Export Development Canada could boost the amount it has invested in private equity ventures by
over 50 percent in the next five years as it broadens international alliances, a top executive told Reuters. The self-financed crown corporation, which helps finance Canadian exporters, is expected to have some C$1 billion ($949 million) in investments under management in five years,
compared with about C$650 million currently.
“In 2010 we aim to place between C$100 million and C$150 million of new commitments subject to, among other things, market conditions and quality of opportunities,” Jennifer Brooy, EDC vice-president for equity, said in an interview. “At this pace we would get to the billion dollar mark
within five years,” she said, adding that reaching that mark would depend on how cash is cycled through private equity and venture capital investments.
Brooy is one of a record number of investors who converged on Ottawa this week for the annual Canadian Venture Capital and Private Equity Association conference. Participants hope to get a better sense of the impact of recent market turmoil on private equity and venture capital sectors. The division Brooy heads at the EDC has grown tenfold in the past 10 years, leveraging decades of relationship building at home and abroad to help Canadian companies grow.
“One of the key things that have been missing in Canada is those strong, go-to-market networks through companies around the world,” said Brooy, pointing to Silicon Valley where venture capitalists can cross the street to tap into networks to suit the technologies they are developing.
“Where we see EDC having an advantage, one of our value propositions, is the fact that we have these established networks, either through our fund investing or through all of the business that EDC has been doing in the past 60 years around the world,” she said.
Currently the company, owned by the government of Canada, is invested 60 percent at home and 40 percent in emerging markets, with much of that in venture capital, although Brooy would like to get more private equity in the mix. EDC invests in companies at various stages. At the start-up
level it prefers technology companies, and subject to milestones can invest between C$1 million and C$15 million.
It also invests sums between C$2 million and C$20 million in mid-market companies across industries and will commit from C$5 million to C$75 million to investment funds abroad. When taking a stake in investment funds abroad, EDC tells fund managers to look at them as they would a strategic investor that can tap the business networks of the companies they buy into. “And then we come back and we say, ‘how do we connect Canadians into these opportunities,'” Brooy said.
At present EDC has international funds in India, China, Southeast Asia, Turkey, Mexico, Brazil, the Caribbean, Pan-Europe and Israel and is looking at other geographies. In Mexico, for example, it is invested in a fund that is managed by a Mexican manager investing in Mexican enterprises.
“Historically, the explorers have had the telescope focused on us, while now we have to stop being the ‘exploree’ and start being the explorer,” said Brooy. EDC raises funds by charging fees for its services and interest on its loans, as well as issuing debt in capital markets.