the way they… integrate technology into their businesses. We are good at letting the Americans show us the way. We have to be more aggressive. “

But the ranks of Canadian venture capital finance firms have grown recently. The Weston family who control Loblaw Cos. Ltd. launched a dedicated venture capital arm in 2019. Shopify Inc. last year became the most active start-up financier in Canada, supporting startups that serve its clients. Several financial services companies have become active start-up financiers.

And last week, the Canadian Imperial Bank of Commerce announced that it had earmarked $ 300 million to invest primarily in venture capital and growth equity funds, while information services giant Thomson Reuters Corp. launched a $ 100 million fund to support and accelerate innovation in its sectors. .

“More and more Canadian companies are realizing that when done right – as their peers around the world have been doing for years – enterprise venture capital is an important tool for innovation and transformation, both for the thought it sparks and the opportunities it creates, ”said Rich Osborn. , former managing partner of Telus Ventures.

Mr Harary said his company decided to go into venture capital after missing out on some overpriced acquisition opportunities. “If we had invested in these companies earlier or taken a minority position and grown with them, we would have had a much better place at the table,” he said. “One of the reasons we missed it is because we don’t have a venture capital arm. “

He said Spin Master’s intention was to buy out the most successful businesses it funds. The company will initially invest between US $ 500,000 and US $ 5 million in businesses ranging from startups to income-generating businesses.

Hoot, co-founded by ex-Spin Master brand manager Carly Shuler, incubated at the non-profit American workshop Sesame. Hoot has 500 teachers on the platform and claims its revenue has grown 30% month over month over the past year. “We were looking for someone who had money, distribution opportunities, industry knowledge, marketing talent and great brands that we could tap into,” Ms. Shuler said in an interview. Spin Master, which led its $ 3 million seed funding, “ticked all of those boxes. And as a former Spin Master student, I felt like we were already a team and could get started quickly.

Ms. Shuler added that while Spin Master will bring Hoot a lot of synergies to tap into, “we’re not going to sell toys to kids” through her platform. “It’s not that type of partnership.

Spin Master was founded in 1994 by Mr. Harary and his fellow University of Western Ontario business students Anton Rabie and Ben Varadi. Their first hit was the Earth Buddies toy, a nylon-covered head filled with grass seeds that grew “hair” when watered. This was followed by successful toy and game launches including Air Hogs, Bakugan, and Paw Patrol. The company also bought legacy toy brands including Etch A Sketch, Meccano, Gund, and Rubik’s Cube.