Tech funds growing in Kitchener-Waterloo
On Jan. 21, Ontario Premier Kathleen Wynne was at the Communitech Hub in Kitchener to announce the establishment of the Northleaf Venture Catalyst Fund, an initiative that aims to invest capital into the province’s technology sector.
The fund is based on the Canadian government’s Venture Capital Action Plan and Ontario’s Venture Capital Fund.
The Northleaf Venture Catalyst Fund aims to act as a incentive for investment, with each level of government investing $1 for every investment of $2 made by the private sector.
So far, the project has raised $217 million with the target for the fund up to $300 million — and the numbers are only increasing. The provincial and federal government are pledging to provide up to $50 million each, with the rest of the money provided by the private sector.
Northleaf Capital Partners, a global private markets investor, will be managing the fund. Managing director Jeff Pentland described the newly-established fund within the private sector as a fund that will “attract future investments into eco-systems going forward.”
“It will create a focus portfolio of commitment through venture capital funds, primarily Canadian based,” he added.
David Barnabe, senior media relations and consultations officer for Canada’s ministry of finance, explained that the fund will be used to make investments into companies across the country.
“In sectors where Canada has existing strengths, including in the information and communication technologies sector, which has a significant presence in the Kitchener-Waterloo region,” he said.
The Communitech Hub hosts a number of technology start-ups and large tech companies, like Google and BlackBerry, also have offices in the area.
Barnabe continued, “The [government] is offering an attractive financial structure to incent the private sector to invest in the venture capital asset class.”
“The structure is consistent with approaches taken by other jurisdictions to stimulate their venture capital sectors and is designed to align the interests of all investors towards achieving the highest possible returns,” he added.
Pentland highlighted Northleaf’s previous successes with other venture capital investments as the reason why they were selected to manage the Catalyst Fund.
“I think the government saw that we have a lot of experience globally investing in private equity funds, but also in Canada,” he said. “I think they liked our philosophy, overall investment track record and in-depth knowledge of the Canadian venture capital market. We have been investing in this space for over 40 years.”
The fund is premised around a return-oriented mandate, allowing for large returns made on investments.
Describing the long-term strategy for the fund, Pentland continued, “We will choose which fund manager we want to back over a three-to-four year period, and in turn they invest in companies. We will pick who we believe is best capable in giving back fund returns and they will have an investment period of three to five years, assisting their companies in growing.”