In 2017, the current federal liberal government launched the Venture Capital Catalyst Initiative (VCCI 2017), as successor to the Venture Capital Action Plan (VCAP) which was launched by the previous conservative government in 2013. As announced in Budget 2021, Venture Capital Catalyst Initiative (VCCI 2022) was renewed by the federal government.
DISCLAIMER – The following information is derived from Innovation, Science and Economic Development Canada (ISED)’s two performance matrices reports and other reports. ISED has chosen not to be fully transparent by not disclosing certain key facts and some of the following information is deducted from other sources of information.
Federal Government Commitments
Venture Capital Action Plan (VCAP)
Under VCAP, the federal government invested $390 million
- $340 million to establish and recapitalize four large scale private sector-led funds of funds in partnership with institutional and corporate strategic investors, as well as interested provinces; and
- $50 million in four existing high-performing VC funds in Canada.
| Capital raised by the VCAP funds-of-funds | |
| Fund-of-fund | Raised capital |
| Northleaf Venture Catalyst fund | $300 million |
| Teralys Capital Innovation fund | $375 million |
| Kensington Venture fund | $306 million |
| HarbourVest Canada Growth fund | $375 million |
The four funds-of-funds raised $1.356 billion from public and private sector investors, including approximately $340 million from the Government of Canada. Provincial governments committed $112.5 million to VCCI program including to the four “high-performing” VC funds.
| Government of Canada investment in the VCAP high-performing funds | |
| Fund | Committed capital |
| Lumira Capital II | $10 million |
| Real Ventures III | $10 million |
| CTI Life Sciences II | $15 million |
| Relay Ventures III | $15 million |
Venture Capital Catalyst Initiative (VCCI 2017)
Through VCCI, the federal government invested $371 million through three streams.:
Stream 1 – $278.5 million in four funds of funds
Stream 2 – $42.5 million in Brightspark, Build Ventures, Garage Capital, Highline Beta, and TandemLaunch
Stream 3 – $50 million clean technology focused fund managed by ArcTern Ventures, Cycle Capital, and Renewal funds
Stream 1
| Capital raised by the VCCI funds-of-funds | |
| Fund-of-fund | Raised capital |
| HarbourVest Canada Growth Fund II | $326.25 million |
| Kensington Venture Fund II | $150 million |
| Northleaf Venture Catalyst Fund II | $300 million |
| Teralys Capital Innovation Fund 2018 | $400 million |
The four funds-of-funds raised $1.176 billion from public and private sector investors, including approximately $278.5 million from the Government of Canada. Provincial governments committed $162 million to VCCI program including to stream 2 and 3 VC funds.
Stream 2
| Government of Canada Investment in the VCCI Stream 2 funds (as of December 31, 2021) | |
| Fund | Committed capital |
| Brightspark Canadian Opportunities Fund | $17.5 million |
| Build Ventures II | $5 million |
| Garage Capital II | $10 million |
| Highline BETA | $5 million |
| TandemLaunchIII | $5 million |
Stream 3
| Government of Canada investment in the VCCI Stream 3 funds (as of December 31, 2021) |
|
| Fund | Committed capital |
| ArcTern Ventures II | $10 million |
| Cycle capital Fund IV | $20 million |
| Renewal4 investment Fund | $20 million |
Venture Capital Catalyst Initiative (VCCI 2022)
Venture Capital Catalyst Initiative (VCCI 2022) is making available up to $450 million through three new streams.
- $350 million dedicated to funds-of-funds;
- $50 million dedicated to support VC investments in life science technologies; and
- $50 million dedicated to support a new inclusive growth stream to increase access to VC for underrepresented groups, such as women and racialized communities.
Applications deadlines:
- 5:00 p.m. PT on June 23, 2022 for the funds-of-funds stream—Now closed
- 5:00 p.m. PT on September 7, 2022 for the life sciences stream—Now closed
- 5:00 p.m. PT on November 30, 2022 for the first round of the inclusive growth stream—Now closed
- 5:00 p.m. PT on September 20, 2023 for the second round of the inclusive growth stream. (Deadline for the second intake of the inclusive growth stream has been extended from June 2, 2023 to September 20, 2023)
In BDC’s just released annual report, $350 million has been authorized and yet to be disbursed (as of March 31, 2023). No information has been disclosed on recipients. On April 6, 2023, Kensington Capital Partners announced $150 million initial close for Kensington Venture Fund III, towards an ultimate fund size of $290 million.
VCAP and VCCI 2017 Disclosed Performance
VCAP
| Performance of the VCAP funds-of-funds portfolio (Program Inception to December 31, 2020) |
||||||||
| (C$, 000s) | Amount committed to VCAP funds-of-funds | Capital called | % called | Cash distributed | Fair value | Total value | Total value to paid-in | Pooled Gross Internal Rate of Return |
| Funds-of-funds | 1,356,000 | 1,249,357 | 92% | 575,614 | 2,046,712 | 2,622,326 | 2.10x | 24.3% |
Note: Assuming 6.5 year life span (for the purpose of calculating IRR, as of December 31, 2020), 2.10X translated to approximated IRR of 12%, not 24.3%
| Performance of the Government of Canada VCAP high-performing funds Investment (as of December 31, 2021) |
|||||||
| (C$, 000s) | Amount committed | Capital called | % called | Cash distributed | Fair value | Total value | Total value to paid-in |
| High performing funds | 50,000 | 51,370 | 103% | 17,939 | 100,789 | 118,728 | 2.31x |
Note: Assuming 7.5 year life span (for the purpose of calculating IRR, as of December 31, 2021), 2.31X translated into IRR of 12%
VCCI 2017
Still too early to gauge the full performance
| Performance of the VCCI funds-of-funds portfolio (program inception to December 31, 2021) |
|||||||
| (C$, 000s) | Amount committed to VCCI funds-of-funds | Capital called |
% called | Cash distributed |
Fair value |
Total value |
Total value to paid-in |
| Funds-of-funds | 876,849 | 399,825 | 45.6% | 32,684 | 783,771 | 911,839 | 1.62x |
| Performance of the Government of Canada VCCI Stream 2 funds investment (as of December 31, 2021) |
|||||||
| (C$, 000s) | Amount committed |
Capital called |
% Called | Cash distributed |
Fair value |
Total value |
Total value to paid-in |
| Stream 2 funds | 42,500 | 19,696 | 46.3% | 127 | 31,716 | 31,843 | 1.62x |
| Performance of the Government of Canada VCCI Stream 3 funds investment (as of December 31, 2021) |
|||||||
| (C$, 000s) | Amount committed |
Capital called |
% Called | Cash distributed |
Fair value |
Total value |
Total value to paid-in |
| Stream 3 funds | 50,000 | 22,778 | 45.6% | 824 | 26,997 | 27,820 | 1.22x |
VCAP and VCCI 2017 Investment Activities
VCAP
Breakdown of direct and indirect investments by the funds-of-funds (as of December 31, 2021)
| Total commitments (C$M) | % of total | |
|---|---|---|
| Direct investments in Canadian companies | 190 | 84% |
| Direct investments in non-Canadian companies | 35 | 16% |
| Total direct investments in companies | 225 | 100% |
| Commitments to Canadian funds | 935 | 85% |
| Commitments to non-Canadian funds | 169 | 15% |
| Total fund commitments | 1,104 | 100% |
VCAP commitment to Canadian funds
| stage focus | Number of funds | Total commitments | ||
|---|---|---|---|---|
| # | % of total | C$M | % of total | |
| Seed | 5 | 15% | 71.6 | 7% |
| Early venture | 17 | 52% | 488.4 | 50% |
| Late venture | 3 | 9% | 99.0 | 10% |
| Growth equity | 8 | 24% | 325.5 | 33% |
| Total | 33* | 100% | 984.5 | 100% |
*one of high-performance funds was also funded by VCAP funds of funds.
Overall, 381 Canadian companies received support of $3 billion under VCAP, as of December 31, 2021. The number included investments by High-Performing funds, funds-of-funds, and underlying funds.
No disclosure on VCAP funds’ investments in US companies.
VCCI 2017
| Breakdown of direct and indirect investments by the funds-of-funds (as of December 31, 2021) | ||
| Total commitments (C$M) | % of total | |
| Direct investments in Canadian companies | 137 | 84% |
| Direct investments in non-Canadian companies | 25 | 16% |
| Total direct investments in companies | 162 | 100% |
| Commitments to Canadian funds | 690 | 79% |
| Commitments to non-Canadian funds | 186 | 21% |
| Total fund commitments | 876 | 100% |
VCCI Commitments to Canadian Venture Capital Funds (as of December 31, 2021)
| Stage Focus | Number of funds | Total commitments | ||
|---|---|---|---|---|
| # | % of total | C$M | % of total | |
| Seed | 11 | 26% | 133.7 | 17% |
| Early venture | 18 | 43% | 316.0 | 40% |
| Late venture | 5 | 12% | 99.0 | 13% |
| Growth equity | 8 | 19% | 234.6 | 30% |
| Total | 42 | 100% | 783.2 | 100% |
302 Canadian companies received $1.4 billion support under VCCI, as of December 31, 2021. The figure included investments by funds-of-funds, underlying portfolio funds, and funds selected under Streams 2 and 3.
VCAP and VCCI 2017 supported Canadian and foreign funds
VCAP
| Fund name | Vintage year | Sector focus | Location | Stage focus |
|---|---|---|---|---|
| 32 Degrees Diversified Energy Fund III | 2015 | Energy and clean technologies | Alberta | Private Equity* |
| Battery Ventures XI | 2016 | Information and communications technologies | Massachusetts | Early stage |
| Battery Ventures XI Side Fund | 2016 | Information and communications technologies | Massachusetts | Late stage |
| Battery Ventures XII | 2018 | Information and communications technologies | Massachusetts | Early stage |
| Battery Ventures XII Side Fund | 2018 | Information and communications technologies | Massachusetts | Early stage |
| Canaan XI LP | 2017 | Information and communications technologies | California | Early stage |
| Clarus Lifesciences III | 2014 | Life sciences | New York | Early stage |
| First Ascent Ventures I | 2015 | Information and communications technologies | Ontario | Early stage |
| Genesys Ventures III | 2016 | Life sciences | Ontario | Early stage |
| Georgian Partners Growth Fund II | 2013 | Information and communications technologies | Ontario | Growth stage |
| Georgian Partners Growth Fund III | 2016 | Information and communications technologies | Ontario | Growth stage |
| Georgian Partners Growth Fund IV | 2018 | Information and communications technologies | Ontario | Growth stage |
| Golden Venture Partners Fund II | 2014 | Information and communications technologies | Ontario | Seed |
| Golden Venture Partners Fund III | 2018 | Information and communications technologies | Ontario | Seed |
| Idinvest Digital Fund III | 2018 | Information and communications technologies | France | Early stage |
| Index Ventures VIII | 2016 | Information and communications technologies | Europe | Early stage |
| Information Venture Partners II | 2016 | Information and communications technologies | Ontario | Early stage |
| iNovia Growth Fund | 2018 | Information and communications technologies | Quebec | Growth stage |
| iNovia Investment Fund 2015 | 2016 | Information and communications technologies | Quebec | Early stage |
| Insight Venture Partners IX | 2015 | Information and communications technologies | New York | Growth stage |
| Lightspeed Venture Partners II | 2016 | Information and communications technologies | California | Growth stage |
| Lightspeed Venture Partners XI | 2016 | Information and communications technologies | California | Early stage |
| Lumira Capital III | 2016 | Life sciences | Ontario | Late stage |
| McRock iNFund | 2015 | Energy and clean technologies | Ontario | Early stage |
| New Acres Capital Ag & Food (formerly Avrio Ventures III) | 2014 | Energy and clean technologies | Alberta | Late stage |
| Novacap TMT IV | 2014 | Information and communications technologies | Quebec | Private Equity* |
| Novacap TMT V | 2017 | Information and communications technologies | Quebec | Private Equity* |
| Persistence Capital Partners II | 2014 | Life sciences | Quebec | Private Equity* |
| Real Investment Fund 17 | 2017 | Information and communications technologies | Quebec | Early stage |
| Relay Ventures III | 2015 | Information and communications technologies | Ontario | Early stage |
| Sierra Ventures XI | 2014 | Information and communications technologies | California | Early stage |
| Silversmith Capital Partners | 2015 | Information and communications technologies | Massachusetts | Private Equity* |
| Sofinnova Capital VIII | 2015 | Life sciences | France | Early stage |
| Trident Capital Cybersecurity I | 2016 | Information and communications technologies | California | Early stage |
| Vanedge Capital II | 2017 | Information and communications technologies | British Columbia | Early stage |
| Versant Ventures V | 2014 | Life sciences | British Columbia** | Early stage |
| Versant Ventures VI | 2016 | Life sciences | British Columbia** | Early stage |
| Versant Voyageurs I | 2018 | Life sciences | British Columbia** | Early stage |
| Version One Ventures I | 2012 | Information and communications technologies | British Columbia | Seed |
| Version One Ventures II | 2014 | Information and communications technologies | British Columbia | Seed |
| Walden Venture Capital VIII | 2014 | Information and communications technologies | California | Early stage |
| White Star Capital | 2014 | Information and communications technologies | New York | Early stage |
| Whitecap Venture Partners III | 2015 | Information and communications technologies | Ontario | Early stage |
| Whitecap Venture Partners IV | 2018 | Information and communications technologies | Ontario | Early stage |
| XPV Water Fund II | 2014 | Energy and clean technologies | Ontario | Private Equity* |
| Yaletown Innovation Growth Fund | 2017 | Energy and clean technologies | British Columbia | Early stage |
|
Note: Seven venture capital funds based in the United States and Canada that received commitments under VCAP are excluded from this list for confidentiality reasons. * ISED classified them as VC Growth Equity **Versant V & VI and Voyageurs I are “Deemed-Canadian funds” based in British Columbia. |
||||
VCCI 2017
Venture capital funds supported by the Venture Capital Catalyst Initiative(as of December 31, 2021)
| Fund name | Sector focus | Location | Stage focus |
|---|---|---|---|
| Amplitude Venture Fund I | Life sciences | Quebec | Growth |
| ArcTern Ventures II | Energy and clean technologies | Ontario | Early stage |
| Brightspark Canadian Opportunities Fund | Information and communications technologies | Quebec | Early stage |
| Build Ventures Fund II | Information and communications technologies | Nova Scotia | Early stage |
| CTI Life Sciences Fund III | Life Sciences | Quebec | Early stage |
| Cycle Capital Fund IV | Energy and clean technologies | Quebec | Early stage |
| Garage Capital Fund III | Information and communications technologies | Ontario | Seed |
| Garage Capital Fund IV | Information and communications technologies | Ontario | Seed |
| Garage Capital Opportunities Fund I | Information and communications technologies | Ontario | Seed |
| Garage Capital Opportunities Fund II | Information and communications technologies | Ontario | Seed |
| Georgian Alignment Fund II | Information and communications technologies | Ontario | Late stage |
| Georgian Partners Growth Fund V | Information and communications technologies | Ontario | Growth |
| Golden Venture Partners Fund III | Information and communications technologies | Ontario | Early stage |
| Golden Ventures Partners Fund IV | Information and communications technologies | Ontario | Seed |
| Golden Ventures Opportunities Fund I | Information and communications technologies | Ontario | Growth |
| Highline BETA Fund 2019 | Information and communications technologies | Ontario | Seed |
| Information Venture Partners III | Information and communications technologies | Ontario | Early stage |
| iNovia Growth Fund | Information and communications technologies | Quebec | Growth |
| iNovia Growth Fund II | Information and communications technologies | Quebec | Growth |
| iNovia Investment Fund 2018 | Information and communications technologies | Quebec | Early stage |
| Lumira Ventures IV | Life sciences | Ontario | Late stage |
| McRock Capital Fund II | Information and communications technologies | Ontario | Growth |
| Mistral Venture Partners III | Information and communications technologies | Ontario | Early stage |
| Relay Ventures V | Information and communications technologies | Ontario | Early stage |
| Renewal4 Investment Fund | Energy and clean technologies | British Columbia | Late stage |
| StandUp Ventures I | Information and communications technologies | Ontario | Seed |
| StandUp Ventures II | Information and communications technologies | Ontario | Seed |
| TandemLaunch III | Information and communications technologies | Quebec | Seed |
| TVM Life Science Innovation II | Information and communications technologies | Quebec | Early stage |
| Vanedge Capital III | Information and communications technologies | British Columbia | Early stage |
| Versant Vantage II | Life sciences | British Columbia | Growth |
| Versant Venture Capital VII | Life sciences | British Columbia | Early stage |
| Versant Venture Capital VIII | Life sciences | British Columbia | Early stage |
| Versant Voyageurs II | Life sciences | British Columbia | Early stage |
| Version One Opportunities Fund I | Information and communications technologies | British Columbia | Late stage |
| Version One Opportunities Fund II | Information and communications technologies | British Columbia | Late stage |
| Version One Ventures I and II | Information and communications technologies | British Columbia | Early stage |
| Version One Ventures IV | Information and communications technologies | British Columbia | Seed |
| White Star Capital III | Information and communications technologies | Ontario | Early stage |
| Whitecap Ventures Partners IV | Information and communications technologies | Ontario | Early stage |
Observation and unanswered questions
- Questionable to list Versant funds as Canadian funds. Versant Venture Capital VI, VII, VIII (Canada), LPs, though domiciled in Ontario, are based and managed in California. Versant Vantage II, Versant Voyageurs II are Delaware funds with Ontario branch, are managed in California.
- 6 private equity funds were masqueraded by ISED as “VC Growth Equity” funds under VCAP. Venture Capital Action Plan backing private equity funds is kind of ironic.
- It is puzzling that CTI Life Sciences II, a high-performance fund, is one of the six unlisted Canadian and foreign VCAP funds.
- Given the fact that 19% is the usual average IRR for VC funds, VCAP “high-performance” funds are sub-par funds.
- How much $364.3 million (based on the actual call-down by funds of funds and high-performance funds) direct investments would have generated in co-investments in Canadian companies in aggregate? If it is more than $3 billion, why the bother for the existence of VCAP program to enrich fund managers?
- VCCI program backed 46 Canadian “VC” funds but ISED chose to list 40. Are the other 6 are private equity funds and who are the US and foreign funds?
- A concentrated few of VC managers are the beneficiary of government backed VCAP and VCCI funding. Are there no other fund managers and funds for the funds of funds to invest in? The high concentration is likely be due to a tiny and limited pool of “good” Canadian VC managers. If the funds of funds must make obligatory capital deployments, based not on fund returns, then why the government continues to fund funds of funds?
- To support transparency, a third-party should be appointed to audit the programs, so there are no intended omissions.
Sources
VCCI
https://ised-isde.canada.ca/site/sme-research-statistics/en/venture-capital-catalyst-initiative/performance-metrics-vcci-2017-december-31-2021
VCAP
https://ised-isde.canada.ca/site/sme-research-statistics/en/venture-capital-action-plan/venture-capital-action-plan-performance-metrics-report-december-31-2021