BDC Capital launches $200M fund to stem deep tech exodus in quantum, AI startups
BDC Capital announced Wednesday that it will launch a $200 million venture capital fund aimed at investing in early-stage companies involved in the development of technologies including artificial intelligence and quantum computing.
The Deep Tech Venture Fund will provide early-stage investments in Canadian startups working in a range of rapidly developing technology sectors, including artificial intelligence, quantum computing, electronics and photonics.
"We see that there's an opportunity to address the gap in innovation in Canada," BDC Capital executive vice president Jérôme Nycz said in an interview. He pointed to the fact that Canadian universities rank highly around the world when it comes to research, but that Canada's global ranking drops off when it comes to the creation of startups.
"There's a real challenge in converting research into entrepreneurial endeavours," he said. "We're trying to create a hub of innovation and support the creation of startups out of these dollars invested in certain sectors."
The fund will be run by partner Thomas Park, formerly BDC Capital's vice president of operations and strategic initiatives. Before the pandemic hit, BDC Capital consulted investors, entrepreneurs and academics about the gaps in Canada's innovation ecosystem. Park said many participants were concerned with a lack of commercialization options – something he said also occurred in the late 2000s in the development of artificial intelligence, when much of the intellectual property (IP) was captured by foreign firms.
Park said part of the motivation behind the fund is to ensure technology and IP developed in Canada is able to stay, grow and scale in the country. The issue of made-in-Canada IP being scooped away by foreign companies has been raised for years.
"The fund is a commercialization vehicle. We're going to focus on certain technologies – such as quantum, semi-conductors, robotics, drones, a lot of hardware – and investing in the best management teams to help companies scale," Park said.
"We're also going to help companies partner and navigate through the government procurement process."
Technological innovation has been a key area of spending for the current federal government, which committed billions in funding towards a range of sectors including artificial intelligence, quantum technology, photonics, genomics, bio-manufacturing, and promoting Canadian IP. The government said it will spend $443.8 million over 10 years towards a Pan-Canadian Artificial Intelligence Strategy, which includes $185 million over five years to support commercialization. Another $360 million will be spent over the next seven years to launch a National Quantum Strategy aimed at amplifying Canada's strength in quantum research.
"Canada has communities of research, homegrown talent, and a diverse ecosystem of start-ups and scale-ups," reads the Liberal government's most recent budget, released last month.
"But these Canadian innovators need investment in order to ensure our economy takes advantage of the enormous growth opportunities ahead in this sector."
Nycz said the fund represents a long-term view on the potential of the technology being developed today.
"We thought it was important to be an early investor, because it's really daunting to look at this technology understanding that it might take seven, 10 or 12 years before there is an opportunity to scale," Nycz said.
"We're sending a clear message that we're there to support this technology, support growth and support the sector scaling."
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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