Toronto-based investment firm Kensington Capital Partners has announced a first close of $85 million CAD for its Kensington Venture Fund II. Led by the federal government’s Venture Capital Catalyst Initiative (VCCI), the fund-of-funds also features participation from BMO Capital Partners, Trend Forward Capital, and Kensington Private Equity Fund, among other institutional and private investors.
Kensington was one of five fund-of-funds named in June to receive a portion of the $350 million earmarked to Stream 1 of VCCI in Budget 2017.
Kensington was one of five fund-of-funds named in June of this year to receive a portion of the $350 million earmarked to Stream 1 of VCCI in Budget 2017, along with Hamilton Lane, HarbourVest Partners, Northleaf Capital Partners and Teralys Capital. Notably, Kensington Venture Fund I, which reached a final close of $306 million, was launch in 2014 via the Venture Capital Action Plan (VCAP), VCCI’s predecessor program.
“Canada’s venture capital industry is critical to our economy and is steadily growing,” Mary Ng, Minister of Small Business and Export Promotion, told BetaKit in a statement. “The Government of Canada is a proud investor in the Kensington Venture Fund II, which will give Canadian companies the capital they need to drive their success. Together, we will make sure Canada remains one of the most entrepreneurial countries in the world.”
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In August of this year, Kensington penned a blog post on the “unique opportunity” provided by VCCI to balance the typical risk-reward question of investment in the VC firms’ favour.
“In a diversified fund-of-funds, investors will own a slice of more than 150 different companies spanning different subsectors, investment stages and geographic regions,” the post reads. “Further, the 30% investment from the Government of Canada is subordinate to private sector investors, acting as a cushion against potential losses. As a result, the overall risk to investors in a VCCI fund is substantially reduced.”
Kensington told BetaKit that it expects Fund II to target both VC funds as well as direct investments in “promising emerging technology companies.” While the firm has a broad mandate with Fund II, expecting over 100 companies in its final portfolio across tech sectors and stages, it has in the past spoken to the potential of AI and machine learning, industrial automation, cybersecurity, FinTech, IoT and digital media. Kensington Fund II will invest primarily in Canada.
According to a report from The Globe and Mail, Northleaf Capital Partners has also hit the halfway point for its $300 million target fund, as has one other yet-unnamed fund. Of the three funds yet to announce, Hamilton Lane has a target of $275 million, HarbourVest of $300 million, and Teralys $400 million.