InBC is positioning the $500 million as an evergreen fund investing both directly in companies and investment funds located in, or with a strong connection to, BC.
Jill Earthy, CEO of InBC, told BetaKit, that InBC views its role as helping bring in additional capital, unlocking additional capital that might already be in the province, and helping grow and scale more companies that will stay in the province longer.
The fund is a major initiative under StongerBC, BC’s economic recovery plan, and Budget 2021. At the time the fund was unveiled, Ravi Kahlon, British Columbia’s minister of jobs, economic recovery and innovation, said that InBC would support scale-ups and startups alike with a mandate that reflects BC’s values: people, the planet, and profit. At the time, Kahlon said the fund was not specifically geared towards technology, but said he expected a lot of the capital would go toward tech companies.
The fund is a major initiative under StongerBC, BC’s economic recovery plan, and Budget 2021.
InBC plans to invest broadly from pre-seed to Series C and beyond, with up to 70 percent of the fund in private equity and venture and the remaining 30 percent into private debt.
The crown corporation said four impact objectives will guide its investments: to drive climate action, innovate for the future, advance reconciliation, and elevate inclusive communities.
InBC plans to invest in BC’s innovation economy, among other sectors, although in an interview InBC officials weren’t prepared to outline specific allocations to particular sectors such as tech.
The crown corporation has set out some robust targets, including investing $75 million to $125 million in funds focused on pre-seed and seed stage startups. InBC’s investment in early-stage companies will encompass $150 million to $225 million in Series A and B raises through pooled investment funds, with the possibility to invest directly in companies.
When it comes to later stage companies, the crown corporation is more focused on direct investing and is planning to invest $175 million to $250 million in Series C and later raises, though that will also include some fund of funds investing.
InBC will partner with other public and private investors to finance companies with the capacity to demonstrate measurable social, economic, and environmental impact while growing their business in British Columbia, according to the crown corporation’s investment policy.
Earthy noted that the fund doesn’t have specific allocations for any of its impact objectives. “It’s one of those things where we have specific objectives but we want to remain flexible as the market evolves,” she said.
Leah Nguyen, chief investment officer at InBC, said intersections are common now between the different sectors, such as climate versus innovation. “There’s definitely innovative companies that are tackling climate, for example, or inclusive communities,” she pointed out. “I don’t think we draw a strong delineation that this is a climate opportunity versus an innovation opportunity.”
InBC will examine each investment for four things: the strength of the connection to the province, its impact, its risk,as well as the ability to generate returns. “Ultimately we are returns-oriented in the sense that our goal is to be an evergreen fund and we need those returns in order to continue to grow,” Nguyen said.
InBC is using what it refers to as a triple bottom line basis for investments. This means the crown corporation intends to optimize financial returns, act as a responsible steward of shareholder capital, and pursue what it identifies as positive social, economic and environmental outcomes.
In terms of fund of funds investing, InBC’s maximum fund commitments vary according to the investment vehicle, and include no more than $10 million to a single fund; no greater than $25 million to a single fund manager; and no more than $20 million to an individual company.
The crown corporation plans to maintain a minority position in terms of ownership, investing no more than 25 percent in an individual company, and no greater than 33.3 percent for a single fund or fund manager.
The fund plans to invest for the long-term, and act as patient capital with an investing window of greater than 10 years for returns. “InBC does not expect that all investment objectives will be attained in any one year or through any single investment. Investment performance will therefore be assessed on a portfolio basis, recognizing the portfolio objectives will be realized over the long term,” according to the investment policy InBC released.
That said, the crown corporation noted that when possible and where it aligns with the agency’s investment objectives, InBC will attempt to diversify its portfolio with investments of less than 10 years in length.
In order to shield its investments from such risks as interest rate fluctuations, macroeconomic factors, and geopolitical events, InBC will diversify its portfolio across different assets, the eight BC economic regions, economic sectors, and stages of business development. The latter will range from startups to mature companies.
The fund’s partial emphasis on cleantech comes as no surprise given the province’s continued fight against climate change. In its 2021 budget the province announced $506 million in new investments to support CleanBC, a BC initiative to battle climate change. That funding included $269 million in new funding for clean transportation, energy-efficient buildings, and other cleantech initiatives.
The 2021 budget also provided The Centre for Innovation and Clean Energy, which supports the development and commercialization of cleantech in BC, with $60 million in one-time funding.
Announcing the fund in 2021, Kahlon said InBC models itself after similar funds in Denmark and Ireland, which take equity stakes in companies but remain independent from the provincial government, as well as leverage private and public sector investments.
Earthy noted that launching InBC in the current economic market likely offers greater opportunity for investments. “I think where the market has softened and valuations are leveling off a little bit, it’s an interesting time. I think we’ll also see some of the under-estimated or under-represented entrepreneurs come to the top a little bit more. And we’re excited to explore more opportunities and support [for them].”
InBC plans to finalize its first investments by year end.
The post InBC reveals direct, indirect investment strategy for $500 million fund first appeared on BetaKit.