Key Takeaways
- • Innovation, Science and Economic Development Canada (ISED) issued a call for expressions of interest for a $700 million federal Fund-of-Funds stream under the Growth VCCI, the largest of three streams in a $1 billion program announced in Budget 2025.
- • Fund managers must raise $3 of private capital for every $1 of public capital, with private capital including pension fund and foreign capital, and expressions of interest close at noon Pacific time on January 21, 2027.
- • Applicants must seek a fund-of-funds of at least $150 million and meet at least one of four market-experience indicators, including a commitment or letter of intent from an institutional investor.
- • Public and private capital are called at a 50:50 ratio, with public capital fully called before private capital, and the waterfall returns private capital first at a 7% IRR hurdle.
- • Minister Mélanie Joly also unveiled a separate $750 million Early and Growth Stage Investment Strategy administered by BDC, with written feedback open until 5 pm Pacific time on November 23.
Summary
Pension funds and other institutional investors are being courted as limited partners in a $700 million federal fund-of-funds stream, according to Benefits and Pensions Monitor. In a news release issued last Thursday in Toronto, ISED said the Fund-of-Funds stream is the largest of three streams under the Venture and Growth Capital Catalyst Initiative (Growth VCCI), a $1 billion program announced in Budget 2025 that provides funding on a cash basis starting in 2026-2027. A $200 million Life Sciences stream and a $100 million Emerging Manager stream make up the balance of the program.
The call requires fund managers to raise $3 from private capital investors for every $1 of public capital. Private capital under the program includes pension fund capital, and foreign capital counts as private. Applicants must seek to raise a fund-of-funds of at least $150 million and meet at least one of four indicators of market experience: an institutional investor committing private capital beyond the general partner commitment, a letter of intent from at least one institutional investor, experience raising a fund-of-funds of at least $100 million with pension or other institutional capital, or at least one general partner who has managed a fund of at least $100 million.
Public and private capital are to be called at a 50:50 ratio. The call document notes this doubles the public pro rata participation that would otherwise be 25 percent at a three-to-one leverage ratio, meaning public capital is fully called before private capital. The waterfall returns private capital with a 7% internal rate of return, then public capital with a 2% internal rate of return, then a general partner catch-up of earned carried interest, followed by pro-rata distribution on a committed capital ratio of 75% private to 25% public, subject to general partner carry. Public capital investors are not eligible for management fee discounts.
Investment restrictions require at least 60% of fund investments to go into Qualified Canadian venture capital funds, with a maximum of 30% into Qualified Non-Canadian venture capital funds. Up to 30% of total fund size may be allocated to direct investments, of which at least 90% must go to Canadian-based companies. The first close is the lesser of $150 million or at least 50% of target fund size, expected within 18 months of confirmation of federal investment. Expressions of interest close at noon Pacific time on January 21, 2027.
In the same announcement, Industry Minister Mélanie Joly unveiled Canada's Early and Growth Stage Investment Strategy, a $750 million plan split between a $75 million Pre-Seed and Seed Investment Stream and a $675 million Later and Growth Stage Investment Stream, administered by BDC. Written feedback on the Later and Growth Stage design is open until 5 pm Pacific time on November 23.
The call requires fund managers to raise $3 from private capital investors for every $1 of public capital. Private capital under the program includes pension fund capital, and foreign capital counts as private. Applicants must seek to raise a fund-of-funds of at least $150 million and meet at least one of four indicators of market experience: an institutional investor committing private capital beyond the general partner commitment, a letter of intent from at least one institutional investor, experience raising a fund-of-funds of at least $100 million with pension or other institutional capital, or at least one general partner who has managed a fund of at least $100 million.
Public and private capital are to be called at a 50:50 ratio. The call document notes this doubles the public pro rata participation that would otherwise be 25 percent at a three-to-one leverage ratio, meaning public capital is fully called before private capital. The waterfall returns private capital with a 7% internal rate of return, then public capital with a 2% internal rate of return, then a general partner catch-up of earned carried interest, followed by pro-rata distribution on a committed capital ratio of 75% private to 25% public, subject to general partner carry. Public capital investors are not eligible for management fee discounts.
Investment restrictions require at least 60% of fund investments to go into Qualified Canadian venture capital funds, with a maximum of 30% into Qualified Non-Canadian venture capital funds. Up to 30% of total fund size may be allocated to direct investments, of which at least 90% must go to Canadian-based companies. The first close is the lesser of $150 million or at least 50% of target fund size, expected within 18 months of confirmation of federal investment. Expressions of interest close at noon Pacific time on January 21, 2027.
In the same announcement, Industry Minister Mélanie Joly unveiled Canada's Early and Growth Stage Investment Strategy, a $750 million plan split between a $75 million Pre-Seed and Seed Investment Stream and a $675 million Later and Growth Stage Investment Stream, administered by BDC. Written feedback on the Later and Growth Stage design is open until 5 pm Pacific time on November 23.
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