Venture capital in Manitoba showing healthy growth

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This article was published 24/08/2023 (955 days ago), so information in it may no longer be current.

Last week the Manitoba First Fund announced the second fund it’s invested in — $15 million into Regina-based PFM Capital.

It should not be a surprise that it, along with the first one, are both Saskatchewan-based operations and are both targeting medium-sized, established companies.

PFM, along with WestCap Management Ltd., which disclosed its new Manitoba fund, Connect Manitoba Growth Fund, in March with a $25 million stake from Manitoba First Fund (MFF) along with investments from seven Manitoba credit unions, are both 20-year-plus veterans in the venture capital space.

Neither of these new Manitoba operations are focused on early stage enterprises, which are inherently riskier undertakings.

While MFF CEO Ken Ross will not say it out loud, Manitoba’s new entry into the venture capital space wants to display solidity rather than daring in its early days, priming the Manitoba market that has been otherwise starved of access to capital with players who are serious-minded (maybe conservative) with a history of profitable returns.

That’s a good look to establish for the province which has committed $100 million to MFF and is re-entering the venture capital market it had effectively abandoned for about 15 years after previous funds dissolved in acrimony and a messy, drawn-out receivership that left everyone with a bad taste in their mouths.

Both WestCap and PFM have proven track records of success. PFM has raised more than $1 billion over the years, has exited a number of deals and currently has about $865 million in assets under management.

PFM has experience in Manitoba with a couple of investments here already — All-Fab Group and Sexton Family of Companies and another, 24-7 Intouch, which it has exited from.

Johanna Salloum, PFM’s senior director of investments and a partner of the employee-owned company, said that the partnership with MFF will allow it to have feet on the ground and a more definite connection with the province.

“So much happens in Manitoba that just doesn’t come to the surface,” she said. “We miss out on the deals that are done under the radar.”

PFM will do its Manitoba investments through its sixth fund, called APEX IV. It’s a $130 million fund that will invest across Western Canada but has a documented “side-car” agreement with MFF to invest at least $30 million in Manitoba enterprises — $15 million from MFF and $15 million from PFM.

It is looking to invest in about three to five companies — so it will make investments of at least $5 million per deal — in established medium-sized companies looking for growth capital to enter new markets, broaden their product offering, or help with succession.

The fund will be sector agnostic, something that Salloum said makes sense with Manitoba’s diversified economy.

Ryan Klassen, the former senior Manitoba executive with Bell MTS, has become a partner in PFM and will front its Manitoba operations.

He said in addition to the firm’s success – its exited deals have generated $600 million in realized returns to date – its culture and approach suits the Manitoba market.

“Their understanding of the business market and the importance of capital in smaller markets like Manitoba is obviously a good fit,” Klassen said.

He is particularly keen on PFM’s commitment to management of the companies they invest in rather than the aggressive approach that some venture capitalists use.

“PFM is really there to partner and support management,” he said.

Klassen said there are already talks underway on a couple of deals, but everyone involved is cagey as to when to expect the first deal to close.

MFF has now committed to disbursing $40 million of the $100 million it has at its disposal and in the meantime Ken Ross continues to talk to other interested fund managers.

He said they are in different states of discussions with these other fund managers but maintains that he’s still on target with the original goal of seeding funds to operate in Manitoba that will address the full spectrum of capital needs in the province from start-ups to mature enterprises.

“Our goal is to have a number of funds that are going to fit with the various business interests in Manitoba,” Ross said.

That the first two are large established, Saskatchewan-based management companies with operating models that have been successful makes a lot of sense.

There is no indication what companies will emerge as the first to benefit from the venture capital renaissance in Manitoba, but chances are they will not be young companies with unproven innovative technologies.

But if everything goes according to plan, those companies will still have a chance to be serviced with some of MFF’s remaining $60 million yet to be dispersed.

martin.cash@freepress.mb.ca