OVCF dips toe in Ontario waters with "commitment" to Georgian Partners

It has been quite the past few days for Ontario’s venture capital ecosystem. For those who might have missed the timeline:

• March 16th: I finally blog about the 8 week old rumour that the Ontario Venture Capital Fund has made their first Venture Capital Fund commitment: to U.S.-based Mayfield;

 

• March 17: CVCA formally writes to Ontario Premier McGuinty, outlining some of our industry’s better ideas to re-ignite the venture capital industry;

 

• March 17th: A timely note comes out from Oslers law firm: Oslers: “difficult decisions” ahead for LSIF managers;

 

• March 18th: the Ontario Government puts out a press release advising of a new $250 million fund, that will co-invest alongside “qualified” venture funds;

 

• March 19th: I pen a gentlely teasing blog about the 18 months that have passed since the OVCF was organized, but has yet to invest in a single Ontario-based fund, and that there is no disclosure of the U.S. commitments that have already been made;

 

• March 24th: the Ontario government puts out a press release announcing their first “Ontario-based commitment:, essentially confirming our blog about the first $ having gone to U.S.-based funds (by specifying “Ontario” in the release).  Why no press release about those U.S. commitments on the OVCF website?

 

What is interesting about the (“up to”) $15 million commitment to Toronto-based Georgian Partners is this, and it bodes well for the industry on a variety of levels:

• prior to the commitment from OVCF, it was largely funded by high net worth investors.  Institutional LPs usually frown on this, so that fact that TD Private Equity Partners (manager the OVCF) will put capital into this structure is fantastic news, even groundbreaking compared to their historical decision-making criteria;
• it is believed to be what is known as a “first time” fund — this doesn’t mean that the VCs involved aren’t very experienced (they are), it’s just a phrase that refers to the fact that they haven’t managed an institutionally-backed fund as a complete team.  This too is wonderful news.  Institutional investors occassionally say “come back for Fund II”.  The fact that OVCF made Georgian Partners their first Canadian-based fund commitment, despite the “First Time Fund” moniker, is also spectacular news for the rest of the venture industry.  Particularly all of those teams that might like to break-off from their current group and start their own fund;
• Georgian is believed to have some type of “strategic relationship” with New York-based Insight Venture Partners, a well-known late stage tech V.C. fund.  A U.S. alliance may be the wave of the future.
• The press release looks to be what’s known as a “hard circle”, as Georgian hasn’t put out their own press release about closing a new fund, where OVCF is one of the LPs.  As such, Georgian may or may not have had a closing yet, although one might have thought that would warrant a release if they had.  It appears that the folks at TD Private Equity Partners have agreed to invest “up to” $15 million based upon how much Georgian raises in their new fund — that’s the only conclusion one can reach.  Maybe they’ve agreed to put up to $15 million if Georgian gets to $150 million in total fund commitments.  Unless Georgian’s plan is to raise a maximum of $75 million, $15 million isn’t the “lead order” size of commitment ($25-30MM) that the industry had thought OVCF would be doing based upon reading the tea leaves.
• What is helpful and important about the fact that OVCF press released this commitment to Georgian is that every other prospective institutional LP knows that OVCF is serious about putting capital into their fund.

Leaving aside the reactive actions by Queen’s Park, the bright side is that the OVCF is up-and-rolling.  Although $15 or $22.5 million of comitments over 18 months is going to make it hard to commit $205 million over four years, as had been originally promised.  Hopefully we’ll see press releases about further commitments to Celtic House, Edgestone, VenGrowth Private Equity Partners, Ventures West, etc. over the coming months.

 

And some press releases highlighting the commitments that OVCF has made to U.S.-based funds are now in order.  At least on the website.  Transparency is the watchword, after all. 

People shouldn’t have to get their news from backwater blogs.

Congrats to Justin, Simon and John on the great news!

MRM