The Globe and Mail

The Ontario government has unveiled a new $165-million venture capital fund that will provide much-needed capital to start-up companies in the province.

The fund is a partnership between the government and some of the province's largest pension managers and financial institutions. John Wilkinson, Ontario's new Minister of Research and Innovation, said in an interview that this is the first time the province has entered into a direct partnership with the private sector.

The government is injecting $90-million into the fund and is counting on the private sector to kick in another $180-million, Mr. Wilkinson said. So far, Ontario Municipal Employees Retirement System, Royal Bank of Canada, the Business Development Bank of Canada and Manulife Financial Corp. have invested a total of $75-million.

The government is creating the fund at a time when the province's struggling manufacturing heartland is shedding jobs. Premier Dalton McGuinty's government is looking to cutting-edge companies to create new jobs by getting their discoveries to the market faster.

“Working together with sophisticated corporate and institutional investors, we can help Ontario's innovative thinkers take their ideas to the next level,” Mr. McGuinty said in a statement. “And that will generate prosperity and good, high-paying jobs for Ontarians in the future.”

The idea behind the fund is to encourage those investors with the deep pockets to help research and development companies evolve from the start-up phase to the point where they are large enough to raise money on a stock exchange. Many of these start-up ventures end up leaving the province and going to other jurisdictions, including California, where it is easier to raise funding.

“We have a wonderful pool of top notch researchers,” Mr. Wilkinson said. “We have wonderful entrepreneurs who create new companies and then what happens is those companies are not able to find a supply of venture capital.”

Pension funds and large financial institutions have the resources to invest in these ventures. But many of these start-up companies are too small to attract their interest.

Mr. Wilkinson said the new fund should get around that obstacle because investors will have a stake in a relatively large fund, which will in turn invest in individual start-up companies.

The government initially earmarked its share of the funding in last spring's provincial budget.

Richard Rémillard, executive director of Canada's Venture Capital and Private Equity Association, said he is pleased with the initiative.

“We have always believed that it is vital that we build a strong venture capital market in Ontario if we want to build world-class, high growth companies here.”