Venture Capital Catalyst Initiative
Access to capital is vital to help growing innovative companies to develop their ideas, market new products, scale up and create good, middle-class jobs in communities across the country.
Venture capital (VC) is a specialized type of private equity financing that takes educated risks on great ideas and smart people, giving young, high growth-potential companies the opportunity to develop their ideas into marketable products. In addition to capital, VC investors bring operational experience, technical knowledge, networks and mentorship to the firms in which they invest. A strong and steady stream of VC investments is an essential element in the success of many of Canada's potential future technology leaders.
In 2017, Canada saw a total of $3.5 billion of VC investment in Canadian start-ups, resulting in the eighth straight year of VC growth and the most VC invested in start-up companies since 2001. Canada is now ranked third for VC investment according to the Organisation for Economic Co-operation and Development (OECD). The Canadian Venture Capital and Private Equity Association (CVCA) attributes much of this growth to the Government of Canada's support for VC, including through the Venture Capital Action Plan (VCAP).
The Venture Capital Catalyst Initiative (VCCI) continues this momentum. Announced in Budget 2017, the Government of Canada, through the Business Development Bank of Canada (BDC), is making available $400 million to increase the availability of late stage venture capital in Canada. With funds leveraged from the private sector, this investment has the potential to inject around $1.5 billion into Canada's innovation capital market. This funding complements other programs under the Innovation and Skills Plan to help grow Canada's innovative high potential start-ups.
In June 2017, the Department of Innovation, Science and Economic Development Canada (ISED), in collaboration with Finance Canada and the BDC held national consultations on the design and development of VCCI. This process captured the views of leaders from the VC ecosystem, such as fund-of-funds managers, investors, fund managers, entrepreneurs and provincial government officials.
The Venture Capital Catalyst Initiative
Through VCCI, the Government is building a portfolio of large funds-of-funds and alternative models that strengthens and broadens the Canadian VC ecosystem, and increases the availability of late-stage VC over time. VCCI also includes a comprehensive focus on enhancing diversity and addressing gender balance among VC fund managers, investors, and portfolio companies.
The Initiative used a competitive process to allocate capital to fund managers in two streams:
- Stream 1 invests $350 million in large private sector-led funds-of-funds that seek to maximize returns through diversified investments, support skilled VC fund managers, and attract substantial private sector capital.
- Stream 2 invests $50 million in VC fund managers that can provide a financial return to investors, but in areas not otherwise be addressed by Stream 1. Applicants under this stream had strategies focused on supporting underrepresented groups such as women or diverse fund management teams and entrepreneurs, or emerging regions and sectors.
Detailed information on the submission process can be found in Eligibility for the Venture Capital Catalyst Initiative.
The Government also established a private sector Selection Committee to evaluate incoming proposals and provide recommendations to ISED on which applicants to select. The composition of the VCCI Selection Committee can be found at VCCI Selection Committee.
Funds-of-Funds selected under VCCI Stream 1
- Hamilton Lane
- HarbourVest Partners
- Kensington Capital Partners
- Northleaf Capital Partners
- Teralys Capital
For further information, please see Minister Bains and Minister Chagger announce first investments under Venture Capital Catalyst Initiative
Funds selected under VCCI Stream 2
- Build Ventures
- Garage Capital
- Highline Beta
- Pique Ventures
For further information, please see Minister Ng announces federal venture capital investments focused on gender and diversity.
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