OTTAWA — The federal government will split $50 million earmarked to make more capital available to Canada’s life-sciences ecosystem between six managers—a mix of established, scaling and newer players in the sector.
OTTAWA — The federal government will split $50 million earmarked to make more capital available to Canada’s life-sciences ecosystem between six managers—a mix of established, scaling and newer players in the sector.
OTTAWA — The federal government will split $50 million earmarked to make more capital available to Canada’s life-sciences ecosystem between six managers—a mix of established, scaling and newer players in the sector.
The firms chosen under the Venture Capital Catalyst Initiative’s (VCCI) dedicated stream are AllosteRx Advanced Therapies, Amplitude Ventures, the CTI Life Sciences Fund and Sectoral Asset Management, all headquartered in Montreal; Toronto-based Genesys Capital; and Vancouver-headquartered Pender Ventures.
Talking Points
The COVID-19 pandemic made clear the importance of the life-sciences sector, and the country has a number of promising startups and funds that “need this investment capital to grow,” said Small Business Minister Mary Ng. The $50 million allocated to the industry in VCCI will “just help us be more resilient in this part of the economy,” the minister added.
Canadian life-sciences firms raised $1.04 billion in 112 rounds last year, back to pre-pandemic levels after a record $1.8 billion across 115 deals in 2021, according to data from the Canadian Venture Capital & Private Equity Association (CVCA). But financing activity has cooled off economy-wide amid rising interest rates and recession fears.
“Getting more firms at a certain scale that also have a focus on investing domestically is critically important for the life-sciences industry here,” said Dion Madsen, a founding partner at Amplitude, noting that such VCs then attract more international money. VCCI’s backing “enables funds like ours to scale,” he said.
Amplitude was established in September 2019 as a quasi-spinout of the Business Development Bank of Canada’s (BDC) biotech portfolio. In June 2021, it closed its first fund, a $200-million envelope for precision medicine that has participated in megarounds for promising domestic startups like Congruence Therapeutics, Deep Genomics and Notch Therapeutics, as well as in some earlier-stage deals.
The firm is focused on biotech firms that use artificial intelligence. “The pipeline of innovation that’s coming from Canadian academia is very strong,” said Madsen; Amplitude backs founders to commercialize those discoveries or grow the companies they build around them. The VCCI money will add to its assets under management.
“We’re living in very difficult times for the biotech market,” said CTI managing partner Shermaine Tilley. The firm will add the $5 million it’s receiving from VCCI to its third fund, for which it has already secured $132 million in commitments. CTI typically invests between $10 million to $15 million per portfolio company, focusing primarily on Series A deals, drug developers and the Canadian market. Successful exits include Medicago and Zymeworks.
The VCCI money will allow CTI to partially fund an additional Canadian investment, or sustain one of its portfolio companies “through a dark period” while the startup seeks new investors, said Tilley. Selection via the program’s review process is a “stamp of approval … that we are people you should give money to invest in biotech,” she said, particularly as the pandemic, interest rates and other macroeconomic factors have created a “very difficult fundraising environment” for all kinds of VCs.
Life-sciences-focused fund managers have traditionally found it challenging to raise in Canada, said Ela Borenstein, vice-president of venture capital-incentivized programs at BDC. The Crown corporation manages the VCCI program on the government’s behalf. The VCCI funds will help address a shortage of emerging managers, she said, noting that Sectoral is moving into venture investing, having traditionally focused on late-stage private equity deals, while Pender is a relatively recent entrant that will focus on health-care IT.
Meanwhile, the VCCI cash will contribute to Genesys and AllosteRx’s ongoing fundraising, according to Borenstein. While the six chosen firms may syndicate deals, they’re also complementary, focusing on different types and stages of companies. “This is a hard area to develop products, and you need smart, committed capital,” she said.
Under the VCCI’s terms, the managers must raise matching private-sector capital, and commit to investing at least 70 per cent of their funds in Canadian firms. Ng pointed to other federal programs that help startups in the medical market, including Ottawa’s funding for the CAN Health Network, which helps firms sell products to hospitals. “It’s an important sector in the Canadian economy,” she said.
The life-sciences cash is the second stream Ottawa has allocated from its $450-million renewal of the VCCI, a program to make more financing available to companies in the country’s innovation economy. In October 2022, the federal government re-upped four funds-of-funds, which will split up to $350 million to seed VC funds.
The Conservative government of the day set up an initial program in January 2013 to boost domestic VC activity; four years later, the Liberals committed to another round under the updated VCCI name, including a $50-million sector-specific stream for cleantech that was ultimately split between three firms. Ottawa renewed the program again in the April 2021 federal budget.
The life-sciences stream will have benefits beyond its direct impact on capital availability for fund managers and startups, said Jean-François Pariseau, Amplitude’s other co-founder and partner. “Our companies are developing new drugs to treat cancer and cardiovascular diseases.”
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