TLDR:
- Wealthy Canadians and family offices are increasingly investing in domestic startups and venture capital firms.
- High-net-worth individuals and family offices now make up 60% of government-backed venture capital investment programs.
Wealthy Canadians and family offices are stepping up their investments in government-backed venture capital funds in Canada, as pension funds are being urged to invest more locally. The Canadian Venture Capital and Private Equity Association (CVCA) has reported a significant increase in participation from high-net-worth individuals and family offices in federal government-backed venture capital investment programs. This increase has been from 29.3% in the first program a decade ago to 60% in the latest program announced in the 2021 budget.
While Canadian pension plans, corporations, and other institutions are being described as “missing in action” in funding early-stage companies, the rise in wealthy individuals and family offices investing in venture capital is seen as a positive development. Some of Canada’s most successful tech entrepreneurs, such as Michael Hyatt and Markus Frind, have reinvested in startups, while established families like the Westons and Slaights have also backed innovative upstarts.
Under the latest federal program, Ottawa provides $1 for every $3 raised by four “fund-of-funds” firms from private investors. Despite some delays, three of the fund managers have hit their fundraising targets, with Northleaf Capital Partners and Kensington Capital Partners each announcing they have reached their fundraising limits. Teralys Capital, another fund manager, is close to reaching its fundraising goal as well.
The article also highlights the challenges faced by venture capital firms in attracting institutional investors due to a lack of cash returns. However, some Canadian companies and institutions, such as Thomson Reuters and the Canada Pension Plan Investment Board, have made investments in venture capital. Overall, the article suggests that the continued support from the government in the risk-capital sector is crucial for driving the future of the Canadian economy.
