Thing promised, thing due. The $450 million promised to the venture capital sector in the 2021 federal budget to help create and grow new technology companies across the country is finally ready to be distributed. Ottawa is giving fund managers a few weeks to apply and promising investments before the end of the year.
The announcement had been awaited for several months by the Canadian venture capital and innovation sector. Given the economic news of the last few months, this influx of new capital was even beginning to press. “What is happening in Ukraine, the pressure caused by the situation in China on supply chains, inflation, all of this may have already had an impact on financing activity in certain investment sectors”, notes moreover the CEO of Réseau capital, Guillaume Caudron.
Venture and development capital investment activity in Quebec for the first quarter of 2022 does not clearly reflect the slowdown feared by observers in this sector, even if the indices point to access to capital which will become more complicated. in the coming months, adds Guillaume Caudron. “A single quarter does not allow us to draw conclusions on the state of the sector, but the context forces us to remain vigilant. »
Given the direction taken in recent weeks by the stock markets, one can imagine that private investment will be more cautious in the future. “There is still capital available for start-up and promising projects. In the medium term, what is worrying is the ability of the funds to recapitalize themselves in order to continue investing,” sums up the manager of Réseau Capital.
“Funds of funds” of 350 million
This is where Ottawa’s announcement comes in handy. The program called Venture Capital Catalysis Initiative (VCCI) includes an envelope of $350 million which will be reserved for investment funds which can in turn then distribute this capital to other funds specializing in more specialized niches. venture capital. Interested investment funds should apply by June 23.
In Quebec, Teralys Capital is an example of these funds that are nicknamed “funds of funds”. Teralys also participated in Ottawa’s previous program dating from 2013 and named Venture Capital Action Plan. Under this program, private funds had to raise $2 in private funding for every dollar received from Ottawa. As this formula worked well the first time, Ottawa decided to raise the bar this time by requiring $2.25 of private capital for every dollar received from the ICCR.
In the medium term, what is worrying is the funds’ ability to recapitalize to continue investing.
In addition to these 350 million, the program includes two additional envelopes of 50 million dollars each for specialized funds. The first amount will be reserved for a maximum of seven life sciences venture capital funds. The second sum will be used to help a maximum of five “inclusive” funds targeting under-represented social groups on the Canadian techno scene: women, non-binary or LGBTQ+ people, as well as Indigenous entrepreneurs or entrepreneurs from racialized communities. Applications for these funds will be accepted until next September.
In total, Ottawa wants venture capital funds to raise $1.8 billion through its new program.