LocalsquestionwhyTorontoVCmanagingB.C.

TechFundmoney
biv.com /article/2017/4/localsquestionwhytorontovcmanagingbctechfu/

WhenLumiraCapitalsteamtoucheddowninVancouverinearlyAprilforitsannualgeneralmeeting,theTorontobasedventurecapitalfirmwasalsomarkingthefirst
timeitwouldhaveanofficeinB.C.

Thenewofficewasnonnegotiableforthefirmreceivinganinvestmentfromtheprovinces$100millionBCTechFundmanagedbyKensingtonCapital(also
headquarteredinToronto).

LumirahadpreviouslyinvestedintwoB.C.companiesVictoriasAuriniaPharmaceuticalsInc.(TSX:AUP)andVancouversZymeworksbuthadnopermanent
presenceintheprovincebeforesecuringtheinvestment.

Sixmonthsafterthelaunchoftheprovinces$100millionfundoffunds,TorontosheavyinfluenceonB.C.taxpayersmoneyisntsittingwellwiththelocalventurecapital
companies.

IdontthinktheBCTechFundhasachievedthegoalsthatwereoriginallyintendedfortheprogram,saidTimiaCapital(TSXV:TCA)CEOMikeWalkinshaw,adecade
plusindustryveteranwhocuthisteethasVancouverbasedChrysalixEnergyschieffinancialofficer.

ClearlytheB.C.governmentwastryingtoputinplaceaprogramthatwouldhelpfundtechnologycompaniesinBritishColumbiaandintheireyescreatejobgrowth.So
far,Idontbelievethathashappened.IcanprobablycountthenumberofdealsthathavereceivedmoneythroughtheBCTechFundononehand.

The$100millionfundoffundshas$25millionearmarkedfordirectinvestmentinearlystagecompanies.Theremaining$75millionistobeallocatedtoventurecapital
fundsthatarerequiredtoinvestinB.C.basedstartups.

Lastfall,VancouversVanedgeCapitalbecamethefirstfundtoreceivemoneyfromthe$75millionpool.AndtechstartupMojioreceivedadirectinvestmentintherange
of$1millionto$3millionfromthe$25milliondirectinvestmentpool,KensingtonCapitalmanagingdirectorRickNathantoldBusinessinVancouverinNovember2016.

TorontosLumiraisthethirdentitytoreceivefundingfromtheBCTechFundsinceitslaunchinOctober.LumiraCEOPetervanderVeldensaidcompanypolicy
preventedhimfromrevealinghowmuchmoneyitreceivedfromthefund.ButNathansaidheexpectedinvestmentsinotherfundswouldbelessthanthe$15million
Vanedgereceived.

AsBIVreportedinApril2016,twoB.C.entitieswithlocalknowledgeandventurecapitalinvestmentexpertisewereshortlistedalongwithKensingtontorunthetechfund.

WalkinshawsaidhisventurecapitalfirmalsoputinabidtomanagetheBCTechFundbutheacknowledgedthattheothertwolocalentitieshadstrongerbids.

Iwasperfectlyfinewithanyofthose[local]playersgettingthatmoney.MygoalinthatwastomakesurethatmoneyendedupinBritishColumbiasothatwecouldstart
afundoffundsindustryhere.

KensingtonCapitalmanagingdirectorGerriSinclairtoldBIVthatnomatterwhereafundmanagerisheadquartered,themoneywillstillgotoB.C.companies.
Oneofourmandatesistoattractoutsideoftheprovinceafundto[moveto]B.C.inordertoqualifyforthetechfund,saidSinclair,whowasrecruitedbyKensingtonlast
yeartolaunchanofficeinVancouver(likeLumira,ithadnopermanentpresenceintheprovincepriortothetechfund).

ShepreviouslyservedaspresidentofPremierChristyClarkstechnologycouncil.

SinclairsaidthereisashortageoflifescienceventurecapitalfundsinB.C.,soattractingLumiraisahugeaccomplishmentfortheBCTechFund.

LumirahasinturnhiredAuriniaPharmaceuticalschairmanRichardGlickman,whosecompanypreviouslyreceivedinvestmentfromLumira,toleaditssinglepartner
officeinB.C.

TimiaCapitalhasmadefourdealswithB.C.techfirms,withafifthtobeannouncedsoon,Walkinshawsaid.

WeveprobablydonemoredealsinthisprovincethananyVC[venturecapitalfirm]hasdoneinthisprovincethisyear.Andyetwedontqualifyforthefundingbecause
werenota$100millionfund.

Thisprogramhadtheintentofreallyprovidingthefundingtolocalventurecapitalcompanies.Now,somewherealongtheline,thestructuringofthefundmovedtoa
placewhereonlytheabsolutelargestfundsweregoingtogetmoney.Asaresultitexcludedalmostallofthelocalcompaniesthataremakinginvestmentsinthis
province.

SurreyTyneheadMLAAmrikVirk,whoservedasB.C.stechnologyministerwhenthetechfundwasannouncedinDecember2015,saidheexpectstohearcriticism
fromthelocalcommunitywhenaTorontofirmreceivesthefunds.

ButhesaidthecalibreoftheTorontofundswouldultimatelybenefitB.C.

WhenwegetaTorontocompanylikeLumirathatsgoingtoengageatadeeperlevelinB.C.,thatsgoingtoraiseallships,Virksaid.

Theyregoingtoinvestmoreinourlocalspace.And,ifwerebringingthecentreofthatventurecapitalworld[Toronto]furtherandfurtherwesttowardus,thisisa
positiveforallofthesecompanies.

VirksaidheexpectsLumirashighprofiletohaveamultipliereffectanddrawmoreventurecapitalfirmstotheprovince.

ButtherolloutoftheBCTechFundhasirkedGeorgeHeyman,MLAforVancouverFairviewandBCNDPtechnologycritic.

WehavefirmsinBritishColumbiathatwouldhavelovedtohavehadtheopportunitythatTorontosKensingtonCapitalwasgiven,theMLAsaid.

HeymansaidthatwhileheunderstandsKensingtonandLumirahavebothestablishedB.C.offices,itshouldbeuptothegovernmenttobuildupgreatercapacityin
BritishColumbiaandnotsendouropportunitiesandmuchofourmoneyoutsideoftheprovince.

WhileallthemoneyfromtheBCTechFundisrequiredtobeinvestedinlocalearlystagecompanies,thefundmanagersareentitledtoannualmanagementfeesbased
onapercentageofthe$100milliontheymanageasopposedtohowmuchmoneyisdistributedeachyear.A1%managementfee,whichisbelowindustrystandards,
wouldnetKensington$1millionannually.
KensingtonisalsoentitledtomanagementfeesfortakingovertheremnantsofthetaxpayerfundedBCRenaissanceCapitalFund.

JayRhind,aprincipalattheVancouverFounderFund,saidheunderstandsthefrustrationsinthelocalVCfundcommunitybutarguedthatafundoffundsmanagerlike
Kensingtonshouldbebasingitsdecisionssolelyonmeritandnotgeography.

IfyoulookattheVCfunduniverseinVancouvertheoptionsofwhereKensingtoncandeploythatcashiftheywereonlytochooselocalmanagersisprettyslim,he
said.

Rhindsventurecapitalfund,whichlaunchedinOctober2015,isoneofB.C.snewestfunds.HesaidtheBCTechFundisareallyniceinitiative,butinnowayisthis
goingtobethesilverbulletthatsolvesallofourproblemsoftheavailabilityofcapital.

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