VCCI-backed funds-of-funds feature respective $370 million and $290 million war chests.
Two Toronto-based investment firms, Northleaf Capital Partners and Kensington Capital Partners, have closed their indirect venture capital funds with backing from the federal government’s Venture Capital Catalyst Initiative (VCCI).
Northleaf has closed its “hard cap” of $370 million for its Venture Catalyst Fund III (NVCF III), while Kensington closed $290 million for its Kensington Venture Fund III (KVF III). Both funds act as fund-of-funds, largely investing in Canadian venture capital and growth funds as limited partners with some capital set aside for direct investing in companies.
Northleaf and Kensington were two of four fund-of-funds chosen to dole out VCCI funding in October 2022, with the other two being HarbourVest Partners and Teralys Capital. The Globe and Mail reported today that the latter two funds are on track to hit their funding targets. All four were also selected to handle the previous round of VCCI funding in 2018.
VCCI is a federal program managed by the Business Development Bank of Canada (BDC) aiming to inject more capital into the ecosystem by leveraging private sector funds. Under VCCI, the federal government provides one dollar to every three dollars raised by the selected fund managers up to a cap.
Kensington said that KVF III has attracted capital from new and returning investors, including TD Bank, BMO Capital Partners and BDC, as well as “several wealth management firms.” Kensington added that KVFIII has been actively deploying capital since it was the first of the VCCI-backed funds to announce it had closed funding in March 2023, having committed to nine venture capital funds and one direct investment since.
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KVF III will primarily focus on the Canadian market, and has allocated 75 percent of its capital to venture capital funds and the remaining 25 percent to direct investments. Through VCCI, the federal government committed to provide 25 percent, or $72.5 million of the fund’s $290 million float.
In a statement, Kensington senior managing director Rick Nathan expressed appreciation to the fund’s backers.
“We are seeing exceptional opportunities for investment in emerging technology companies in the current market and we are excited to now renew our investment program,” Nathan said.
Earlier this year, Toronto-based AGF Private Capital took a 51 percent controlling interest in Kensington for $45 million, while Kensington held onto the remaining 49 percent as well as “its investment and operational independence.”
When it comes to Northleaf, the firm said that in addition to the Government of Canada’s support through BDC, a number of Canadian institutional investors committed capital to NVCF III, including Canada Pension Plan Investment Board and “high-net-worth individuals and family offices.”
RELATED: Northleaf Capital Partners completes final close of $285-million CAD growth equity fund
“Over the past 16 years, we have invested in some of Canada’s most promising companies, including Shopify, Verafin, BlueCat Networks, Chinook Therapeutics, and Zymeworks, and we look forward to building upon the success of our track record in the Canadian venture capital market as we invest NVCF III,” Northleaf managing director Lauren Harris said in a statement.
NVCF III is Northleaf’s third federal government-backed venture fund, having also received capital from VCCI’s Harper-era predecessor, the Venture Capital Action Plan, for its first Northleaf Venture Catalyst Fund in 2014 and for its second Catalyst fund in 2017. Since launching the NVCF III in July 2023, Northleaf says it has invested in 11 venture capital funds and directly invested in three companies.
In November 2023, Northleaf joined as a limited partner on Active Impact’s Fund III, a fund focusing on early-stage climate technology startups, which Active Impact founder and managing partner Mike Winterfield called “a big deal.”
Earlier this year, Northleaf also held the final close for its first growth equity fund, giving the firm $212 million USD ($285 million CAD) to invest in growth-stage North American technology and healthcare companies through a combination of direct co-investments and “opportunistic” secondary transactions.
Feature image courtesy Kensington Capital Partners.
