Archived - Backgrounder: Establishment of HarbourVest Canada Growth Fund

The Government of Canada’s Venture Capital Action Plan (VCAP) is deploying $400 million in new capital to:

• Help increase private sector investment in early-stage risk capital.
• Support the creation of large-scale venture capital funds of funds led by the private sector.
• Improve access to venture capital financing to provide high-growth companies with the financing and resources they need to create jobs and grow the economy.

To achieve these objectives, the VCAP has already made 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.
• An aggregate investment of up to $50 million in four 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 managing the VCAP investments.

Since the announcement of the VCAP, the Government has made significant progress. In 2014, the Government announced investments in three funds of funds. To date, the respective fund managers have secured a number of commitments from investors:

• Northleaf Venture Catalyst Fund—$233.5 million.
• Teralys Capital Innovation Fund—$279 million.
• Kensington Venture Fund—$160 million.

HarbourVest Canada Growth Fund, the last of the four private sector-led funds of funds to be established under VCAP, had its initial closing with $197.2 million in commitments—$131.5 million from institutional and corporate investors, alongside $65.7 million from the Government of Canada. The Fund will place an emphasis on investment opportunities in 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 HarboutVest Canada Growth Fund, up to a maximum of $125 million.

The initial partners in HarbourVest Canada Growth Fund are:

• BDC Capital Inc. (on behalf of the Government of Canada)
• BMO Financial Group
• Canada Pension Plan Investment Board
• CIBC
• HarbourVest Global Private Equity Limited
• Knight Therapeutics Inc.
• Laborers’ Pension Fund of Western Canada
• Royal Bank of Canada
• Scotiabank
• TD Bank Group

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

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

HarbourVest Partners, a top-tier firm headquartered in Boston (U.S.), is an independent private markets specialist, providing investment programs and customized solutions focused on venture capital, buyout, mezzanine debt, credit, and real assets through primary fund investments, secondary purchases, and direct co-investments. In more than 30 years of investing in private equity, HarbourVest Partners has committed more than $25 billion to newly formed funds, completed over $11 billion in secondary purchases, and invested $4 billion directly in operating companies. It has also recently established an investment office in Toronto, Ontario.

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 Government 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; and,
• Robin Louis, Senior Advisor to Vanedge Capital.