$217M Northleaf Venture Catalyst Fund Sees Ontario And Canada Bet Big On Early-Stage Startups

I’ve often lamented the state of access to early stage investment capital in Canada, since there’s a relatively small pool and generally firms are more conservative with their funds than they are south of the border. Today, the governments of Canada and Ontario together announced a new “fund of funds” with a target size of $300 million to help inject some, called the Northleaf Venture Catalyst fund.

The governments of Ontario and Canada will match funds put into the fund by committing one dollar for each two put forth by private investors, with a target total fund value of $300 million. Already, they’ve raised $217.45 million, so they’re on the right track, and that funding is earmarked specifically to help support “Canada-focused early stage and mid-stage venture funds,” as well as to be put directly in innovative companies, according to Canadian Conservative MP Gary Goodyear. As a fund of funds, its purpose is to make sure that there are sufficient early stage funds with enough capital to make the kind of risky early bets that encourage innovation.

That means access to capital for high-growth companies. Goodyear said that Canadian companies have proven to them that they’re able to compete on the world stage, and said that “all [government] have to do is provide resources and get out of the way.” In Canada, the VC industry relatively young and small compared to the U.S. he said, and clearly there’s a need to expand the supply for venture capital in Canada. “One of the biggest obstacles to Canadian R&D by Canadian businesses is the lack of access to expertise and to capital,” he explained during a press conference today.

The fund had a first close of $217.45 million, drawing investment from OpenText, the Canada Pension Plan and others. The federal and provincial government contributed up to $50 million of that, in keeping with their agreement to match private investment. Goodyear said there’s “no reason” Canada should continue to lag behind our OECD partners in product development and innovation.

“This is about bringing the right people together at the right time to do the right thing for Canadians,” he said. “We will help get the conversation started and then we will help turn those conversations into action.”

Ontario premier Kathleen Wynne noted that when Canada launched the Ontario Venture Capital Fund in 2008, there were critics who questioned whether this was the right way to go. But their original $190 million investment leveraged over $850 million in private capital, and helped companies grow, gain a foothold, and create jobs to support the economy.

“If our most promising companies don’t have access to capital, then they may relocate,” she said. “We need to make sure that we’re an environment that draws companies here and keeps them here.”

It’s definitely the case that more money available to younger companies should help stem the Silicon Valley exodus: Many entrepreneurs I talk to are struggling with the decision of whether or not to leave, and access to resources is without a doubt the number one reason they seek to fly the coop.