With VCCI commitment, Kensington Capital Partners targets $290 million third venture fund

With renewed mandate from Government of Canada, Kensington aims to nearly double its previous fund.

Kensington Capital Partners has announced plans for its third venture fund of funds, which the Toronto-based investment firm says will have a total size of $290 million.

This amount, which will go primarily towards other Canadian venture funds that make direct investments in companies, is nearly double the size of Kensington’s last fund of funds, which was $150 million.

According to Kensington, through the Venture Capital Catalyst Initiative (VCCI), the Government of Canada will provide 25 percent, or $72.5 million, of that $290 million target.

Kensington’s Rick Nathan hailed the Government of Canada’s renewed commitment as “a strong endorsement” of the firm’s team and track record.

Kensington was one of four fund-of-funds managers recently chosen to receive funding from the latest, and possibly final, round of VCCI. The other three recipients were Boston’s HarbourVest Partners, Montréal-based Teralys Capital, and Toronto’s Northleaf Capital Partners.

All four also managed the previous round of VCCI capital. This group has been selected to dole out the additional $350 million that was committed to VCCI in Budget 2021.

The renewed federal backing now means Kensington, HarbourVest, Teralys, and Northleaf Capital Partners will each raise new funds.

“We are delighted that the Government of Canada has once again chosen Kensington as a VCCI fund manager,” said Kensington senior managing director Rick Nathan. “We are especially proud to have been awarded a mandate for a fund of roughly double the size of our last fund, representing a strong endorsement of our Kensington team and our performance track record.”

Kensington has been investing in Canadian tech for quite some time: the firm claims it has deployed more than $1.5 billion in venture capital into the ecosystem over the past 15-plus years, through both its two prior VCCI-backed venture funds and its other funds. According to The Logic, Kensington aims to back about 15 venture funds through its third fund.

RELATED: VCCI fund managers chosen for latest $350 million injection of federal capital

Managed by the Business Development Bank of Canada (BDC), VCCI is the Government of Canada’s venture capital investment program. Through VCCI, the federal government aims to strengthen Canada’s venture market by building a larger pool of available capital, attracting other investors with an incentive structure designed to reduce risk. The Government of Canada has stated that it hopes these latest funds will generate a collective investment pool of around $1.4 billion.

According to The Logic, each firm is required to raise three times as much private capital as it received in government financing. Recipients are expected to disburse at least 60 percent of their allotted capital to Canadian venture funds and allocate no more than a quarter towards direct investments in companies.

The three remaining VCCI-backed firms have yet to publicly announce their plans for their next funds. For the last round of VCCI, Teralys and Northleaf raised $400 million and $300 million, respectively, while HarbourVest’s fund was $326 million; according to The Logic, the latter firm’s next fund will likely be about the same size.

Feature image courtesy Kensington Capital Partners.

Josh Scott

Josh Scott

Josh Scott is a BetaKit reporter focused on telling in-depth Canadian tech stories and breaking news. His coverage is more complete than his moustache. He was also the winner of SABEW Canada’s 2023 Jeff Sanford Best Young Journalist award.

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