Archived - Backgrounder: Establishment of Kensington Venture 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 of 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 fund 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.

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.

Since the announcement in January 2013, the Government has made significant progress in implementing the VCAP.

In January 2014, the Government announced its investment in Northleaf Venture Catalyst Fund, the first fund of funds established under the VCAP, and on November 10, 2014, the Government announced its investment in the second such fund of funds, Teralys Capital Innovation Fund.

On November 14, 2014, Kensington Venture Fund had its initial closing with $160 million in commitments, of which $107 million was from institutional, corporate and individual investors, alongside $53 million from the Government of Canada. The Fund has an overall target size of $300 million.

Kensington Venture Fund will have an emphasis on investment opportunities in clean technology and energy technology as well as information and communications technologies, and will invest primarily in early-stage and mid-stage venture capital funds and directly in companies across Canada. The Government of Canada has agreed to make a capital commitment of $1 for every $2 committed by private sector investors to the new Fund, up to a maximum of $100 million.

The initial partners in Kensington Venture Fund are:

• BDC Capital Inc. (on behalf of the Government of Canada)
• BMO Financial Group
• CIBC
• OpenText Corporation
• Richardson GMP
• Royal Bank of Canada
• Scotiabank
• TD Bank Group
• Individual investors

This Fund will seek additional investors to reach its target size and anticipates holding a second closing in 2015.

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

Founded in 1996, Kensington Capital Partners is a leading independent Canadian investor in alternative assets, best known for its private equity and venture capital investment programs. Since 2002, Kensington has invested over $600 million in private equity, venture capital, infrastructure and hedge funds.

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, former Minister of Finance Jim Flaherty established the private sector Venture Capital Expert Panel to provide advice and recommendations on key components of the VCAP, including the selection of private sector fund of funds managers. The Panel members have extensive experience in the venture capital asset class, business and finance and include:

• Annette Verschuren (Chair), Chair and CEO of NRStor Inc.
• Jim W. Davidson, Chairman and CEO of FirstEnergy Capital Corp.
• Samuel L. Duboc, former Clifford Clark Visiting Economist at the Department of Finance
• 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

The Government of Canada is continuing to engage with other private sector investors, interested provinces and potential general partners to establish the remaining fund of funds under the VCAP.