Third Canadian Public-Private Venture Capital Fund Announced

Toronto Night Skyline

By James Noble

November 27, 2014

The latest Canadian public-private venture capital fund recently announced it raised $160 million on its initial closing. The newest fund, dubbed the Kensington Venture Fund, is run by Toronto-based Kensington Capital Partners and supported by a government commitment of $1 for every $2 committed by private sector investors. 

Since early 2013, the Canadian government announced it would invest $400 million in several new funds over seven to 10 years through its Venture Capital Action Plan (VCAP). Venture capital activity in Canada has steadily decreased over recent years and much of the risk capital deployed by venture firms has been directed at the oil and gas and mining sectors. VCAP is an effort to change this trend.

The Kensington Venture Fund will place an emphasis on investment opportunities in clean technology and energy technology as well as in communications technologies.  The fund will invest primarily in early-stage and mid-stage venture capital funds and directly in companies across Canada, but pay special attention to those companies located in Western Canada, which it considers an underserved market.

This is the third government-backed venture fund established under the VCAP program, alongside the NorthLeaf Venture Catalyst Fund and the Teralys Capital Innovation Fund. It is expected that a fourth fund-of-funds investment announcement will be made in the near future.

The strong attraction of Silicon Valley, with its robust capital markets and strong start-up culture, is forcing Canadian policy makers to adapt. Programs like VCAP are designed to make access to capital easier, encouraging Canadian entrepreneurs to stay in the country, and grow their businesses here.

On paper, policies and subsidies for start-ups in the United States and Canada are strikingly similar, as they both stress the importance of private sector involvement and leadership. However, thanks to programs like VCAP, Canadian startups often have more opportunities to take advantage of government subsidies.

With additional money flowing into the Canadian venture capital system, coupled with government incentives, the pull of Silicon Valley may weaken, giving Canadian entrepreneurs the choice to stay home and build their start ups here.