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New Venture Capital Funds to Fuel Economic Growth

Posted Wednesday, November 5, 2014

http://www.releases.gov.nl.ca/releases/2014/exec/1104n02.aspx

Innovative entrepreneurs with high-growth potential will now have greater access to capital to help their businesses thrive, through a $20 million Provincial Government investment in two venture capital funds, Venture Newfoundland and Labrador and Build Ventures. The Honourable Paul Davis, Premier of Newfoundland and Labrador, was joined today by the Honourable Darin King, Minister of Business, Tourism, Culture and Rural Development, the Honourable Ross Wiseman, Minister of Finance and President of Treasury Board, and partner representatives at Common Ground in St. John's, a hub for entrepreneurs to work, network and meet with other like-minded people.

"Our government is proud to expand the support we currently provide to businesses even further through our investment in venture capital in our province. We know what a positive difference access to venture capital will make to new or established entrepreneurs with innovative ideas and technologies. For emerging growth sectors, such as ocean technology and other knowledge-based industries, these new venture capital funds will help improve the global competitiveness of companies, strengthen high-end employment opportunities and drive economic diversification throughout Newfoundland and Labrador."
- The Honourable Paul Davis, Premier of Newfoundland and Labrador

All businesses require various forms of financing and advisory support throughout their evolution and growth. Venture capital is a form of funding available to businesses that demonstrate high-growth potential.

"We have heard directly from the start-up business community and investors who have indicated that greater access to venture capital will support innovative, high-growth companies operating in Newfoundland and Labrador and lead to exciting new opportunities. The establishment of the Venture Newfoundland and Labrador fund and our investment in the Build Venture fund, as was announced in Budget 2014, will help diversify our economy and further strengthen the business climate. Venture capital is very much about investing in ideas, innovation and intelligence."
- The Honourable Darin King, Minister of Business, Tourism, Culture and Rural Development

The Venture Newfoundland and Labrador Fund will provide funding to support new local start-ups and companies in the very early stages of their development. Along with a $10 million Provincial Government investment, this fund will also be supported by $2 million from BDC Capital and anticipated investment from individual private investors.

"Our participation in these two venture capital funds is part of an overall strategy that we initiated four years ago with the objective of bringing much needed seed and early stage capital to Canada's venture capital ecosystem. We're pleased to see the Government of Newfoundland and Labrador join its provincial counterparts in helping back the Atlantic provinces' most promising entrepreneurs."
- Jérôme Nycz, Executive Vice President, BDC Capital

GrowthWorks Atlantic Ltd., a leading venture capital management firm that has over two decades experience in managing regionally-focused funds, will manage the Venture Newfoundland and Labrador Fund.

"We believe the time is right for public and private investors to create this new pool of capital for budding entrepreneurs and we are very pleased to be involved in this exciting opportunity."
- Tom Hayes, President & CEO, GrowthWorks Atlantic Ltd.

The Provincial Government will also implement a Venture Capital Tax Credit as an incentive for private investors to partner in capitalizing the fund.

"Available to both individual and corporate investors, the Venture Capital Tax Credit will provide a 30 per cent non-refundable tax credit on investment, capped at a lifetime maximum $75,000 credit to be applied against provincial taxes. This tax credit will serve as a powerful incentive to encourage the necessary participation that will support successful ventures in Newfoundland and Labrador."
- The Honourable Ross Wiseman, Minister of Finance and President of Treasury Board

The two venture capital funds will provide entrepreneurs with access to the capital, advice and extensive business networks they need to expand into the global economy.

"The St. John's Board of Trade is confident about the business opportunities in Newfoundland and Labrador. The creation of this fund is an effective way to exploit these opportunities and address the critical gap in the supply of early stage capital."
- Nancy Healey, CEO, St. John's Board of Trade, sponsor of the Newfoundland and Labrador Angel Network

Build Ventures is a privately managed venture capital fund focused on the Atlantic Canadian Region. The fund began operating in early 2013. Build Ventures makes equity investments in early-stage technology based companies that have successfully gained early customers in what are expected to be large global markets. Newfoundland and Labrador will contribute $10 million toward the $65 million fund.

"We are thrilled that Newfoundland and Labrador has joined with the three other Atlantic provinces to create a truly regional fund. We are excited to work with entrepreneurs in Newfoundland and Labrador and provide the capital they need to build valuable businesses."
- Patrick Keefe, Partner, Build Ventures

The venture capital model of investment has been a primary facilitator of the growth in knowledge-based sectors in recent decades, and it is anticipated this will remain the case.

"As a co-founder of an emerging company, I am very pleased with today's announcement. Access to capital is fundamental in supporting innovative and early stage companies in the start-up community. It is positive to see the partners involved in the creation of these funds come together to address the gap in the supply of early stage capital for companies like mine."
- Dr. Tyler Wish, Co-founder Sequence Bioinformatics Inc.

The Provincial Government will act as a limited partner in both the Venture Newfoundland and Labrador and Build Ventures funds, providing general direction to the fund managers, but not participating in day-to-day operations.

The Government of Newfoundland and Labrador offers a wide suite of programs, including small business tax credits, which are driving economic development. For more information on the venture capital funds, partners and other Provincial Government programs please see the Backgrounder below.

QUICK FACTS

  • The Provincial Government will invest $20 million in two venture capital funds to help entrepreneurs access the funding they need to grow their business.
  • Venture Newfoundland and Labrador will provide funding to support new local start-ups and companies in the very early stages of their development.
  • The Provincial Government will implement a 30 per cent non-refundable Venture Capital Tax Credit as an incentive for private investors to partner in capitalizing the Venture Newfoundland and Labrador fund.
  • The Build Ventures Fund is a pre-existing privately managed Atlantic Canadian regional venture fund that supports early-stage companies which are able to generate enough cash flow to sustain operation.
  • Support in venture capital will complement existing programs offered by the Department of Business, Tourism, Culture and Rural Development.

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Media contacts:

Heather MacLean
Director of Communications
Office of the Premier
Heathermaclean@gov.nl.ca
Donna Ivey
Special Assistant (Communications)
Office of the Premier
709-729-3551, 699-2402
donnaivey@gov.nl.ca
Tansy Mundon
Director of Communications
Department of Business, Tourism, Culture and Rural Development
709-729-4570, 693-1865
tansymundon@gov.nl.ca
Daniela Pizzuto 
Manager, Public Relations
Business Development Bank of Canada
514-496-6768
Daniela.pizzuto@bdc.ca
Thomas J. Hayes
President & CEO 
Growthworks Atlantic Ltd.
902-441-3827
Tom.hayes@growthworks.ca
John Tompkins
Director of Communications
Department of Finance
709-729-6830, 728-7762
jtompkins@gov.nl.ca
Kristina George
Communications and Advocacy Specialist
St. John's Board of Trade
709-726-2961, 699-2044
kgeorge@bot.nf.ca
Patrick Keefe
Partner
Build Ventures Inc.
902-209-7644
Patrick@buildventures.ca
Tyler Wish, PhD
Cofounder
Sequence Bioinformatics Inc.
709-728-6858
tyler@sequencebio.co

BACKGROUNDER
Securing a Vibrant and Diversified Economy

Venture Newfoundland and Labrador
The Government of Newfoundland and Labrador established the Venture Newfoundland and Labrador Fund that will provide approximately $15 million of venture capital. This fund will be capitalized through $10 million in Provincial Government funding, $2 million from BDC Capital and anticipated investment from individual private investors.

The Venture Newfoundland and Labrador Fund will be managed by GrowthWorks Atlantic Ltd., a leading venture capital management firm that has over two decades experience in managing regionally-focused funds. GrowthWorks manages funds by the following core principles: structure strategic investments in growth-oriented companies, value portfolio assets conservatively, build vital industry connections and minimize risk through diversification. GrowthWorks have specialized teams in each core sector to identify and structure investments. These teams also help the companies with GrowthWorks manage funds to grow with strategic management support and advice. Companies get guidance from experienced leaders and in turn, the funds' investors know that these companies receive direction to help them thrive.

The Government of Newfoundland and Labrador will act as a limited partner in the fund, able to provide general direction to fund managers, but will not play a role in day-to-day operations.

Venture Capital Tax Credit
The Venture Capital Tax Credit is an incentive for individual investors to partner with the Provincial Government and BDC Capital in capitalizing the Venture Newfoundland and Labrador Fund to the desired level of $2.5 million. It will provide a 30 per cent non-refundable tax credit on investment made in the Venture Newfoundland and Labrador Fund. The amount is capped at a maximum $75 thousand in tax credit to be applied against provincial taxes.

BDC Capital
BDC Capital offers a full spectrum of specialized financing and investment solutions to help Canadian entrepreneurs grow, both at home and abroad. BDC Capital is contributing $2 million to capitalize the Venture Newfoundland and Labrador Fund, in addition to $10 million it invested in Build Ventures in December 2012.

Build Ventures
The Build Ventures Fund is a privately managed Atlantic Canadian regional venture fund that began operation in May 2013. Their mission is to help founders build companies. They provide early stage capital to emerging Atlantic Canadian technology companies. When the fund began it was capitalized by the following limited partners: Nova Scotia ($15 million), New Brunswick ($15 million), Prince Edward Island ($2.5 million), BDC Capital ($10 million), Export Development Canada ($5 million), the Fund Manager ($1 million), Technology Venture Corporation ($5 million), and private investors ($1-3 million).

The Government of Newfoundland and Labrador will now provide $10 million to the Build Ventures Fund, and will act as a limited partner, in concert with the other limited partners, and be able to provide general direction to the fund managers, but will not play a role in day-to-day operations.

While there is no requirement for Build Ventures to spend specific amounts in each partner province, the Government of Newfoundland and Labrador is confident that the province will receive investments, equal to or greater than its share of total fund capital. Additionally, this will create an opportunity to attract venture capital firms from outside the region to invest in Newfoundland and Labrador, given that other established funds, such as the Build Ventures Fund, will be active in the province.

Newfoundland and Labrador Angel Network
The Newfoundland and Labrador Angel Network (NLAN) represents angel investors, successful venture capitalists looking for opportunity in emerging businesses. They help link ready capital with investment opportunities and broker the relationships that can ensure a successful venture. They are the link between capital and emerging opportunities.

Common Ground
Common Ground is a hub for entrepreneurs to work, network and meet with other like-minded people. It is a new way for creative individuals and freelancers to work in St. John's, NL. Members of Common Ground receive access to an innovative working space, office equipment, board rooms, marketing by the company and access to similar spaces across the country.

Other Department of Business, Tourism, Culture and Rural Development Programs
The Regional Development Fund provides non-repayable capital to support non-commercial organizations in activities related to regional and sectoral development, diversification and innovation. These activities include sector and market development, building research and development capacity, advancing regional and sectoral infrastructure, and community, regional and sectoral capacity building. The fund has two components:

  • Regional Development - focuses on infrastructure, marketing and research; as well as human resource and community development. Funding is in the form of non-repayable contributions. Projects must clearly link non-commercial activities to economic diversification and/or business development.
  • Partnership and Capacity Building - supports activity that will coordinate community, regional and sectoral insight and planning in concert with the private sector to identify areas for community development and sustainability. Funding is in the form of non-repayable contributions

The Business Investment Fund provides a flexible source of funding that responds to the shifting needs of today's enterprises, maximizes the available support to clients and strategically expands the pool of eligible companies and activities. These activities include building research and development capacity, investment in business infrastructure, market, product and workforce development - components critical to improving overall competitiveness, productivity, innovation and ensuring strong, sustainable regions.

The fund has three components:

  • Business Investment - provides capital for the growth and expansion of small and medium-sized enterprises, with particular focus on sectors that build on regional strengths. Funding is in the form of term loans and/or equity investments.
  • Business Development - designed to encourage businesses to undertake improvements in technology utilization, adoption of environmental and green technologies, market development, new product development, export readiness, work-skills enhancement and professional technical assistance to enhance productivity, competitiveness and sales. Funding is in the form of non-repayable contributions.
  • Investment Attraction - provides funds for investment in firms expanding or investing in Newfoundland and Labrador that offer economic benefit to the province, with emphasis on new and expanding sectors. Funding is in the form of term loans, forgivable loans, conditionally-repayable loans, or equity investment.