Venture Capital Action Plan Performance Metrics Report – December 31, 2020

Backgrounder

In 2013, the Government of Canada announced the Venture Capital Action Plan (VCAP), a market-oriented approach to putting Canada's venture capital industry on the path to sustainability and increasing the availability of financing for innovative Canadian firms.

Through VCAP, the Government has invested:

• $340 million to establish four large, private sector-led funds-of-funds (Northleaf Venture Catalyst fund, Teralys Capital Innovation fund, Kensington Venture fund and HarbourVest Canada Growth fund)
• $50 million directly in four existing high-performing Canadian venture capital funds
  (Lumira Capital II, Real Ventures III, CTI Life sciences II and Relay Ventures III)

Under VCAP, the Government's investment of $390 million has attracted significant investments in the venture capital industry in Canada. In particular, the four VCAP funds-of-funds attracted investments from a diverse set of investors that included pension funds, high-net-worth individuals, corporations, banks, and the governments of Ontario and Quebec. Including the federal government investment, the four funds-of-funds raised $1.356 billion. Of that total, $904 million came from private sector investors. Canadian-based sources account for 95 percent of the capital, while 5 percent was from American and European investors.

In total, investments under VCAP have to date translated into $935 million committed to 33 Canadian funds^{Footnote 1}. Variations to the total committed dollars committed under VCAP may vary year-to-year due to foreign exchanges fluctuations. Further, the 360 Canadian companies that the VCAP program has invested in have received a combined $2.8 billion in capital from all investment sources.

VCAP aims to make Canada's venture capital industry more globally competitive, while ensuring that Canada's high-potential firms have the resources they need to grow and create jobs.

Key VCAP metrics

Section 1: VCAP funds-of-funds program overview

Metrics in this section relate to the activities associated with the four VCAP funds-of-funds.

VCAP funds-of-funds fundraising

Table 1: Capital raised by the VCAP funds-of-funds

Fund-of-fund	Raised capital
Northleaf Venture Catalyst fund	$300 million
Teralys Capital Innovation fund	$375 million
Kensington Venture fund	$306 million
HarbourVest Canada Growth fund	$375 million

The four funds-of-funds raised $1.356 billion from public and private sector investors, including approximately $340 million from the Government of Canada.

Table 2: Nationality of investors participating in VCAP

	NumberFootnote 2 of investors	Total commitments (C$M)	% of total
Canada (private sector)	24	838.5	62%
Canada (public sector)	3	452.0	33%
Europe	2	18.0	1%
U.S.	1	47.5	4%
Grand Total	30	1,356.0	100%

Portfolio allocation across the four funds-of-funds

Table 3: Breakdown of direct and indirect investments by the funds-of-funds (as of December 31, 2020)

	Total commitments (C$M)	% of total
Direct investments in Canadian companies	179	84%
Direct investments in non-Canadian companies	34	16%
Total direct investments in companies	213	100%
Commitments to Canadian fundsFootnote 3	935	85%
Commitments to non-Canadian funds	169	15%
Total fund commitments	1,104	100%

Funds-of-funds commitments to Canadian VC funds

Table 4: Distribution of fund-of-fund commitments across Canada
(as of December 31, 2020)

Location of fund manager HQ	Number of funds		Total commitments
	#	% of total	C$M	% of total
BC	8	27%	165.0	18%
AB	2	7%	20.1	2%
ON	14	47%	549.4	59%
QC	6	20%	200.6	21%
Total	30	100%	935.1	100%

Table 5: Primary stage focus of Canadian fund-of-fund commitments
(as of December 31, 2020)

Primary stage focus	Number of funds		Total commitments
	#	% of total	C$M	% of total
Seed	4	13%	61.6	7%
Early venture	15	50%	458.6	49%
Late venture	3	10%	89.1	10%
Growth equity	8	27%	325.8	35%
Total	30	100%	935.1	100%

Table 6: Primary sector focus of Canadian fund-of-fund commitments
(as of December 31, 2020)

Primary sector focus	Number of funds		Total commitments
	#	% of grand total	C$M	% of grand total
Energy & Cleantech	5	17%	89.1	10%
ICT	19	63%	671.5	72%
Life sciences	6	20%	174.5	19%
Grand Total	30	100%	935.1	100%

Financial Returns

Table 7: Performance of the VCAP funds-of-funds portfolio
(Program Inception to December 31, 2020)

(C$, 000s)	Amount committed to VCAP funds-of-funds	Capital calledFootnote 4	% called	Cash distributedFootnote 5	Fair valueFootnote 6	Total valueFootnote 7	Total value to paid-inFootnote 8	Pooled gross internal rate of return
Funds-of-funds	1,356,000	1,160,335	85.60%	370,608	1,599,967	1,970,575	1.70x	21.80%

Section 2: VCAP high-performing venture capital funds program overview

Metrics in this section relate to the activities associated with the four high-performing venture capital funds, which together received a commitment of $50 million under VCAP.

Commitments to high-performing funds

Table 8: Government of Canada investment in the VCAP high-performing funds

Fund	Committed capital
Lumira capital II	$10 million
Real ventures III	$10 million
CTI life sciences II	$15 million
Relay ventures III	$15 million

Table 9: Primary stage focus of Canadian high-performing fund commitments
(as of December 31, 2020)

Primary stage focus	Number of funds		Total commitments
	#	% of total	C$M	% of total
Seed	1	25%	10	20%
Early venture	2	50%	30	60%
Late venture	1	25%	10	20%
Growth equity	0	0%	0	0%
Total	4	100%	50	100%

Table 10: Primary sector focus of Canadian high-performing fund commitments
(as of December 31, 2020)

Primary sector focus	Number of funds		Total commitments
	#	% of grand total	C$M	% of grand total
Energy & cleantech	0	0%	0	0%
ICT	2	50%	25	50%
Life sciences	2	50%	25	50%
Grand total	4	100%	50	100%
Note: One of the high-performing funds was also supported by a fund-of-funds; therefore, a total of 33 funds have received funding under VCAP.

Financial Returns

Table 11: Performance of the Government of Canada VCAP high-performing funds Investment
(as of December 31, 2020)

(C$, 000s)	Amount committed	Capital calledFootnote 4	% called	Cash distributedFootnote 5	Fair valueFootnote 6	Total valueFootnote 7	Total value to paid-inFootnote 8
High performing funds	50,000	47,510	95.0%	15,300	56,999	72,299	1.52x

Section 3: Overall VCAP Program Overview

Metrics in this section relate to the overall activities associated with the four VCAP funds-of-funds and the four high-performing venture capital funds that received VCAP investment.

Commitments to Canadian venture capital funds

Table 12: Primary stage focus of overall VCAP commitments to Canadian funds, including to high-performing venture capital funds
(as of December 31, 2020)

Primary stage focus	Number of funds		Total commitments
	#	% of total	C$M	% of total
Seed	5	15%	71.6	7%
Early venture	17	52%	488.6	50%
Late venture	3	9%	99.1	10%
Growth equity	8	24%	325.8	33%
Total	33Footnote 1	100%	985.1	100%

Table 13: Primary sector focus of overall VCAP commitments to funds-of-funds and high-performing venture capital funds
(as of December 31, 2020)

Primary sector focus	Number of funds		Total commitments
	#	% of grand total	C$M	% of grand total
Energy & cleantech	5	15%	89.1	9%
ICT	20	61%	696.5	71%
Life sciences	8	24%	199.5	20%
Grand total	33Footnote 1	100%	985.1	100%

Table  14: Proportion of underlying Canadian VC fund managers supported under VCAP that raise follow-on funds, (as of December 31, 2020)

Number of Canadian fund managers supported under VCAP	Total that raised follow-on funds	% of total
21	12	57%

Investments in Canadian companies

Total invested in the 360 Canadian companies that received support under VCAP was $2.8 billion, as of December 31, 2020. This includes investments by High-Performing funds, funds-of-funds, and underlying funds.

Table 15: Distribution of overall VCAP investments in companies across Canada
(as of December 31, 2020)

Location of company HQ	Number of companies
	#	% of total
BC	40	11%
AB	16	4%
SK	5	1%
MB	3	1%
ON	181	50%
QC	107	30%
NB	2	1%
NS	6	2%
Total	360	100%

Footnotes