The B.C. government will announce today it has named Toronto-based Kensington Capital Partners to manage a $190-million pool of publicly funded venture capital – a cornerstone of its innovation strategy.
As the Globe revealed this month, Kensington will manage the new $100-million BC Tech Fund and take over management of an older $90-million venture capital portfolio known as the BC Renaissance Capital Fund. Kensington advised the government on setting up the Renaissance fund in the late 2000s.
The private capital firm, which emerged as the preferred choice last spring among three finalists, has moved quickly, making its first investment, in Vancouver-based Mojio, an open platform for connecting cars, said sources familiar with the situation. The BC Tech Fund will invest between $1-million and $3-million alongside other investors Deutsche Telekom and Relay Ventures in a venture finance round.
Kensington will initially earn a management fee of 1 per cent of assets for the first five years, which will then decline over the balance of the 13-year management agreement, plus a percentage of investment returns.
The new $100-million pool will be managed as a "fund of funds" that will distribute three-quarters of the money to venture funds based in British Columbia to invest directly in startups. The remaining $25-million can be invested directly in firms by the fund itself. It will target early-stage "Series A" funding rounds, where the province determined there is a funding gap for startups.
The fund will target four subsectors – digital media, information and communications technology, life sciences and clean technology. For every $1 that the B.C. fund gives to VC firms – which typically invest more broadly than in one jurisdiction - the firms must invest $1 in B.C. firms. The B.C. Fund can invest up to $15-million in any single fund; it will only invest in funds that are at least $100-million in size if managed by veteran fund managers, or $50-million for first-time funds.
Part of Kensington's mandate is also to "build a more robust provincial capital system by increasing the supply of local venture capital, and drawing other investors into B.C.," according to the province's request for proposals.
Some B.C. tech-industry players have quietly criticized the fund, saying the government has placed too many constraints on the winning manager, which they say could impede the fund's ability to make the best investment decisions. Some say there are too few established venture capital firms in British Columbia that will qualify for funding, and that $100-million isn't enough to fill the perceived funding shortage. There are less than 10 VC firms in British Columbia big enough to currently qualify under the tech fund's criteria.
Kensington has $1.1-billion in assets under management. It launched its first venture-capital-focused fund-of-funds in 2014 under the federal government's Venture Capital Action Plan, raising more than $200-million from private investors along with $100-million from the federal government.
Kensington will open an office in downtown Vancouver in the coming weeks, a condition of winning the mandate. It will be led by managing partner Gerri Sinclair, a B.C. tech sector veteran and past head of the Premier's Technology Council, who joined Kensington's advisory board last year.
Editor's Note: The spelling of Vancouver-based Mojio has been corrected in the online version of this story.