Frequently Asked Questions: Venture Capital Action Plan

General Partner and Manager of Funds of Funds

Why is the Government seeking private sector managers for funds of funds under the Venture Capital Action Plan?

As part of the Venture Capital Action Plan announced on January 14, 2013, the Government committed to establishing and recapitalizing large-scale, private sector-led funds of funds with the participation of institutional investors, corporate strategic investors, and interested provinces. The Government is seeking private sector managers who have the experience and expertise to make investments that are market-oriented and focussed on maximizing returns. These managers will be responsible for the day-to-day management of the funds of funds, and will also be responsible for securing some of the private sector investors for the funds of funds.

How will the General Partner and Manager selection process work? How will candidates be rated?

Evaluation of candidates will be based on a process determined by a private sector advisory panel (to be announced shortly) that will conduct the evaluation process in consultation with lead investors.

The evaluation process will take into account the candidate's submission and reference checks. Candidates will be ranked and a shortlist of candidates will be invited to proceed to the next stage of the selection process. At this stage, candidates will be asked to make a presentation and respond to more detailed questions.

Following this, a shortlist of preferred candidates will be identified to enter into negotiations with the lead investors, including the Government of Canada, in the funds of funds. A final preferred candidate for each fund will be chosen by the lead investors in the funds. The preferred candidate will participate in the final negotiation and settlement of a term sheet and other documents relating to the establishment of the fund for which it has been selected as General Partner and Manager.

When does the Government anticipate selecting General Partners and Managers for the funds of funds?

The Government anticipates selecting General Partners and Managers in the coming months.

How many General Partners and Managers does the Government anticipate selecting?

The Government is expecting to establish two new and recapitalize up to two private sector-led funds of funds.

How many funds of funds will be established?

The exact number of funds of funds will depend on the outcome of discussions with private sector investors. The Government anticipates establishing two new and recapitalizing up to two private sector-led funds of funds.

When does the Government anticipate finalizing the funds of funds?

The Government anticipates establishing and recapitalizing funds of funds in the coming year.

Will funds of funds focus on a particular investment stage?

The primary focus of the funds of funds in the Venture Capital Action Plan will be early stage (e.g., series A or series B) venture capital, with some growth equity or expansion capital investments throughout the life cycle of such investments.

Can a General Partner and Manager apply for more than one fund of funds?

The Government is considering up to three potential investment strategies for large-scale funds of funds: 1) an investment strategy focused on venture capital investment opportunities in the information and communications technology sector; 2) an investment strategy with some emphasis on venture capital investment opportunities in the life science, and/or clean technology sectors; or 3) a broader investment strategy with no specific sector or industry focus or emphasis.

General Partners and Managers may signal an interest in any number of these models; however, a selected General Partner and Manager may only manage one of the funds of funds.

How is substantial presence in Canada defined? Is the selection process only open to Canadian General Partners and Managers or can foreign-based General Partners and Managers apply?

The process is open to Canadian and foreign-based General Partners and Managers. All candidates must have or be prepared to establish, a principal office in Canada that is an active investment office and which is staffed with senior investment professionals who are residents of Canada, of whom at least one is responsible for making the investment decisions of the firm for the fund of funds.

What investment restrictions will General Partners and Managers be expected to follow?

The investments made by the funds of funds will be market-oriented and focused on maximizing returns. To be eligible for investments from the funds of funds, underlying venture capital fund managers must have a substantial presence in Canada and must also commit to investing at least one third of their total capital in Canadian-domiciled firms.

Managers of the funds of funds will be able to invest up to 20 per cent of the funds of funds' capital directly into companies, alongside the venture capital funds in which they invest.

The investment strategies of the funds of funds could have a sectoral focus in information and communications technologies, life sciences, and clean technologies. These sectors are high-growth sectors where Canadian firms have existing strengths. The exact size, number and investment strategies of the funds of funds will depend on the outcome of discussions with private sector investors, and the investment strategies that maximize participation from institutional and corporate strategic investors.

What level of investment will successful General Partners need to make into a fund of funds?

A minimum level of investment by the General Partner has not been established. The evaluation process will take into consideration the amount of investment the General Partner expects to contribute to the fund of funds.

What level of fundraising will successful General Partners and Managers be expected to undertake?

A specific level of fundraising has not been predetermined. General Partner and Manager candidates should indicate in their expression of interest the approach they will use to raise incremental funds, and their previous experience in this respect.

When does the Government anticipate announcing the private sector advisory panel that will assist in the selection process?

The private sector advisory panel will be announced in the coming weeks.

High-Performing Venture Capital Funds Selection Process

Why is the Government making investments in high-performing venture capital funds?

As part of the Venture Capital Action Plan announced on January 14, 2013, the Government committed to provide additional resources in the near term to a few high-performing private sector-managed venture capital funds. This will provide immediate capital to the Canadian venture capital sector. These resources will allow fund managers to increase the size of their funds, optimize the execution of the fund's strategy, and accelerate investments in innovative firms. 

What will the high-performing venture capital funds selection process entail? How will candidates be rated?

Evaluation of candidates will be based on a process determined by a private sector advisory panel (to be announced shortly) that will conduct the evaluation process.

The evaluation process will take into account the candidate's submission and reference checks. Based on the evaluation process, candidates will be ranked and a shortlist of candidates will be invited to proceed to the next stage of the selection process. At this stage, candidates will be asked to make a presentation and respond to more detailed questions.

At the conclusion of the process, up to five preferred candidates will be selected for investment commitments by the Government.

When does the Government anticipate selecting the high-performing venture capital funds to receive investments from the Government?

The Government anticipates selecting high-performing venture capital funds to receive investments in the coming months. 

Who is eligible to apply?

Candidates eligible to apply under the selection process for high-performing venture capital funds include venture capital funds that have as their primary investment objective the making of early stage (e.g., series A or series B) venture capital, with some growth equity or expansion capital investments throughout the life cycle of such investments.

How is substantial presence in Canada defined? Is this process only open to Canadian venture capital funds, or may foreign-based venture capital funds apply?

For the purpose of the high-performing venture capital funds selection process, venture capital funds must have in Canada a principal office that is an active investment office and that is staffed with senior investment professionals who are residents of Canada and who represent a majority of persons responsible for making the investment decisions of the firm for the fund in which the Government will invest.

What level of investment will be provided to successful venture capital funds?

The Government will make aggregate investments of $50 million in up to five high-performing venture capital funds. The level of individual fund investments will depend on individual fund requirements and the number of funds selected.

When does the Government anticipate announcing the private sector advisory panel that will assist in the selection process?

The private sector advisory panel will be announced in the coming weeks.

Please check back often as these Frequently Asked Questions will be updated as we provide responses to inquiries from potential candidates.