November 18, 2014 / 8:03 PM / in 3 years

UPDATE 1-Canadian public-private venture capital fund raises C$160 million

(Adds comment from Kensington Capital)

By Euan Rocha and Alastair Sharp

TORONTO, Nov 18 (Reuters) - The latest of several Canadian government-backed investment funds that are being set up to breathe life into the country’s venture capital industry raised C$160 million ($141.6 million) on its initial closing, its backers said on Tuesday.

The government said in early 2013 it would invest C$400 million in several new funds over seven to 10 years through its Venture Capital Action Plan to match and attract private-sector funding for Canadian startups.

It wants the funds to spur investment in such sectors as digital media, information technology, cleantech and telecommunications. Each fund can make investments in any startups in those sectors.

In January, the first such fund, Northleaf Venture Catalyst, raised C$217.5 million from institutional and corporate backers, including some of Canada’s biggest banks, as well as the federal and Ontario governments.

The latest fund, dubbed the Kensington Venture Fund, is being run by Toronto-based Kensington Capital Partners.

Rick Nathan, managing director of Kensington Capital, said that by giving Canadian technology companies the ability to grow and thrive at home, the fund will help stem the pull that is driving many of Canada’s leading entrepreneurs, engineers and others to the tech hub of Silicon Valley.

“There is this massive gravitational force in Silicon Valley that draws entrepreneurs to sell their companies there,” Nathan said in an interview. “There’s lots of reasons for it, but one of the big reasons for it is the access to capital. There has not been enough risk capital in the Canadian market for technology.”

The government’s stake in the Kensington Venture Fund is 33 percent, so the majority of the investment will come from the private sector, Kensington said.

The private sector backers include Richardson GMP, OpenText Corp, Royal Bank of Canada, BMO Financial Group, CIBC, TD Bank Group, and Scotiabank as well as individual investors. The fund will remain open to new accredited and institutional investors until it reaches its maximum size of C$300 million.

The fund has also received an investment commitment from the Kensington Private Equity Fund, a diversified private equity mutual fund that is also managed by the Kensington team.

Kensington said it sees opportunities in the underserved markets of Western Canada, especially in energy technologies and cleantech, as well as information technology, telecommunications and digital media.

$1=$1.13 Canadian Reporting by Euan Rocha; Editing by W Simon and Peter Galloway

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