Archived - Backgrounder: Establishment of Northleaf Venture Catalyst Fund

The Government of Canada announced the Venture Capital Action Plan (VCAP) in January 2013 to guide the deployment of $400 million in new capital, to help increase private sector investment in early-stage risk capital and to support the creation of large-scale venture capital funds led by the private sector. Improving access to venture capital financing will provide high-growth companies with the financing and resources they need to create jobs and grow the economy. With this goal in mind, the VCAP will make available:

• $350 million to establish or recapitalize up to four large-scale private sector-led funds of funds (a funds of funds portfolio consists of investments in several venture capital funds), in partnership with institutional and corporate strategic investors as well as interested provinces; and,
• An aggregate investment of up to $50 million in up to five existing high-performing venture capital funds in Canada.

Since the announcement in January 2013, the Government has made significant progress in implementing the VCAP. In September 2013, the Government announced the selection of four high-performing venture capital funds in Canada to receive an aggregate of $50 million from the Government under the VCAP. The establishment of Northleaf Venture Catalyst Fund is the latest step in the implementation of the VCAP.

The Fund had its initial closing with $217.5 million in commitments, of which $145 million is from private sector investors and $36.3 million is from each of the Governments of Canada and Ontario. The Fund has an overall target size of $300 million.

Northleaf Venture Catalyst Fund will invest primarily in Canada-focused early-stage and mid-stage venture capital funds and directly in companies across Canada.

The Government of Canada and the Government of Ontario have agreed to make a combined capital commitment of $1 for every $2 committed by private sector investors, up to a maximum of $50 million each.

The initial partners in the Fund are:

• BDC Capital Inc.
• BMO Financial Group
• Canada Pension Plan Investment Board
• Canadian Imperial Bank of Commerce
• National Bank of Canada
• Ontario Capital Growth Corporation
• OpenText Corporation
• RBC
• Scotiabank
• TD Bank Group

The Fund will seek additional investors to reach its target size and anticipates holding a second closing later in 2014.

Recognizing the importance of selecting experienced high-quality private sector fund managers, in the spring of 2013 the Government invited interested parties to submit their candidacy to act as a general partner and manager for one of the funds of funds. To ensure that the VCAP is informed by private sector principles, the Minister of Finance established the Venture Capital Expert Panel to provide advice and recommendations on key components of the VCAP, including the selection of these private sector fund managers. The Panel members have extensive experience in the venture capital asset class, business and finance and include:

• Samuel L. Duboc, former Clifford Clark Visiting Economist at the Department of Finance
• Jim W. Davidson, Chairman and CEO of FirstEnergy Capital Corp.
• Gilles Duruflé, Executive Vice-President of the Quebec City Conference and President of its Public Policy Forum on Venture Capital and Innovation
• Robin Louis, Senior Advisor to Vanedge Capital
• Annette Verschuren, Chair and CEO of NRStor Inc.

Northleaf Capital Partners has been selected by lead investors to act as the general partner and manager for Northleaf Venture Catalyst Fund, following a fair and competitive selection process led by the Venture Capital Expert Panel.

Northleaf Capital Partners, headquartered in Toronto, Ontario, is Canada’s largest independent global private markets fund manager and advisor, with more than $5 billion in commitments under management on behalf of public, corporate and multi-employer pension plans, university endowments, foundations, and financial institutions and family offices. Northleaf Capital Partners is also the general partner and manager of the Ontario Venture Capital Fund, which has $205 million in capital commitments, of which $90 million came from the Government of Ontario.

The Business Development Bank of Canada is facilitating the implementation of the VCAP on behalf of the Government of Canada by providing independent expertise, undertaking due diligence, supporting negotiations with funds and other investors, and assisting in the deployment of VCAP investments.

Northleaf Venture Catalyst Fund is the first fund of funds to be established under the VCAP. The Government of Canada is continuing to engage with other private sector investors, interested provinces and potential general partners to establish the other funds of funds under the VCAP in 2014.