Manitoba’s New Venture Capital Fund Makes First Investment

Source: Winnipeg Free Press

Manitoba’s newly formed venture capital fund — Manitoba First Fund — has made its first investment of $25 million with the veteran Saskatchewan venture capital money manager, WestCap Management Ltd.

WestCap is forming a dedicated $60-million Manitoba fund, called Connect Manitoba Growth Fund, along with about $30 million of investment from four Manitoba credit unions, led by Access Credit Union.

The Manitoba fund will invest in later-stage growth companies that have market acceptance for their product or service.

Grant Kook, who has led WestCap for 25 years, out of Saskatoon, and whose five funds manage about $1 billion in assets, said his sweet spot will be investments of between $2 million and $6 million in Manitoba companies.

“Our expertise is investing in those types of companies,” Kook said at a news conference at the site of Manitoba First Fund (MFF) offices in the southwest end of the city.

“It also aligns with the risk that the credit unions want to take,” Kook said.

It will invest in sectors such as agriculture, manufacturing and processing.

“We like innovative companies whose product has been proven out and have market acceptance, but need capital for accelerated growth to take their companies to the next level,” he said.

Premier Heather Stefanson attended the news conference. Her government announced an additional $50-million investment in the Manitoba First Fund in last week’s budget, bringing the province’s commitment to the fund to $100 million.

The province’s move into venture capital investing — which it has not done since the Crocus Investment Fund went into receivership 15 years ago — is to help Manitoba companies deal with the lack of access to capital — a sore point for many years.

Kook quoted recent data from the Canadian Venture Capital Association that said of the $7.2 billion of private equity invested in Canada in the first three quarters of 2022, only 0.3 per cent of it came to Manitoba.

“The Manitoba Connect Growth Fund is here to help change that stat,” he said.

The MFF — which is looking to hire a professional manager — will invest in professionally managed funds that will bring their own capital to leverage the impact of the province’s investment. Those independent funds will invest in specific Manitoba companies and MFF — which will have two of five board members chosen by the province — will only invest in professionally managed funds like WestCap.

While Connect Manitoba Growth Fund will not address capital needs of early stage or startup companies, Mike Pyle the chairman of the board of MMF, said other funds, which will handle every stage of capital needs, will come on.

Larry Davey, president and CEO of Access Credit Union, the largest in the province — which is finalizing mergers with Amaranth, Carpathia and Casera credit unions — said the move into this type of venture capital investing has been in the works for a few years.

Access has invested in Manitoba companies with WestCap in the past.

He said he expects more Manitoba credit unions will want to participate after the fund gets going. Fusion, Sunrise and Stride credit unions are joining Access as initial investors.

“At the end of the day, all credit unions are looking to determine the best way to support their members,” said Davey. “It’s frustrating when you can’t help members when they need the support. We definitely have members that will be able to take advantage of this fund.”

Kook said having credit unions as partners means the fund will have feet on the ground in communities across the province.

Connect Manitoba Growth Fund will set up an office in Winnipeg soon, with an initial staff of one or two people.

Kook and WestCap have a good perspective on the Manitoba economy. It already owns a stake in a few companies from this province, including Librestream and Fort Garry Brewing.

Kook said the deal flow is expected to be strong.

“It will be diversified in that respect because we will not have geographic diversification,” said Kook. “Every investment we make will be in only Manitoba companies.”

While it will focus on established companies, Pyle said the MFF has been in discussions with four or five other funds, including an early-stage technology fund out of Alberta, and another Saskatchewan fund.

“We have not finished our due diligence with them yet. That’s why the province stepped up with the second batch of capital,” he said. “There’s nothing worse than getting started and then running out of money right away.”