Manitoba eyes return to venture capital business

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This article was published 08/02/2018 (2837 days ago), so information in it may no longer be current.

More than a decade after the Crocus Investment Fund went into receivership, the province of Manitoba is tip-toeing its way back into the venture capital business.

The Free Press has learned the province is to issue a request for pre-qualifications today, seeking out potential fund management partners with the hopes of eventually launching one or two funds likely with a minimum of $40 million each.

The province is keeping its options open, but Growth, Enterprise and Trade Minister Blaine Pedersen said it would likely operate in the mid-market, providing growth capital for existing, growing companies rather than, for instance, early stage seed financing.

“We’re very excited about this,” Pedersen said. “This is the start of the process to get an access to capital plan in place.”

For many years, business leaders in the province have been complaining about the lack of access to capital. Since the disappearance of labour-sponsored funds such as Crocus, Manitoba has been left out of the market. Meanwhile, labour-sponsored funds continue to operate in neighbouring provinces, injecting hundreds of millions of dollars into their economies.

The Crocus Fund went into receivership in 2005 after its share prices crashed.

Pedersen would not give any idea as to the capital commitment the province is prepared to make, other than to say “it will have a stake” in the fund.

“We will get many different proposals. That’s part of the pre-qualification process,” he said. “Some fund companies may say government has to have the majority of the money. Well, that is not what we are looking for. We are looking for private equity.”

Jeff Hodge, executive director of the enterprise department of Growth, Enterprise and Trade, said the department has reviewed best practices from across the country about how to go about seeking proposals, including the recent funds initiative from the federal government.

Hodge said it is not likely there will be a retail investment component to the new funds, which was the model used in labour-sponsored funds in the past.

“It will likely be a partnership with institutional funds,” Hodge said.

He said among other things, the funds will need enough capital to maintain liquidity and investments will need monitoring.

The province is also not restricting the types of companies the funds would invest in. But Pedersen said there are sectors that operate here and are in need of growth capital.

“We’re not judging what the funds should be or what kind of investment they should be making,” he said. “We know there are lots of opportunities for value-added agriculture and advanced manufacturing, for instance.”

The request for pre-qualifications asks a number of detailed questions as to how the funds would operate, and it seems to target management groups that are already in existence.

“It will be open to out-of-province managers but if there are some here that can do it, great,” Pedersen said. “We want the fund to be in Manitoba and to fund Manitoba businesses.”

In addition to analysis as to how the fund will operate and how management will be paid, and what sort of partnership arrangement they will have with the province, they are asked a series of questions including: the size of the fund; investment focus; where the funds will raise their capital; what sort of strategies will be in place to mitigate risk; governance of the funds; and proposed management compensation formula.

The province anticipates it should be able to have the pre-qualification completed by the fall. That will be followed by a targeted request for proposals.

It is hoped the funds could be up and running some time next year, Pedersen said.

The process stems from the government-commissioned report by Deloitte late last year that did a comprehensive review of the province’s economic development efforts.

martin.cash@freepress.mb.ca