Ontario launches $205m VC fund of funds

The fund, anchored by a $90m commitment from the Ontario government and backed by LPs including OMERS, is the latest Canadian vehicle aiming to assuage declining venture funding in the region.

The Ontario government, in concert with institutional investors, has launched the Ontario Venture Capital Fund, a $205 million (€133.6 million) venture capital fund of funds managed by Canadian fund of funds manager TD Capital Private Equity Investors.

The fund aims to both produce superior returns and address a lack of funding for high-potential companies in the region. Early stage venture capital investment in Ontario declined from $1.5 billion in 2000 to $236 million in 2007.

Long-term goals for the fund include job creation, increased levels of institutional investment in venture capital in Canada and making Ontario’s venture industry more globally competitive.

The Government of Ontario contributed $90 million to the fund. Five institutional investors contributed the remainder. OMERS Capital Partners, the private equity investment arm of the Ontario Municipal Employees Retirement System, and RBC Capital Partners, the private equity arm of the Royal Bank of Canada are among the limited partners. Also invested are Canadian financial services company Manulife Financial, Business Development Bank of Canada, which supports the development of small and medium sized enterprises in Canada, and Toronto-based commercial bank TD Bank Financial Group.

The first close was held on 6 June. Additional limited partners will be sought with the goal of holding a second close in late 2008.

The Ontario Venture Capital Fund will invest between 80 percent and 100 percent of capital in Ontario-based and Ontario-focussed funds. Up to 20 percent of capital will be used for direct co-investments alongside fund managers in Ontario-based companies.

Between 75 percent and 100 percent of capital will be invested in venture capital and growth funds with up to 25 percent available to invest in small- and mid-market private equity funds.

Investment will begin this year with an expectation of deploying all capital within three to four years.

Ontario is not the first Canadian province to launch such an initiative. In April, the Canadian province of British Columbia launched BC Renaissance Capital Fund, a $90 million venture capital fund of funds with similar goals.