As a wave of aging Canadian entrepreneurs retire, the Business Development Bank of Canada (BDC) has launched a new, $50-million fund aimed at providing women entrepreneurs with the capital and support they need to buy and grow those outgoing leaders’ companies.
“This is an amazing opportunity to rebalance the equity and ownership between men and women.”
BDC Capital’s Thrive Entrepreneurship Through Acquisition (ETA) Fund includes $10 million for indirect investments in private equity (PE) funds that finance search funds for women-led business acquisitions. It also offers $40 million for direct equity investments in search funds, management buyouts, or self-funded ETA hunts.
The Thrive ETA Fund will include an accelerator aimed at providing women entrepreneurs with the training and mentorship they need to not only source and strike such deals, but also take over and run these companies. The goal is to help more than 60 Canadian women pursue acquisition-based entrepreneurship.
The launch comes as many Canadian entrepreneurs are gearing up to sell, hand off, or shut down their businesses. A 2023 report from the Canadian Federation for Independent Business (CFIB) characterized this as a “succession tsunami.”
The CFIB found that 76 percent of Canada’s small business owners planned to exit over the next decade, three-quarters of them due to retirement. However, the CFIB’s report determined that only one in 10 had a formal succession plan, while the majority said that finding a suitable buyer or successor was the biggest obstacle.
Sévrine Labelle, managing director of BDC’s Thrive Lab for Women, described this changeover as a “once-in-a-lifetime” chance to foster women entrepreneurship across Canada. In an interview with BetaKit, Labelle highlighted recent analysis by Statistics Canada indicating that less than one in five private businesses in Canada are majority women-owned.
“This is an amazing opportunity to rebalance the equity and ownership between men and women,” Labelle said.
Earlier this summer, BDC launched a separate but similar $100-million joint financing initiative with First Nations Bank of Canada (FNBC) geared towards helping Indigenous groups fund ETA deals. Labelle said she thinks ETA and business transitions “will be at the core” of BDC’s strategy for the next few years.
BDC is an arm’s length Crown corporation wholly-owned by the Government of Canada. Its mandate is to support Canadian entrepreneurship, with a focus on small and medium-sized businesses, and operate as a complementary player in the market. The bank provides loans, equity funding through its investment arm BDC Capital, and advisory services to companies and funds across the country.
According to BDC’s latest annual report, the bank has directly supported 21,586 women entrepreneurs in Canada and is on track to reach nearly 23,000 by fiscal 2027.
The bank has bolstered its support for women in recent years through initiatives like its 2022 commitment of $500 million to women-led Canadian startups and funds through BDC Capital’s Thrive platform. Labelle, who joined BDC’s Thrive Lab in 2023, said the Thrive ETA Fund is the final “missing piece” from that envelope.
“Our role is to play where others don’t play yet,” and crowd more capital into the space, Labelle said. “That’s exactly what we’re doing with the [Thrive] ETA Fund.”
According to Labelle, most Canadian ETA search funds still raise the majority of their capital from United States (US)-based investors. “We hope to change that,” she said.
Labelle said BDC has seen more ETA-focused funds and accelerators being created in the US and Europe lately. She argued the timing is right for the bank to help develop Canada’s own ETA and search fund ecosystem.
Labelle said BDC Capital has already brought on Amanda Kattan as Thrive ETA Fund partner as it builds out the remainder of the team. Among other roles, Kattan previously worked in PE, sat on Constellation Software’s board, and served as chief financial officer at Rippling.
Labelle said the Thrive ETA Fund will primarily target stable, established, profitable mid-sized companies with earnings before income, taxes, depreciation, and amortization of $1 million to $5 million and room to grow or be modernized. This could include tech firms, but will likely be more concentrated in traditional markets like manufacturing or services.
The Thrive ETA Fund intends to help women entrepreneurs with searching, analysis, due diligence, negotiation, business transition, and post-acquisition leadership. Labelle said there is no requirement that entrepreneurs themselves coinvest, calling this “a game-changer” given that women historically have had less wealth and therefore capacity to pursue ETA than men.
Finding these businesses is often the biggest challenge, Labelle said. The process is typically dependent on “the sweat of the searcher” and reliant on cold calls, though brokers and virtual marketplaces can sometimes help. Through its own network and this fund, the bank hopes to “open more doors.” Down the road, Labelle sees room for BDC to potentially match entrepreneurs looking to sell and buy businesses within its own portfolio.
Feature image courtesy BDC.