BDC Capital is the largest and most prolific venture capital investor in Canada’s tech sector, with 12 in-house VC funds that invest directly in companies.Sean Vokey/The Canadian Press
Federal Crown corporation Business Development Bank of Canada is recapitalizing its in-house growth equity investment program with $950-million to back emerging domestic companies, citing the need to help entrepreneurs access capital amid a period of heightened economic uncertainty.
BDC Capital, the equity investment arm of the small business support agency, said Tuesday it would commit $500-million to its growth venture fund and $450-million to its growth equity partners program to invest in later-stage companies. Its growth venture fund has invested $390-million in 30 companies since 2016, while its 10-year-old growth equity partners program has invested $440-million across 36 companies. The intended investment period for both is five years.
BDC Capital is by far the largest and most prolific venture capital (VC) investor in Canada’s tech sector, which also gets significant federal funding from fellow Crown corporation Export Development Canada and the Venture Capital Catalyst Initiative (VCCI) program, which BDC administers. BDC manages 12 in-house VC funds that invest directly in companies, with a recently expanded focus on companies led by women, Black and Indigenous entrepreneurs, as well as those focused on clean technologies.
In total, BDC’s venture capital portfolio, excluding the VCCI program, was valued at $2.98-billion as of Sept. 30.
Canada’s VC and tech industry has been heavily – and increasingly – supported by government money, particularly since the late 2000s, when changes to federal law and the 2008-09 credit crisis prompted many pension funds to pull back from the high-risk sector. In the United States, private capital funds account for the lion’s share of financing. The Canadian government has tried to persuade domestic pension funds to invest more at home, launching a working group last year led by former Bank of Canada governor Stephen Poloz to collect ideas from their CEOs.
The recapitalization of BDC’s two growth equity programs “comes at a time when entrepreneurs continue to be challenged” by economic conditions in the tech sector, said BDC Capital executive vice-president Geneviève Bouthillier in an interview. That includes depressed valuations and muted growth opportunities because of heightened interest rates and a weak market for initial public offerings and mergers and acquisitions. The threat of sweeping tariffs targeting the Canadian economy from U.S. President Donald Trump has also created instability. “We’re a steady hand in the market” she said. “The fact that we can be there when private market retracts, it’s our role and this is what we’re doing now.”
VC financing for later-stage domestic startups has fallen in each of the past three years, according to Canadian Venture Capital and Private Equity Association (CVCA) statistics, although growth capital funding levels for more advanced companies rebounded in 2024 to the second-highest amount on record. However, the number of late-stage and growth deals remained at muted levels last year compared with peak levels earlier this decade.
BDC Capital authorized $403.6-million for VC investments in its fiscal year ended last March 31, down 23.4 per cent from the previous year. It authorized $202.8-million in venture capital investments in the first six months of this fiscal year, up 65 per cent year-over-year. But its VC portfolio has also been a drag on results, losing $129.5-million in the first half of the fiscal year because of higher writeoffs and net changes in unrealized depreciation, after two years of losses totalling $849-million from those investments.
CVCA chief executive Kim Furlong said BDC’s renewed growth investment commitment is particularly relevant given the mounting economic uncertainty. BDC’s leaders “are thinking, ‘Okay, how do we ensure that companies have that ambition and the tools to continue to expand?’” she said. She noted a recent Globe and Mail report found there were at least 71 Canadian technology and technology-enabled private companies that now generate more than US$100-million in annual revenue, indicating there was potential in the domestic market. But she added it was up to players such as BDC to ensure there was enough capital to help Canadian companies continue to grow.