Ontario creates VC fund initiative for life sciences sector

Ontario has announced a life sciences venture capital initiative to provide provincial firms with much-needed capital to grow their business. The Ontario Capital Growth Corporation (OCGC), the agency managing the province’s VC interests, is seeking fund managers who can leverage the province’s $50-million investment.

The Life Sciences Venture Fund Initiative is the first provincial VC fund solely for the life sciences, joining the Ontario VC Fund and the Northleaf Venture Catalyst Fund as incentives for innovative companies.

By helping the sector gain access to capital, the government says the fund will “help businesses foster new discoveries, including new technologies, treatments and cures for illnesses while supporting high quality, knowledge-based jobs for people across the province” and help the province attract and retain talent.

Ontario is the largest life sciences jurisdiction in Canada with more than 50% of overall Canadian revenue, according to provincial data. The sector employs close to 61,000 people in almost 2,000 firms. However, the province also notes that VC investing in the sector is insufficient.

The initiative is welcome news to the sector which has been campaigning for more focus and government support. At its annual policy forum last year, Life Sciences Ontario (LSO), the province’s industry association, unveiled a blueprint calling for a coordinated strategy to “accelerate the success of life sciences.”

At the launch, LSO president and CEO Jason Field said the provincial government has recognized the contribution of the life sciences sector to the economy, as evident in their policies and mandates. However, he noted that it’s not easy for firms to advance. Access to capital is one of the most often discussed challenges, Field said, but the sector itself is diverse and complex for the provincial government to address because the life sciences, while primarily associated with health, also encompasses other sectors such as agriculture and the environment.

In an email exchange with RE$EARCH MONEY, Field says the new VC fund is a “very welcome initiative”. “But the VC fund is only one source of capital and does not meet the needs of every company. We need to mobilize other sources of capital such as pension funds, angel investors and the public capital markets,” he adds. “This is a terrific first step and the province should be applauded for this initiative, but there's more to be done in order to propel Ontario's life sciences forward.”

Field adds that tax incentives, such as the angel tax credit in British Columbia, are another way to help Ontario life sciences companies gain access to capital.

He expresses confidence that fund managers could be attracted to the new initiative since this could help reduce the risks and uncertainty in investing.

The initiative is open to fund managers outside of the province and the country, and they have until April 28 to submit Expressions of Interest.

Ontario did not provide leverage for the fund, only saying it’s “significant.” The fund aims to attract top fund managers and institutional and corporate investors.

The fund is primarily focused on “high potential and innovative” life sciences companies, the province said. And the focus of these companies should be in human health, including pharmaceuticals, medical devices and laboratory instruments, health information technology, health products, and healthcare services.

In a written response to R$, the Ontario government says the initiative is not the first attempt to establish such a fund. In 2014, Ontario announced $30 million for the Life Sciences Seed Venture Capital Fund with $10 million coming from the province. However, the government and its partners had deemed the fund to be too high-risk and too small to proceed so the fund was never developed. “This new Life Sciences Venture Capital Fund Initiative will fulfill the province’s commitment to participate in a VC fund dedicated to life sciences,” says the government.

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