The news Thursday that Prince Edward Island will invest $2.5 million in the Regional Venture Capital Fund is just one of many signs that the fund’s organizers are actively courting more sources of capital.
Three sources familiar with the talks say that the government of Newfoundland and Labrador, which was thought during the summer to have declined to participate, is once again in talks about investing. And the organizers, led by Innovacorp, have been lobbying the federal government to contribute some of the $400 million in VC funding announced in the last federal budget.
The P.E.I. commitment brings the total funding to $32.5 million, as both Nova Scotia and New Brunswick have promised $15 million. The fund was due to be launched in February but it’s proven a longer and harder job to get agreement from all the parties than originally believed. The P.E.I. press release said the organizers have found a fund manager and will announce the selection soon.
In the summer, the conventional wisdom was that both P.E.I. and Newfoundland had said thanks but no thanks to the fund, and the only other investors would be Business Development Bank of Canada, and one or two private investors.
BDC is still expected to invest, but there is a movement afoot to secure more funding from the federal government. Finance Minister Jim Flaherty in his budget in March admitted Canada must do more to finance innovation, and set aside $400 million to invest in venture capital funds.
This summer, federal officials were invited to a meeting in Halifax where representatives of Innovacorp, East Valley Ventures and others made the case for part of that money to be placed with the Atlantic Canada fund. They argued that investment should be in addition to a contribution from the BDC, given BDC’s past success in investing in Atlantic Canada.
BDC Venture Capital left Atlantic Canada four years ago, but before departing it invested in Radian6 and Q1 Labs, two New Brunswick companies that have since exited. Those deals were awarded the VC Deal of the Year award by Canada’s Venture Capital & Private Equity Association in each of the last two years – the only times that BDC has won the award.
Two final thoughts on the P.E.I. announcement. First, it’s difficult to find a more gracious public pronouncement than the Island government’s press release. It included a quote from Nova Scotia Premier Darrell Dexter before any mention of P.E.I. Premier Robert Ghiz, and it credits Innovacorp, a Nova Scotia agency, with representing all the provinces in organizing the fund. This provincial collaboration business is gaining momentum.
And finally, the government in Charlottetown is showing refreshing confidence in excellence of P.E.I. startups, obviously believing that at least one company can attract $2.5 million or more in funding. Led by Innovation PEI and the PEI BioAlliance, the Island’s innovation community is becoming more assertive, and was a noticeable presence during Atlantic Innovation Week in Halifax last week.
Several young companies, such as Island Abbey Foods and Vitrak, have raised angel money in the past year, and will need follow-on financing. Ghiz’s government obviously believes, with some justification, that they can compete effectively with anyone else for the VC fund’s money.