Toronto’s Kensington Capital poised to manage B.C. venture fund

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Toronto-based Kensington Capital Partners is poised to win a B.C. government mandate to manage a $190-million pool of venture capital – a cornerstone of the province's innovation strategy.

The private capital firm emerged as the preferred choice last spring among three finalists to manage the new $100-million B.C. Tech Fund, several sources familiar with the situation said. The winning bidder will also take over management of an older $90-million provincially funded 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 provincial cabinet has yet to officially sign off, but sources said a final decision is expected in October. Premier Christy Clark said in a recent interview that a decision will come "really soon, because we want to get this money out the door as soon as we can." She declined to confirm the name of the winning bidder.

The new $100-million pool will be managed as a "fund of funds" that will distribute money to B.C. venture funds to invest directly in startups, but also directly co-invest alongside them in companies.

In its request for proposals, the province said it was looking for an experienced private-sector manager with a demonstrated track record of success and willingness to open an office in British Columbia and "build a more robust provincial capital system by increasing the supply of local venture capital, and drawing other investors into B.C."

Enter Kensington, a 20-year-old firm with $900-million in assets under management that launched its first venture capital-focused fund-of-funds in 2014 under the federal government's Venture Capital Action Plan. Led by managing director Rick Nathan, a lawyer and veteran of Toronto's venture finance scene (he co-founded Brightspark Ventures), the Kensington venture fund raised more than $200-million from private investors along with $100-million from the federal government.

Kensington was already thinking of expanding west after investing in a few B.C. companies (the firm is looking for office space in Vancouver) before the government announced the fund last December. Earlier that fall, it recruited B.C. tech-sector veteran Gerri Sinclair, past head of the Premier's Technology Council, to its advisory board. She is expected to become managing partner of the B.C. fund.

Some B.C. tech-industry players have quietly criticized the fund, saying the government has placed too many constraints on the winning manager, including requiring it to invest across four subsectors – digital media, information and communications technology, life sciences and clean technology – and to keep the investment dollars limited to B.C. companies. That could impede the fund's ability to make the best investment decisions, they worry.

Some say there are too few established venture capital firms in B.C. that will qualify to receive money invested by the fund-of-funds manager, and that $100-million is not enough to fill a perceived funding shortage for early-stage companies.

But James DeGreef is hoping to tap the new B.C. fund to launch Vancouver Island's first venture capital firm. The 41-year-old Victoria tech entrepreneur, who sold his human genome sequencing firm GenoLogics last year, is trying to raise $25-million for a new "micro-VC fund" called Haro Ventures based in the provincial capital and already has soft commitments from local investors for the first $5-million.

"It feels like now is the right time" to start a fund in Victoria, which has a small but flourishing tech scene that employs more people locally than the government, he said. "There are a lot of great software angels in Victoria [making investments individually] and there have been a good number of exits [sales of startups] recently. It's spurring reinvestment in the community. The fund can be a good vehicle to organize our efforts so we're not lone wolfing."