The Nova Scotia First Fund, Innovacorp’s fund for early stage investments in Nova Scotia, is receiving $40 million in capital to ensure it can continue funding companies for the next few years.

The Nova Scotia government announced Thursday it would contribute $29 million in fresh capital to the fund, which was known to be running out of money. It also said it would transfer $11 million from an expired cleantech fund into the Nova Scotia First Fund.

The fund will invest in all sectors, including cleantech, said the government statement, and the funding is to last eight years.

"Over the past few days we've seen Analyze Re sold to a United States company and Kinduct attract $12 million in funding from highly strategic investors," said Business Minister Mark Furey in the statement. "Clearly, Nova Scotia's startup scene has impressive momentum, and we need to ensure these businesses have access to the right resources to launch, expand and grow our economy."

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Earlier this year, Innovacorp said in its annual accountability report that as of March 31 it had $5.5 million left in the fund – less money than it invests in a typical year. Over the years, provincial governments have placed $49.6 million in the fund, and Innovacorp has invested an average of $5.6 million in startups in the last four years. The agency said it hopes to earn back money as the startups it has invested in are sold to larger companies or listed on stock exchanges.

The outlook for Innovacorp had been further muddied by the government’s plan to back a new private investment fund in Halifax. The government, which has asked for proposals from private fund managers, has committed $25 million to the fund and hopes private backers will contribute more to the fund. It hopes the new fund will be up and running next year.

It now appears that Innovacorp will continue to invest in early stage companies in all sectors, while the private fund will invest in companies across Atlantic Canada, predominantly in IT. Innovacorp will mainly be investing in the first $500,000 of funding while the new fund will invest at a slightly later stage.  

"Access to early stage capital is important to drive innovation and bring new companies and products to market," Analyze Re CEO Adrian Bentley said in the statement. "We benefitted first-hand from a capital investment from Innovacorp, which was instrumental in our ability to get our idea off the ground, and we also received a wealth of advice and support from the investment team as we learned to build our business."

Innovacorp had operated a separate cleantech fund, launched by the New Democratic government in about 2010. The goal had been to encourage more companies that would benefit the environment, but the agency could never find enough good investment opportunities in cleantech to use all the money. Now the remainder of that fund is being wrapped into the more broad-based Nov Scotia First Fund. 

Disclaimer: Innovacorp is a client of Entrevestor.