Manitoba ready for bold, new ventures

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This article was published 29/04/2022 (925 days ago), so information in it may no longer be current.

Premier Heather Stefanson said the $50-million venture capital investment, disclosed in the recent budget, will be managed through a fund-of-funds concept with a plan to have that structure in place before the end of the year.

Stefanson seemed genuinely pleased to make the announcement on Friday, which marks the end of 15 years of Manitoba being on the sidelines of the venture capital business.

“This is something the business community has been asking for. They have told us access to capital was critical for the development and expansion of Manitoba businesses now and well into the future. We are listening and taking steps to create a dynamic venture capital framework here in Manitoba,” she said.

It is an ambitious plan in which the Manitoba venture capital fund could invest in several funds that would address different stages of investment needs and different sectors of the economy.

A board of directors, with expertise in the complex capital markets, will be established for the main fund. The board will hire professional management who will vet proposals from professional fund managers, who would tap into the fund and be expected to bring their own capital to the table. It will leverage the province’s investment at least on a one-to-one ratio.

Marshall Ring, the CEO of the Manitoba Technology Accelerator, will be the interim manager who will put together the initial board.

Ring, who has stated his own goal to create multiple $100-million companies while making Winnipeg the startup capital of Western Canada, called it “a tremendous day.”

“Almost every single assessment over the past decade on Manitoba’s economy has concluded that one of the biggest challenges limiting our growth was a lack of venture capital,” he said. “This announcement today is working to solve a persistent and pervasive problem which has suppressed Manitoba’s economic ecosystem.”

The province is hoping that seeding other funds from the $50-million pool will attract venture capital players who have up to this point chosen largely to overlook Manitoba.

Michael Swistun, head of the province’s newly created Economic Development Board, said he and his team have been talking to interested parties and believes there will be plenty of interest from professional fund managers.

“The reality is, the market loves underserviced markets,” he said. “The very smart guys in the venture capital world will see this as a chance to de-risk the decision to set up in Manitoba.”

While he did not mention the Crocus Investment Fund by name, Swistun said the government will not have anything to do with the actual investment decisions of the funds something that was believed to have negatively impacted Crocus, which was shut down in 2005.

“One of the flaws of the former model and one of the things you want to avoid is government getting into the business of picking winners,” he said. “When you impose government parameters you get distortions and mal-investments. It is a recipe to underperform.”

Kim Furlong, CEO of the Canadian Venture Capital and Private Equity Association agrees with that assessment.

“This is great news for Manitoba,” she said. “I’m really glad they came to this conclusions to go with the fund of funds model.”

She noted that British Columbia recently set up a $500-million fund but they did not leverage private capital. Manitoba has chosen the same model the federal government’s venture capital funds have used.

“The two federal programs have been a resounding success,” Furlong said. “Private capital just makes the pie bigger so why wouldn’t you go down that route, even though you have less control (on which companies are actually invested in).”

While all the details have yet to be worked out the province has left open the opportunity for participating funds to raise money from individual Manitoba investors who would be able to take advantage of the 45 per cent small business venture capital tax credit.

Bram Strain, the CEO of the Business Council of Manitoba whose members are likely to get a seat or two on the fund board, said he thinks that feature could be very effective attracting investments from high net worth individuals into the funds.

“It provides people the opportunity to invest in Manitoba, an opportunity to bet on themselves,” he said. “A 45 per cent tax credit takes away a lot of the risk right off the hop.”

The whole initiative presupposes there are attractive companies in Manitoba to invest in. Joelle Foster, the CEO of North Forge Technology Exchange, believes that won’t be a problem.

“We have 40 founders out there raising capital right now,” she said.

But Foster said that diversity and inclusion must factor into the management of the funds.

“It is harder for women to raise capital and there needs to be a good lens around that and good representation on the board,” she said.

Catherine Metrycki, the CEO and founder of Winnipeg-based Callia.com, an online florist delivery operation, has raised about $10 million over the past years, about 80 per cent of which has come from outside the province.

“The Manitoba community is so supportive when it comes to backing entrepreneurs with time, advice and purchases, but there has been a huge gap in terms of capital available,” she said. “That was certainly a barrier to us in that we had to go outside the province for almost all of our funding.”

Callia now operates in 50 cities across the country.

Metrycki believes there could be so many more companies like hers if there was a venture capital structure in the province like the one that is now being built.

martin.cash@freepress.mb.ca