S M L Reset to Default

An inspiring buzz

Outside VCs are looking at Atlantic Canada, while our regional fund gets up and running

by Peter Moreira
There’s a buzz about venture capital that’s growing louder. In fact, while it’s rising to impressive volumes nationally, in Atlantic Canada it’s reaching unprecedented decibel levels.
The numbers are starting to show the reason for optimism. As I wrote previously, 2011 should prove to be a record year for VC investment in the region, especially in Nova Scotia. But statistics can prove a one-time aberration, and the current chatter among investors goes beyond big investments in or exits by a handful of companies.
What’s happening on nationally is fascinating because Canada never recovered from the dot-com bust of 2001. For more than a decade, there has been a drain of funds from the VC industry. Even though VC investments in companies began to recover this year, there’s still no increase in money flowing into VC funds themselves. But that may be changing as well.
OMERS, the Ontario Municipal Employees Pension Group, this year opened a VC fund with an initial $180-million investment. Avrio Ventures of Alberta has already closed $50 million of its second fund, which it hopes will be worth $100 million. And our own Atlantic VC fund will open its doors early next year.
New Brunswick and Nova Scotia have both committed $15 million to that fund. From the beginning, the backers hoped it could attract additional investment. The hope is that the other two Atlantic provinces, which now have their provincial elections behind them, will come in, as will the federal government, likely through the Business Development Bank of Canada.
Finally, and perhaps most importantly, there was hope that private investors would back the fund. The development of this new fund has reached an interesting stage. Wilson Executive Search, Innovacorp and the people putting the fund together are in the final stages of choosing a manager for the fund, which is due to open next year.
As I’ve written before, the choice of manager will be key to attracting new money. I’m optimistic they’ll get it right. It sounds trite, but the creation of this fund is rare in Atlantic Canadian history. The principals realize it can be a strong agent for change and development, and they’re emphasizing the success of the fund rather than narrow provincial interests.
It appears this fund will be larger than the $30 million now committed. The question is, how much larger? I bet the commitments could exceed $70 million within a year.
These are the factors we’re dealing with: increased activity in Canadian VC; new funds coming into this asset class; and the creation of a new, hopefully well capitalized, fund in Atlantic Canada. But there’s one more intangible that can’t be overestimated: the willingness of VC funds from outside the region to back companies here.
That fact can’t be overestimated, because for too long the knee-jerk reaction of fund managers west of Gaspé Bay or south of the border was to reject our companies simply because they were based in Atlantic Canada. New Brunswick’s Radian6, which exited for about $370 million, and Q1 Labs (its exit was rumored to be worth $600 million) put the kibosh to the myth that East Coast companies are inferior.
Today, outside VCs are noticing us. Of the two VC funds mentioned above, Avrio has already invested in Origin BioMed of Halifax and Ascenta Health of Dartmouth. OMERS Ventures is one to watch. And just last week, GoInstant of Halifax was voted the most impressive company at 48 Hours in the Valley, raising its profile among the top tech VCs in the world.
With their capital growing, outside VCs are willing to look at Atlantic Canada, while our own regional fund gets up and running. The buzz is inspiring, and I believe it’s justified.
 
Peter Moreira is the principal of Entrevestor.com, a website with news and analysis on investment and entrepreneurship in Atlantic Canada.

 

Subscribe to the Articles feed

advertisement