UAE's Sheikh Khalifa Fund vs. Ontario's OVCF
News report: US$30.2 million funding approved for Abu Dhabi SMEs
I see in my Arabian Business journal that The Sheikh Khalifa Fund for Support and Development of Small and Medium Enterprises has advanced another US$30 million to startups based in the United Arab Emirates. Since June 2007, when it was first launched, The Sheikh Khalifa Fund has put about US$100 million into local SMEs.
Here at home, the $205 million Ontario Venture Capital Fund (see prior posts “$165MM MRI Fund: blessing or curse?” Dec 3-07 and “Ontario Government as V.C.? part 2” March 19-09) has put exactly $1.8 million into I Love Rewards and $2 million into BlueCat Networks during the same timeframe (ignoring the undrawn commitments to Edgestone and Georgian, and the U.S. V.C. commitments that curiously haven’t been press released).
Cynics will point out that this $3.8 million in invested capital over a two year period is about the same amount of money as has likely been paid to Northleaf Capital Partners (formerly TD Private Equity Investors) in management fees — assuming they are charging “1 & 10” on the fund. For the uninitiated, “1 & 10” means that the fund-of-fund manager gets 1% a year ($2.05 million) in cash management fees on the OVCF funds they steward, plus 10% of whatever upside the fund generates over its investment horizon.
But that’s not the point. The OVCF’s slow pace of actual investing reflects, in part, the VC crisis that we’ve been writing about for the past few years. If new funds aren’t closing, there’s no where for OVCF’s capital to go.
Ontario Premier Dalton McGuinty is just back from a sucessful trade mission to India. I think he should join us when we make our second trip to the UAE in March (see prior post “Gulf Trip: Day Five” Dec 5-08). It’d be worth his time to meet with the folks who run the Sheikh Khalifa Fund; see what their secret is.
MRM
Excellent post Mark. Have also blogged about funding challenges in Ontario Funding for many years, particularly with the cancellation of the LSIF … but don’t get me going on that.
.
I have always found significant room for improvement in the way Ontario sets up and manages funding mechanisms for knowledge based businesses. Have been doing some research in this area myself.
.
Scottish Enterprise Investments (in Scotland as the name suggests; http://www.scottish-enterprise.com/) is probably the world leader. They have a fund structure almost an identical OCE; Investment Accelerator Fund, Ontario Emerging Technology Fund and Ontario Venture Capital Fund. The key difference IMHO is the model and results.
.
SEI has 1/5th of the employees (compared to OCE) and allocates 10X as much funding which if my math is correct is about 5000% more efficient. Based on your comments it sounds like the Sheikh Khalifa Fund has a similar order of magnitude performance difference compared to Ontario.
.
Now back to the model. SEI has a linear model where the only interface to the knowledge based company is the investor. (ie. SEI — Investor — Company). The government matches funding (which scales back as the company business risk decreases) and only the investor has an equity stake not the government.
.
In the Ontario the model is more parallel with government taking an equity stake along side (sidecar)in the knowledge based business. Both government and investor interface to the company. I don’t know about most of your readers but, IMHO that last thing that a quick and nimble knowledge based start-up needs is the government “helping” them as an owner and decision maker. Significantly flawed model IMHO.
.
Ontario’s performance in the arena as a province (when compared to Quebec and BC) has been significantly impaired by the current policy and implementation.
I always read blogs in similar topic, but I never visited your blog Mark. bookmarked and i’ll be your constant reader. Thanks