The federal government Monday announced its plan for deploying $400 million to improve access to venture capital financing.
The last federal budget pledged support for the venture capital industry, including $400 million to help increase private sector investments in early-stage risk capital, and to support the creation of large-scale venture capital funds led by the private sector. Today, the government said that it now has a plan for deploying those funds over the next seven to 10 years.
The plan includes $250 million to establish new, large private sector-led national funds of funds that will, in turn, invest in several venture capital funds, in partnership with institutional and corporate strategic investors, as well as interested provinces. These funds of funds will be managed by a private sector general partner, and they will also be able to invest up to 20% of its capital into companies directly. Co-investors, which may include banks, insurance companies, pension funds, corporations, and sovereign wealth funds, will have to to make a minimum investment of $10 million, it says.
It will also contribute up to $100 million to recapitalize existing large private sector-led funds of funds, in partnership with willing provinces. The government says that the exact size, number and investment strategies of the recapitalized, large-scale funds of funds will depend on the outcome of discussions with provinces, as well as the interest of private sector investors. Provincial governments would be expected to provide capital to the funds of funds on the same terms as the capital from the federal government.
And, it will make an aggregate investment of up to $50 million in three to five existing high-performing venture capital funds. Those funds are expected to be selected in the coming months.
The government says that it will turn to the private sector in the coming weeks to advise on the selection of private sector management for the large-scale, national funds of funds, and on the selection of the high-performing venture capital funds to receive capital from the government. It’s also asking potential investors to signal their interest in co-investing in new or existing funds of funds, by February 8.
The plan comes in the wake of consultations carried out during the summer on how to structure its planned support and on how to ensure that the support contributes to the creation of a sustainable, private sector-led venture capital sector in Canada.
“Our government understands that Canada’s long-term economic competitiveness in the emerging knowledge economy needs to be driven by globally competitive, high-growth businesses that innovate and create high-quality jobs,” said Prime Minister, Stephen Harper, in announcing the plan. “We will provide the resources needed to put Canada’s venture capital industry on the path to sustainability and ensure Canada’s high-potential firms have the resources they need to succeed.”