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Locals Question Why Toronto VC Managing B.C

- The BC Tech Fund, a $100 million fund created by the BC government to invest in local tech startups, has drawn criticism for being managed by Kensington Capital, a Toronto-based firm. - Local venture capital firms question whether the goals of the fund to support BC companies and job growth have been achieved, as few deals have been made and the money is being managed outside the province. - While Kensington and funds they invest in like Lumira Capital are now opening BC offices, local VC firms argue they should have been given the opportunity to manage the fund and help grow the local industry.

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47 views3 pages

Locals Question Why Toronto VC Managing B.C

- The BC Tech Fund, a $100 million fund created by the BC government to invest in local tech startups, has drawn criticism for being managed by Kensington Capital, a Toronto-based firm. - Local venture capital firms question whether the goals of the fund to support BC companies and job growth have been achieved, as few deals have been made and the money is being managed outside the province. - While Kensington and funds they invest in like Lumira Capital are now opening BC offices, local VC firms argue they should have been given the opportunity to manage the fund and help grow the local industry.

Uploaded by

wclonn
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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LocalsquestionwhyTorontoVCmanagingB.C.

TechFundmoney
biv.com /article/2017/4/localsquestionwhytorontovcmanagingbctechfu/

WhenLumiraCapitalsteamtoucheddowninVancouverinearlyAprilforitsannualgeneralmeeting,theTorontobasedventurecapitalfirmwasalsomarkingthefirst
timeitwouldhaveanofficeinB.C.

Thenewofficewasnonnegotiableforthefirmreceivinganinvestmentfromtheprovinces$100millionBCTechFundmanagedbyKensingtonCapital(also
headquarteredinToronto).

LumirahadpreviouslyinvestedintwoB.C.companiesVictoriasAuriniaPharmaceuticalsInc.(TSX:AUP)andVancouversZymeworksbuthadnopermanent
presenceintheprovincebeforesecuringtheinvestment.

Sixmonthsafterthelaunchoftheprovinces$100millionfundoffunds,TorontosheavyinfluenceonB.C.taxpayersmoneyisntsittingwellwiththelocalventurecapital
companies.

IdontthinktheBCTechFundhasachievedthegoalsthatwereoriginallyintendedfortheprogram,saidTimiaCapital(TSXV:TCA)CEOMikeWalkinshaw,adecade
plusindustryveteranwhocuthisteethasVancouverbasedChrysalixEnergyschieffinancialofficer.

ClearlytheB.C.governmentwastryingtoputinplaceaprogramthatwouldhelpfundtechnologycompaniesinBritishColumbiaandintheireyescreatejobgrowth.So
far,Idontbelievethathashappened.IcanprobablycountthenumberofdealsthathavereceivedmoneythroughtheBCTechFundononehand.

The$100millionfundoffundshas$25millionearmarkedfordirectinvestmentinearlystagecompanies.Theremaining$75millionistobeallocatedtoventurecapital
fundsthatarerequiredtoinvestinB.C.basedstartups.

Lastfall,VancouversVanedgeCapitalbecamethefirstfundtoreceivemoneyfromthe$75millionpool.AndtechstartupMojioreceivedadirectinvestmentintherange
of$1millionto$3millionfromthe$25milliondirectinvestmentpool,KensingtonCapitalmanagingdirectorRickNathantoldBusinessinVancouverinNovember2016.

TorontosLumiraisthethirdentitytoreceivefundingfromtheBCTechFundsinceitslaunchinOctober.LumiraCEOPetervanderVeldensaidcompanypolicy
preventedhimfromrevealinghowmuchmoneyitreceivedfromthefund.ButNathansaidheexpectedinvestmentsinotherfundswouldbelessthanthe$15million
Vanedgereceived.

AsBIVreportedinApril2016,twoB.C.entitieswithlocalknowledgeandventurecapitalinvestmentexpertisewereshortlistedalongwithKensingtontorunthetechfund.

WalkinshawsaidhisventurecapitalfirmalsoputinabidtomanagetheBCTechFundbutheacknowledgedthattheothertwolocalentitieshadstrongerbids.

Iwasperfectlyfinewithanyofthose[local]playersgettingthatmoney.MygoalinthatwastomakesurethatmoneyendedupinBritishColumbiasothatwecouldstart
afundoffundsindustryhere.

KensingtonCapitalmanagingdirectorGerriSinclairtoldBIVthatnomatterwhereafundmanagerisheadquartered,themoneywillstillgotoB.C.companies.
Oneofourmandatesistoattractoutsideoftheprovinceafundto[moveto]B.C.inordertoqualifyforthetechfund,saidSinclair,whowasrecruitedbyKensingtonlast
yeartolaunchanofficeinVancouver(likeLumira,ithadnopermanentpresenceintheprovincepriortothetechfund).

ShepreviouslyservedaspresidentofPremierChristyClarkstechnologycouncil.

SinclairsaidthereisashortageoflifescienceventurecapitalfundsinB.C.,soattractingLumiraisahugeaccomplishmentfortheBCTechFund.

LumirahasinturnhiredAuriniaPharmaceuticalschairmanRichardGlickman,whosecompanypreviouslyreceivedinvestmentfromLumira,toleaditssinglepartner
officeinB.C.

TimiaCapitalhasmadefourdealswithB.C.techfirms,withafifthtobeannouncedsoon,Walkinshawsaid.

WeveprobablydonemoredealsinthisprovincethananyVC[venturecapitalfirm]hasdoneinthisprovincethisyear.Andyetwedontqualifyforthefundingbecause
werenota$100millionfund.

Thisprogramhadtheintentofreallyprovidingthefundingtolocalventurecapitalcompanies.Now,somewherealongtheline,thestructuringofthefundmovedtoa
placewhereonlytheabsolutelargestfundsweregoingtogetmoney.Asaresultitexcludedalmostallofthelocalcompaniesthataremakinginvestmentsinthis
province.

SurreyTyneheadMLAAmrikVirk,whoservedasB.C.stechnologyministerwhenthetechfundwasannouncedinDecember2015,saidheexpectstohearcriticism
fromthelocalcommunitywhenaTorontofirmreceivesthefunds.

ButhesaidthecalibreoftheTorontofundswouldultimatelybenefitB.C.

WhenwegetaTorontocompanylikeLumirathatsgoingtoengageatadeeperlevelinB.C.,thatsgoingtoraiseallships,Virksaid.

Theyregoingtoinvestmoreinourlocalspace.And,ifwerebringingthecentreofthatventurecapitalworld[Toronto]furtherandfurtherwesttowardus,thisisa
positiveforallofthesecompanies.

VirksaidheexpectsLumirashighprofiletohaveamultipliereffectanddrawmoreventurecapitalfirmstotheprovince.

ButtherolloutoftheBCTechFundhasirkedGeorgeHeyman,MLAforVancouverFairviewandBCNDPtechnologycritic.

WehavefirmsinBritishColumbiathatwouldhavelovedtohavehadtheopportunitythatTorontosKensingtonCapitalwasgiven,theMLAsaid.

HeymansaidthatwhileheunderstandsKensingtonandLumirahavebothestablishedB.C.offices,itshouldbeuptothegovernmenttobuildupgreatercapacityin
BritishColumbiaandnotsendouropportunitiesandmuchofourmoneyoutsideoftheprovince.

WhileallthemoneyfromtheBCTechFundisrequiredtobeinvestedinlocalearlystagecompanies,thefundmanagersareentitledtoannualmanagementfeesbased
onapercentageofthe$100milliontheymanageasopposedtohowmuchmoneyisdistributedeachyear.A1%managementfee,whichisbelowindustrystandards,
wouldnetKensington$1millionannually.
KensingtonisalsoentitledtomanagementfeesfortakingovertheremnantsofthetaxpayerfundedBCRenaissanceCapitalFund.

JayRhind,aprincipalattheVancouverFounderFund,saidheunderstandsthefrustrationsinthelocalVCfundcommunitybutarguedthatafundoffundsmanagerlike
Kensingtonshouldbebasingitsdecisionssolelyonmeritandnotgeography.

IfyoulookattheVCfunduniverseinVancouvertheoptionsofwhereKensingtoncandeploythatcashiftheywereonlytochooselocalmanagersisprettyslim,he
said.

Rhindsventurecapitalfund,whichlaunchedinOctober2015,isoneofB.C.snewestfunds.HesaidtheBCTechFundisareallyniceinitiative,butinnowayisthis
goingtobethesilverbulletthatsolvesallofourproblemsoftheavailabilityofcapital.

WithafilefromKirkLaPointe

torton@biv.com

@reporton

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