A new $825M Fund for Venture Capital to be put in place by Quebec Government

I believe this is great news for Quebec, for Canada and the whole Venture Capital Community. Earlier today, the Quebec Finance Minister Monique Jérôme-Forget presented here budget in which she outlines the $15-billion stimulus package. Budget 2009-2010.

We find in this Budget many changes and numerous proposed solutions for critical sectors of the economy. But the two initiatives that captured my attention are 1) the creation of the new $825M Venture Capital Fund (or will it be a Fund of Fund?) and 2) a $500Memergency Fund for businesses. Of course we have yet to see the details and inter-workings of such a Fund, but I would guess that these monies will provide some level of continuity to Venture Capital Fund managers and potentially direct investments as well. This is great news as long as the capital being put at work is done through proper management of such funds.

Over the last few years, The Solidarity Fund, the FondAction CSN, Desjardins Capital and the Caisse de Dépot have been hard at work figuring out ways to help entrepreneurs and business owners out. They have played a crucial/leading role in support of the Canadian Private Equity & Venture Capital industry. Their efforts are now joined by a clear and strong commitment to Venture Capital by the Quebec Government. This news comes a day after the Ontario Budget and announcement of their own co-investment fund in the amount of $250M.

I look forward to soon be witnessing a revived Canadian Venture Capital Ecosystem through (mostly) an indirect involvement by our governments into businesses through their direct commitment as limited partners into leading private venture capital fund managers across Canada.

Here are a few key highlights of 2009-2010 Quebec budget (as outlined by the Montreal Gazette):

- $15-billion economic stimulus package;

- $3.9-billion deficit budget;

- Quebec Stock Savings Plan, returns, tax deductions for stock market investments;

- Quebec sales tax will rise to 8.5 per cent in 2011;

- Indexing of fees, from birth certificates to driver’s licences, in 2011;

- $500 million more for job re-training;

- $1.5-billion more for health, $490 million more for education;

- A $500-million emergency fund, for businesses;

- A $825-million venture-capital fund, for businesses;

- $2,000 increase in tax credit for child-care expenses;

- Program to eliminate elder abuse;

- $1.6-billion more for Generations Fund over two years, to offset Quebec’s growing debt;

- Crack down on “aggressive tax planning” to curb tax evasion;

- 3,000 more low-cost housing units.

To read: $5 billion to end up in the hands of Canadian entrepreneurs, nothing less!

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Mar 21, 2009

Chris Arsenault said...

In addition to the $825M fund of fund and the $500M later stage fund, Quebec will be put in place 3 seed funds for an additional aggregate amount of $125M.

Key success factors for profitable seed funds include: its capability to link itself up to one or many follow-on funds and to develop a strong network of partners and collaborators (which isn't obvious due to the limited amount of management fees a seed fund has).

A seed fund should never look at a deal alone, it can close a deal alone, but it should always be looking into opportunities in conjunction with other investors and partners, in order to initiate relationships early on.

Within the High Technology & Venture Capital ecosystem, we find many parties playing critical roles such as: tech transfer offices, seed funds, coaching and incubators, early stage funds, later stage funds, buyout & PE, bankers... (and I personally believe its important not to "wear" too many hats). Failing to feed the ecosystem adequately is a big problem, and I've witnessed it many times in the past, either we see players trying to hold multiple roles and do more than what is expected from them and thus, they put themselves into direct conflict of interest with other players; or better yet, are the players (by fear of not getting the best deal possible in the world and potentially loosing out on a huge return) try to limit the exposure of their deal flow to other parties in order to close the deal by themselves and to then only open up the gate of collaboration once the company is in desperate need of cash!

Coming back to the new Quebec initiatives to bolster venture capital across Canada, note that the $825M fund is a fund of funds, and once the management of this fund of fund is identified (soon enough I presume), it will be investing in top tier venture capital fund managers focused on different industries as well as different stages of investment. This is really good news for entrepreneurs!

In my view, Minister Raymond Bachand did an amazing job because if consulted (over a reasonable period of time) with practically every player of the food chain in Quebec, many others across Canada as well as going out and discussing models with foreign collaborators. He is smart - he did his due-diligence.

The next few years will be interesting and I expect Quebec to show strong leadership in reviving the venture capital industry across Canada, thus reviving available funding of our best entrepreneurs!

Chris’s posterous

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A new $825M Fund for Venture Capital to be put in place by Quebec Government

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