As the Canadian venture capital market matures in the 1990s, it has witnessed some unique and unprecedented initiatives. A good illustration is the increased incidence of specialty or niche venture capital pools. Examples include Genechem, (commercialization of genomics research), MDS Capital Corporation (emerging biotechnology and life science firms), and TechnoCap (emerging information technology firms). These three also happen to have the backing of pension assets.
A second illustration is the recent emergence of seed financing pools. In 1997, Ventures West, in collaboration with the Business Development Bank of Canada and Cascadia Pacific Management, established the $25 million Western Technology Seed Investment Fund, intended to advance promising ideas in universities and other private and public research centres in British Columbia, Alberta, Saskatchewan and Manitoba. Seedings of this kind occur without a formal enterprise or management team in place, but with an innovative product concept recognized as having strong commercial viability.
Along with initial financing that can range from $100,000 to $500,000, the new western Canadian pool will offer value- adding management resources to projects. Among the latter will often be “company creators” or skilled entrepreneurs hired to help construct a business entity around the product concept and potential managers. Company creators assist with market analysis, business plan writing, internal development, personnel recruitment, fund-raising and the formation of customer and strategic partner relationships. Such hands-on support will permit seed projects to gradually become high technology start-ups, creating follow-on investment opportunities in which the pool (and Ventures West) may also invest. Technical experts sitting on the pool’s advisory committee provide still further input. After one year in operation, the western seed financing pool made seven investments launching firms from product concepts in assorted research outfits. These include the University of British Columbia, the University of Manitoba and the University of Victoria.
Public sector pension plans associated with British Columbia’s OCIO contributed to the capitalization of the western seed financing pool. There is also an eastern counterpart, organized through similar partnerships and geared to provinces in central and Atlantic Canada.
Also in 1997, the Caisse de dépot co-established a pair of Quebec-based seed financing pools. Capitalized at $30 million each by the subsidiary Sofinov, T2C2/Bio and T2C2/Info (i.e., Transfer, Technologies, Commercialization and Capital) also partner with their parent in seedings that lead to start-ups and further growth in emerging biotechnology/life science and information technology industries, respectively. Like the above, financing supports marketable ideas generated in provincial universities and other research centres.
By the end of their first year in operation, T2C2/Bio had initiated several projects in the fields of genomics, drug manufacturing and medical equipment, while T2C2/Info had done the same with regard to new Internet-related technology.
Sources: Western Technology Seed Investment Fund, Brochures and Press Clippings, 1997; Znaimer, Sam, Canadian Venture Capital in the Late ‘90s — Not Like the Old Days!, Ventures West, 1998; Caisse de dépot et placement, 1997 Operations Report, 1998