The Business Development Bank of Canada is launching a $150-million venture fund to invest in life sciences startups, marking a return to direct investing in a sector that faces persistent funding gaps.

The Life Sciences Venture Fund—managed by BDC Capital, the bank’s venture arm—will target early-stage companies developing therapeutics and medical technologies, with the goal of helping early-stage companies move scientific discoveries toward commercialization.

BDC plans to invest about $8 million to $12 million per company over the life of each investment. That will typically start with $1 million to $3 million at the seed stage, followed by larger Series A cheques and reserves for follow-on funding. 

The fund will be led by veteran biotech executive Parimal Nathwani, who most recently served as president and CEO of Toronto Innovation Acceleration Partners, a non-profit that helps create startups out of university and hospital health research. 

The launch marks an effort by the federal Crown corporation to get back into an industry it had moved away from. In 2019, BDC spun out its earlier health-care fund into what became Amplitude Ventures, now a privately run venture capital firm. BDC president Isabelle Hudon said earlier this year that the bank likely exited the sector “too quickly, too early.” 

BDC Capital senior managing partner Joe Regan said that while the bank has pulled back from investing directly in life sciences startups, it has continued backing other venture capital funds in the sector as a limited partner. Since the spinout, market conditions have changed, said Regan, who added that the demand for life sciences funding has grown while the share of venture capital flowing to the sector has declined. 

That dynamic has left Canada with a mismatch between research output and available financing to commercialize those innovations, according to Regan. “With the rich research environment we have in Canada, you can see that the supply of capital is just not aligned with demand,” he said. 

Life sciences companies have continued to face funding shortages since BDC stepped back from investing directly in firms in the sector. Despite that, life sciences startups in Canada generated the strongest 10-year returns in venture capital in 2024, according to BDC’s most recent report on the VC industry.

Regan said those returns haven’t spurred enough investment, in part because the sector requires deep technical expertise and longer development timelines than most sectors. “It is an incredibly specialized field,” he said. “We have not, over the last decade, seen the emergence of sophisticated, knowledgeable new funds.”

Nathwani said BDC plans to lead investments it makes through the fund, while also bringing both Canadian and international investors into deals. “That is one of the market needs in the context of life sciences, and the role of a development bank.”