Archived - Backgrounder: Establishment of Teralys Capital Innovation 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 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. Teralys Capital Innovation Fund is the second fund of funds established under the VCAP.

Teralys Capital Innovation Fund had its initial closing with $279 million in commitments, of which $186 million was from institutional and corporate investors, alongside $46.5 million from each of the Governments of Canada and Quebec. The Fund has an overall target size of $375 million.

Teralys Capital Innovation Fund has an emphasis on investment opportunities in the life sciences sector, and will invest primarily in Canada-focused early-stage and mid-stage venture capital funds, and directly in companies across Canada.

The Governments of Canada and Quebec have agreed to make a combined capital commitment of $1 for every $2 committed by private sector investors to the new Fund, up to a maximum of $62.5 million each.

The initial partners in Teralys Capital Innovation Fund are:

• BDC Capital Inc. (on behalf of the Government of Canada).
• Caisse de dépôt et placement du Québec
• Desjardins
• Fondaction CSN
• Fonds de Solidarité FTQ
• Investissement Québec (on behalf of the Government of Quebec)
• Knight Therapeutics Inc.
• National Bank
• OpenText Corporation

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

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

Teralys Capital is a fund manager financing private venture capital funds investing in innovative businesses in information technologies, life sciences, and industrial or clean technologies. With more than $1.5 billion in assets under management across two venture capital funds of funds and a management mandate for two additional portfolios of funds, Teralys is one of the largest investors in Canada focused on innovation. Teralys has been supported since inception in 2009 by its many partners including the Caisse de dépôt et placement du Québec, the Fonds de Solidarité FTQ and Investissement Québec.

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 former Minister of Finance established the private sector-led Venture Capital Expert Panel to provide advice and recommendations on key components of the VCAP, including the selection of private sector fund 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 other funds of funds under the VCAP.