Home Venture Capital Manitoba-based venture capital activity in spotlight – Winnipeg Free Press

Manitoba-based venture capital activity in spotlight – Winnipeg Free Press

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In April it will be two years since the former Heather Stefanson government announced that it would commit $50 million to a new venture capital fund of funds, called the Manitoba First Fund (MFF), but none of that money has yet to be invested in Manitoba enterprises.

The Stefanson government’s financial commitment doubled to $100 million about a year later and since then the MFF has committed $40 million of that to two Saskatchewan-based fund operators — the Connect MB Growth Fund, a WestCap Management Ltd. fund and a new fund run by PFM Capital Inc. called Apex IV.

Both of the two funds first out of the gate are targeting mid-market companies that are already established with revenue in the $10 million range that are looking for growth capital or investment to facilitate some sort of succession planning.


MIKAELA MACKENZIE / WINNIPEG FREE PRESS FILES
                                Grant Kook, CEO of Westcap Management: “At any given time we are looking at 15 to 20 different companies.”

MIKAELA MACKENZIE / WINNIPEG FREE PRESS FILES

Grant Kook, CEO of Westcap Management: “At any given time we are looking at 15 to 20 different companies.”

Grant Kook, the CEO of Westcap Management, said its Connect MB Growth Fund only finished raising money last summer, so he considers that it’s only been actively seeking investment targets for four or five months.

“What people have to realize as it related to private equity is that the lead time is quite long to do due diligence inside these companies,” he said. “At any given time we are looking at 15 to 20 different companies at various stages of due diligence.”

Connect MB Growth Fund is an $81 million fund. It received a $25 million stake from MFF, has invested $5 million of its own funds and raised another $51 million from seven Manitoba credit unions.

Ryan Klassen, the Manitoba lead for PFM Capital’s Apex IV fund, said the quality and volume of the deal flow has been what was expected. But Klassen, the former top executive at Bell MTS, said the process of re-introducing the venture capital option into the Manitoba landscape has required some remedial work.

“We have been spending a lot of time educating and informing the relevant parties that this option exists once again in this market,” Klassen said. “It’s going to take a little time to see the uptake. But I would say early indications are we are confident with the approach and the plan we have in place.”

In addition to a $15 million investment from MFF, PFM has invested $15 million of its own in the $30 million fund.


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                                Ryan Klassen of PFM Capital’s Apex IV fund.

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Ryan Klassen of PFM Capital’s Apex IV fund.

Ken Ross, the MFF’s chief executive officer, said, “We’re getting close” to deals with additional funds. While the first two partner funds are focused on what would be considered low-hanging fruit — companies that are already established in the market — the MFF is also expected to invest in funds looking at early stage financing, a much trickier space but which would require lower levels of capital.

Both of the players who have entered the Manitoba market manage assets of about $1 billion in various funds.

While there might be a heightened sense of anticipation as to what sort of deals will get done since there hasn’t been Manitoba-based venture capital activity in Manitoba for 15 years, Klassen said the business doesn’t really work if there are artificial deadlines imposed to speed up closings.

“At the end of the day no one wants to rush into a bad deal,” said Klassen. “All the partners are aligned that we want to see good transactions in deals that come out of this.”