Posts Tagged ‘ Quebec

Teralys a $700M Fund of Funds: A turning point for VC fund raising in Canada?

Re-post by Chris Arsenault, Managing Partner & COO at iNovia Capital

Definitely, this is great news for the Canadian VC industry and for tech entrepreneurs alike. Today, Teralys Capital was born, with at its helm Mr. Jacques Bernier (an experienced entrepreneur, executive and investor), and with $700 million in capital (as a first closing), making it the largest Fund of Funds of its kind in Canada.

The Caisse de dépôt et placement du Québec (CDP), the Fonds de solidarité FTQ (the Fond), and the Québec government (via Investissement Québec), announced the creation of Teralys Capital, a new Quebec based Canadian Fund of Funds, which will invest in private venture capital funds (VC Funds) that in turn will invest in technology companies in sectors that include Infotech, Cleantech and Life Sciences. CDP announcement here (link).

The Caisse de dépôt et placement du Québec and the Fonds de solidarité each contributed $250 million and Investissement Québec contributed $200 million to Teralys Capital, all as part of the Fund’s first closing. Mr. Bernier expect to raise an additional $125 million from other institutional and private investors, bringing the first fund size up to $825 million.

The Government versus the role of the VC Fund in funding entrepreneurs.

I don’t believe in having our governments involved in every aspect of our businesses and especially not calling the shots on who should receive funding and who shouldn’t. And I don’t believe in bailouts per say. I believe in intelligent investments that can generate strong returns by enabling and by levering, knowledge, networks and expertise.

We live in a very competitive technology driven environment that requires our best entrepreneurs to not only have the best ideas, the best innovations but also the best business models and a unique competitive edge that is, more often than less, far from obvious to the venture capital firm looking to invest. Canada needs a strong community of privately driven VC Funds with industry expertise and broad networks of partners and co-investors to provide the insight and support our Canadian entrepreneurs need to succeed. These VC Funds need capital (just like entrepreneurs do) and today’s announcement will somewhat facilitate, for the few, their fund raising efforts and will hopefully create more awareness and interest towards this investment class.

Over the last 12 months, many provincial governments (British Columbia, Alberta, Ontario) and even some cities (Ottawa) announced their intent to actively support the Canadian venture capital industry by playing a direct or indirect role as an investor or co-investor in existing and upcoming VC Funds.  It was refreshing to start hearing about their concrete investment commitments into VC Funds, and not just read about it in the budgets! You can read more about the positive impact of these initiatives in an article ported on the Montreal Tech Watch blog (link).

But today’s joint announcement from the CDP, the Fond and the Government of Québec I believe is setting new standards in Canada by all means. And I think they are calling it right!

  • First, they put together a substantial amount of cash for this type of activity to be effective;
  • second they named an experienced management team, making the fund privately managed in its self, that can lead    the investment process without the direct involvement of the government  (and I expect this to be the first of many  Funds to come under Teralys Capital’s management);
  • And finally, they acted fast (within 2 months from the Government of Québec 2009 budget).

So with this announcement, we can expect Teralys Capital to announce its first commitments into VC funds within the two quarters. This is great, but let’s not forget that these VC Funds managers will likely be required to attract further capital from other Fund of Funds, Pension Funds, Institutional and Private investors before  themselves start investing into tech companies. Therefore, we should see the first few $ in the hands of promising technology companies and entrepreneurs by this time next year.

Now, we haven’t seen any traction from the Federal Government front yet, nor do we see enough traction for this class of investment from Canadian and Foreign institutional investors. The CVCA also welcomed the Quebec Fund of Fund initiative today, but highlighted the situation our industry in their press release (link), stating: The Canadian venture capital industry has endured several years of declining fundraising. Thus, the industry raised $1,718 billion in 2005 and only $1,028 billion in 2008, a precipitous drop of 41%. So allot still needs to be done.

Yet, I applaud today’s announcement and welcome the path of action taken by the Government of Québec, by not trying to substitute itself for a VC Fund manager, but instead, by acting quickly, partnering up and leveraging the expertise and knowledge of industry leaders in order to have a more substantial impact.

Expect to hear more at this year’s CVCA Annual Conference, to be held in Calgary on May 27-29th, where the likes of Jacques Bernier – CEO of Teralys Capital, Ian Carew – Vice President, TD Capital Private Equity Investors and other Fund of Funds managers and VC Fund managers will share their thoughts, vision and action plans.  LINK TO CONFERENCE PAGE

Other related posts:

$5 billion to end up in the hands of Canadian entrepreneurs, nothing less!

CVCA’s Comprehensive Study on The Impact of Venture Capital in Canada on Economy, Jobs and Innovation

CVCA English press release  Communiqué en Français ci-joint

Caisse de dépôt et placement du Québec press release

CVCA Welcomes New Quebec Fund of Funds

 

By Gregory Smith, President of the CVCA

CVCA – Canada’s Venture Capital and Private Equity Association welcomed the arrival of a significant new fund of funds that was put together by the Government of Québec, the Caisse de Dépôt and the Fonds de Solidarité. CVCA Press Release. Caisse de dépôt et placement du Québec full Press Release.

“This $700 million fund of funds first closing, called Teralys Capital, is a shining example of the positive impact that close public sector-private sector collaboration can bring about,“ said Gregory Smith, President of the CVCA. “The venture capital industry in Canada sorely needs more capital and more sources of capital supply in order to fund the industries of tomorrow upon which our future depends,” added Mr. Smith.

The Canadian venture capital industry has endured several years of declining fundraising. Thus, the industry raised $1,718 billion in 2005 and only $1,028 billion in 2008, a precipitous drop of 41%.

“This worrisome situation must be halted and reversed,” said Mr. Smith. “Objective research recently conducted by the CVCA with the financial participation of several provincial governments including Québec, Ontario, Alberta and British Columbia as well as the federal government shows the positive ‘snowball effects’ that venture capital has on economic development and job growth. Evidence reveals that venture capital investment has resulted in close to 150,000 direct and indirect jobs in Canada and added $14.5 billion to GDP.”

The CVCA also welcomed the nomination of Mr. Jacques Bernier as President of the new fund of funds.

“Mr. Bernier has a long, positive track record in the venture capital industry and we wish him every success,” commented Mr. Smith.

CVCA

The CVCA – Canada’s Venture Capital & Private Equity Association, was founded in 1974 and is the association that represents Canada’s venture capital and private equity industry. Its over 1600 members are firms and organizations which manage the majority of Canada’s pools of capital designated to be committed to venture capital and private equity investments. The CVCA fosters professional development, networking, communication, research and education within the venture capital and private equity sector and represents the industry in public policy matters.

To arrange an interview with Gregory Smith, President of the CVCA, contact Iris Roesler, 416 607-5166.

 

 

 

Réseau Capital sharing the study on the impact of Venture Capital on the Canadian Economy (en français et en anglais)

Text en français au bas

*** 

Letter sent out April 1t, 2009

To all members of Réseau Capital,

We are pleased to attach the study on the impact of Venture Capital on the Canadian Economy sponsored by the Canadian Venture Capital Association (CVCA) and BDC.  Aimed at a wide audience, it explains how venture capital works, reviews the major impact studies conducted in the United States and measures its impact on Canadian employment, growth, innovation and exports. Going beyond such quantitative impacts, it also illustrates by way of case studies the “snowball effect” of venture capital, whereby one success spurs the birth and growth of a new generation of technological enterprises. Finally, it highlights the risks to the entire ecosystem of the industry’s shrinking ability to attract more investment at this time.   Download .pdf link here.

Québec and Réseau Capital were active participants in this initiative, funded jointly by the Ministère du Développement économique, de l’Innovation et de l’Exportation, the other provinces and Industry Canada. Summit Capital provided additional funding that led to four success stories in Québec: Axcan Pharma, BioChem Pharma, Positron Fiber Systems and Taleo.  Annie Thabet, Charles Cazabon and Hubert Manseau were on the steering committee for the study, which was presented at the Réseau Capital convention in February and served as the basis of discussions between Réseau Capital and Raymond Bachand, Minister of Economic Development, Innovation and Export Trade, when the Québec budget was being prepared. It is a fine example of partnership between Réseau Capitaland the CVCA, which we intend to maintain. 

Janie C. Béïque             François Chaurette

Co-President                 Co-President

Réseau Capital              Réseau Capital

___________________________________________________________ 

À tous les membres de Réseau Capital,

Vous trouverez ci-joint l’étude sur la contribution du capital de risque à l’économie canadienne commanditée par l’ACCR et la BDC. Destinée à un large public, elle explique comment fonctionne le capital de risque, passe en revue les grandes études d’impact qui ont été conduites aux États-Unis, mesure l’impact sur l’emploi, la croissance, l’innovation et les exportations au Canada et, au-delà de ces effets quantitatifs, illustre par des histoires à succès « l’effet boule de neige » du capital de risque par lequel un succès alimente la naissance et la croissance d’une nouvelle génération d’entreprises technologique. Elle met également en lumière les risques que fait courir à l’ensemble de l’écosystème la contraction de la levée de fonds à laquelle fait actuellement face l’industrie. Suivez le lien suivant pour une copie de l’étude.

Le Québec et Réseau Capital ont pris une part active à cette entreprise. Le MDEIE l’a financée aux côtés des autres provinces et d’Industrie Canada. Sommet Capital a ajouté un financement supplémentaire qui a permis de porter à quatre le nombre d’histoires à succès du Québec : Axcan Pharma, Biochem Pharma, Positron Fiber Systems et Taleo.  Annie Thabet, Charles Cazabon et Hubert Manseau ont fait partie du Comité directeur de l’étude. Enfin, l’étude a été présentée au Congrès de Réseau Capital en février et elle a servi à supporter les discussions que Réseau Capital a pu avoir avec le Ministre Raymond Bachand lors de la préparation du budget. C’est là un bel exemple de partenariat entre Réseau Capital et l’ACCR que nous entendons poursuivre.

Janie C. Béïque             François Chaurette

Coprésidente                Coprésident

Réseau Capital              Réseau Capital

Réseau capital http://www.reseaucapital.com

CVCA http://www.cvca.ca

Onwards, upwards VC fund commitments!

by Chris Arsenault

March 2009 will definitely be the month the Canadian Venture Capital Industry heard its “wake up” call. Fund of fund initiatives, new funds, follow on funds, co-investment fund, business funds. We got swamped with VC related initiatives and announcments and even withnessed some true initial traction. It was refreshing to read about the Québec Government Venture Capital initiative, done in close partnership with la Caisse de dépôt, the Fond de solidarité FTQ and Investissement Québec, with commitments toward the creation of: a $500M business growth fund, $125M for the creation of three seed stage funds as well as the creation of a $825M Fund of Fund. Now, the latest news comes from Ontario, where the Ontario Venture Capital fund announced, earlier today, that it had completed its first commitment to a private fund manager: Georgian Partners. Below an extract of the press release: 

  

Venture Capital Fund Invests In Jobs Of The Future

McGuinty Government Welcomes First Ontario-Based Commitment.

The Ontario Venture Capital Fund is committing up to $15

million inGeorgian Partners “Growth Fund I” to help support

innovative, high-growth businesses, including high-potential

companies in Ontario.

Georgian Partners (http://www.georgianpartners.com/index.html)

is an Ontario-based venture capital firm investing in companies

in the information technology, information aggregation, and

enterprise software sectors.

 

 

Note that the Ontario Government first announced the creation of its Fund of Fund, in close collaboration with its partners (OMERS, RBC Capital Partners, Manulife Financial, BDC & TD Bank Financial Group) back in June 2008 (Link), a $205M Fund, and, at the time of its announcement, it was one of the biggest to-be active Canadian Fund of Fund  (the Ontario Government commitment was in the order of $90 million). We hadn’t heard much since then nor seen any activity until earlier this month when the Ontario government followed up with the announcement of a new $250M VC fund that would co-investing with other eligible fund managers in emerging technologies (Link). This announcement was quickly followed by other rumors about the first two investment commitments towards private funds by the Ontario Venture Fund (the Fund of Fund) which were rumored to be Kodiak Venture Partners and Mayfield (both US funds). I guess it was just rumors, because today they announced their first commitment, and its towards Ontario based venture capital Georgian Partners.

The level of energy and the willingness coming from large Canadian institutions and government to commit important amounts of capital to Venture Capital is well received by the community. The CVCA and many of its members, have been putting allot effort towards gathering support from large institutions as well as from our governments in order to help address the current lack of funding available to bridge the gap between research and development and the commercialization of promising technologies. If you haven’t yet, take a look at the recently released study on the economic impacts of venture capital: Why Venture Capital is Essential to the Canadian Economy (Link).

Even if all of this sounds really good, I still fear that in the current economic climate, as a VC fund manager, attracting funds from the non-government entities, such as: Pension funds, Insurance Companies, Banks, large corporations, endowment funds… will prove to be at the least extremely difficult.

But we will get there.. only by showing our Canadian existing and potential limited partners, that yes, Venture Capital Funds in Canada can provide strong returns (IRR)!

Onwards, upwards!

Over $1 billion in stimulus for Canadian startups

Repost from Flow Ventures

by Raymond Luk

This is a great time to be building startups in Canada. Ontario and Quebec have recently announced over a $1 billion in funding for new ventures through matching funds and fund-of-funds. There may be more good news when Ontario tables its budget on March 26.

Here’s a quick summary:

Ontario:

Quebec (link to budget):

  • $825 million for a fund-of-funds to invest in 15-20 VC funds ($700 million from the government, $125 million from the private sector)
  • $125 million for the creation of 3 seed funds ($100 from the government, $25 from the private sector)
  • 10-year provincial tax holiday for new ventures that commercialize research from a Quebec university or research centre

So how does this trickle down to startups?

  1. If you’re raising your first round it means there will be more seed funding sources and more money in existing funding sources. Private investors may be more willing to invest since the government is matching their dollars 1 to 1 or 2 to 1 in some cases.
  2. If you already have investment it means your investors may be more likely to top-up if they are on the receiving end of these funds.
  3. If you’re commercializing research, which Canada does a poor job of, you look a lot more attractive to investors. Not paying provincial corporate tax for 10 years has a huge effect on investor returns (assuming you’re planning on profitability).

The best part of these initiatives is that they support the existing investment ecosystem rather than trying to replace it with something government run. We already have the pleasure, privilege and intestinal fortitude to deal with the government for SRED and other subsidies. Best leave investment to experienced managers.

So is there any bad news? Timing will be an issue as nobody can deploy this much money quickly. It’ll be awhile before funds actually trickle down to companies. I personally don’t like any initiative with a geographical limitation. I understand the desire to create jobs in a particular place but technology companies can be spread out. In Canada, where we don’t have the density of markets and talent, an Ontario-only company doesn’t make sense.

But enough complaining. Does this mean that we at Flow are more likely to make investments in the near future? You bet!

 

A new $825M Fund for Venture Capital to be put in place by Quebec Government

Posted by Chris Arsenault

What do you think, can local Governments play leading roles in the Venture Capital Community?

Earlier today, the Quebec Finance Minister Monique Jérôme-Forget presented here budget in which she outlines the $15-billion stimulus package. Budget 2009-2010. I believe this is great news for Quebec, for Canada and the whole Venture Capital Community, will funds be managed by private fund managers? 

We find in this Budget many changes and numerous proposed solutions for critical sectors of the economy. But the two initiatives that captured my attention are 1) the creation of the new $825M Venture Capital Fund (or will it be a Fund of Fund?) and 2) a $500M emergency Fund for businesses. Of course we have yet to see the details and inter-workings of such a Fund, but I would guess that these monies will provide some level of continuity to Venture Capital Fund managers and potentially direct investments as well. So this is great news as long as the capital being put at work is done through proper management of such funds.

Over the last few years, The Solidarity Fund, the FondAction CSN, Desjardins Capital and the Caisse de Dépot have been hard at work figuring out ways to help entrepreneurs and business owners out. They have played a crucial/leading role in support of the Canadian Private Equity & Venture Capital industry.  Their efforts are now joined by a clear and strong commitment to Venture Capital by the Quebec Government. This news comes a day after the Ontario Budget and announcement of their own co-investment fund in the amount of $250M.

I look forward to soon be witnessing a revived Canadian Venture Capital Ecosystem through  (mostly) an indirect involvement by our governments into businesses through their direct commitment as limited partners into leading private venture capital fund managers across Canada.

Here are a few key highlights of 2009-2010 Quebec budget (as outlined by the Montreal Gazette):

- $15-billion economic stimulus package;

- $3.9-billion deficit budget;

- Quebec Stock Savings Plan, returns, tax deductions for stock market investments;

- Quebec sales tax will rise to 8.5 per cent in 2011;

- Indexing of fees, from birth certificates to driver’s licences, in 2011;

- $500 million more for job re-training;

- $1.5-billion more for health, $490 million more for education;

- A $500-million emergency fund, for businesses;

- A $825-million venture-capital fund, for businesses;

- $2,000 increase in tax credit for child-care expenses;

- Program to eliminate elder abuse;

- $1.6-billion more for Generations Fund over two years, to offset Quebec’s growing debt;

- Crack down on “aggressive tax planning” to curb tax evasion;

- 3,000 more low-cost housing units.