The federal government released a call for proposals Wednesday afternoon for the second cycle of the Venture Capital Catalyst Initiative, the program through which it seeds a substantial number of Canada’s venture funds with public money. The $450 million in new funding comes as tech stocks plummet, interest rates rise and economic uncertainty slows investment in startups and scale-ups. Here’s what you need to know:

Who is she? The government launched the program—originally the Venture Capital Action Plan, now VCCI (it’s pronounced “Vicky”)—in 2013 to encourage investment in Canada’s fledgling tech sector.

This funding round, like its 2017 predecessor, is broken into three streams. It will give $350 million to “funds-of-funds”—venture capital firms that invest in other funds, which ultimately invest in companies. The firms have to raise $3 from other private investors for every government dollar they receive. Another $50 million each is dedicated to life-science funds and to “inclusive growth” funds that back underrepresented founders. Those funds need one private-sector dollar for every government dollar. 

A just-in-time announcement: The government announced the fresh $450 million more than a year ago, in April 2021. As the economic forecast worsened, the VC community started getting antsy.

HarbourVest managing director Senia Rapisarda told The Logic she had expected the new VCCI money to flow within six months of the announcement, and that speed was now essential. Kim Furlong, CEO of the Canadian Venture Capital & Private Equity Association, told The Logic earlier this month that investors would have made other fundraising plans had they known they’d be waiting so long for the government to act, and that the four funds-of-funds that received the last round of VCCI money—HarbourVest, Kensington Capital Partners, Teralys Capital and NorthLeaf Capital Partners—have already allocated it all.

“We will be following closely every step of the process to ensure that no time is lost,” Furlong told The Logic by email Wednesday afternoon. “Historically these programs take up to a year to implement. We hope that all stakeholders will work together to make this process more efficient.” Small Business Minister Mary Ng’s office told The Logic the government plans to start rolling out the new VCCI money this year.

A capital access gap: Rapisarda said that given how long it’s taken for the government to open VCCI applications she anticipates a shortfall in investing capital for funds and the companies they back. “There is still some dry powder … but all the new managers… that are going to fundraise in 2022 and 2023 are going to have very few limited partners to go to,” she said. “We’re probably going to have one year where there is going to be a lack or a substantial decrease in capital available.”

The last VCCI cycle? Furlong told The Globe and Mail that she doesn’t plan to lobby for another government funding program on behalf of the VC community. “This is not a crutch the industry should rely on,” she said. Documents The Logic obtained via access to information request suggest the government agrees. The new money is intended to create a “complete drive toward a sustainable VC industry in Canada and supporting Canadian firms,” reads a deck prepared for Isabelle Hudon, the new president and CEO of the Business Development Bank of Canada. 

Ng’s office said they didn’t yet know whether this would be the last VCCI cycle. Elizabeth Douville, founder of Montreal-based life-science fund AmorChem, told The Logic it might be premature to end the program after this round, citing a lack of institutional investors ready to fill the void, particularly for life sciences. “My sense is we’re not quite there yet,” said Douville, who plans to apply for the life-science VCCI stream as she begins fundraising later this year. “[Does the government] have a permanent role to play? I don’t know … but maybe it requires another cycle beyond this one.”