BDC Capital has announced the creation of a new $200 million CAD fund designed to invest in and support early-stage Canadian deep tech companies.
The Deep Tech Venture Fund marks Canada’s largest dedicated deep tech fund. The move follows BDC Capital’s recent investment in Montréal’s Boreal Ventures, a $26 million Québec-focused deep tech fund founded by BDC Capital alumni David Charbonneau.
“If we play our cards right… There will be tech champions headquartered here,” said Thomas Park, partner at BDC Capital’s Deep Tech Venture Fund.
Through the new fund, BDC Capital aims to address what it views as “a critical gap in the Canadian technology landscape” by financing and supporting deep tech startups. The Deep Tech Venture Fund is the product of consultations BDC Capital held with over 60 stakeholders.
The fund will aim to accelerate the development of “transformational technologies” in a variety of deep tech sectors, including quantum computing, electronics, photonics, semiconductors, robotics, foundational artificial intelligence (AI), and cybersecurity.
The Deep Tech Venture Fund will be led by Thomas Park, BDC Capital’s VP of operations and strategy. Park is leaving his current role to focus on running the fund as a partner. In the new position, Park aims to draw upon his past venture capital experience and understanding of the opportunities presented by deep tech.
In an interview, Park called the potential of the fund enormous, noting it is now “open for business.”
“If we play our cards right, if we can leverage our academic and research excellence, this could be a major hub, a global hub for a deep tech ecosystem,” said Park. “There will be tech champions headquartered here.”
The new fund will have a 12-year lifespan, with the possibility of a four-year extension. It aims to support 15 to 20 seed to Series A-stage Canadian-headquartered companies with an average deal size of $5 million, and a target of 2x reserves.
Like Toronto-based venture firm RiSC Capital, the Deep Tech Venture Fund plans to back early-stage deep tech startups across the country.
“$200 million of new deeptech capital for all of Canada is a great step forward,” Scott Pelton, co-founder of RiSC Capital, told BetaKit. “We’re excited to see the ecosystem coming together including Boreal Ventures in Québec.”
Pelton, former general partner of Round 13 Capital, co-founded RiSC in 2019 with Hero Ventures alumni Colin Webster. Last May, the firm announced its first close of just over $7 million, led by Shopify co-founder and former CEO Scott Lake.
The Deep Tech Venture Fund is BDC Capital’s second deep tech-focused move this year, following its February investment in Boreal Ventures, which supports deep tech companies that emerge from Montréal incubator Centech and Québec. Prior to founding Boreal, Charbonneau worked at BDC Capital’s Industrial, Cleantech and Energy (ICE) Venture Fund.
“[Canadian deep tech is] really excellent at the research and technical capability, world-class,” said Park. “But we don’t have the infrastructure in place to really commercialize this kind of leading-edge technology.”
According to Park, part of the issue has to do with deep tech startups’ need for capital. “The problem with these companies [is] they consume an enormous amount of capital,” he said. Given its lifespan, Park anticipates the new BDC fund will be able to provide the kind of “patient capital” that these businesses need.
Jérôme Nycz, BDC Capital’s executive VP, told BetaKit that existing early-stage deeptech funds don’t have “deep [enough] pockets to be able to sustain the development of these companies over time.” BDC’s new fund aims to do just that.
“With this fund, we hope to be able to be an early investor alongside these funds and others in the market, and be able to support multiple rounds of financing to develop these technologies over time,” said Nycz. “What we want is to supplement what’s already there.”
According to BDC Capital, “Canada has historically been a leader in deep tech.” But as other countries ramp up investment and intellectual property protections in the sector, Canadian startups “require greater access to early-stage funding” to protect their innovations.
In addition to providing that capital in the form of equity financing, the BDC fund plans to offer companies a range of other financing options, as well as technical expertise, segment specific-insights, and help facilitate their market entry.
For example, Park said the fund will aim to help its portfolio companies navigate the federal government’s procurement process and partner with large global corporations.
Kim Furlong, CEO of the Canadian Venture Capital and Private Equity Association (CVCA), said that through the fund, “BDC Capital is helping to lay the foundation for these new and emerging industries to thrive and scale here in Canada.”
By providing “critical risk capital” to promising startups, BDC Capital hopes to help early-stage companies grow, expand to global markets, and create quality jobs, while also contributing to Canada’s recovery from COVID-19 and the country’s long-term growth.
Park said BDC Capital plans to measure the fund’s success in terms of the return-on-investment it generates, the amount of external funding it attracts, and the partnerships it builds.
“We’re really planning to be there to participate in subsequent rounds and really partner with these companies long term,” he said.
Photo courtesy of the BDC