Canada is one of the world-class leaders in deep technology. From quantum computing to AI, a whole wave of businesses has sprung up in the area. Only recently, however, have venture capitalists taken an interest in these businesses. One of these venture capital groups is BDC Capital. “BDC – the Business Development Bank of Canada – is the bank for Canadian entrepreneurs” Thomas Park, Partner at BDC Capital stated, “and BDC Capital, its investment arm, is the largest and most active venture capital investors in Canada – with investments in over 90 different funds and with several direct investment teams targeting underserved sectors.”
One of these underserved markets is deep tech. As of May 2021, BDC Capital created a new $200 million venture fund to invest in deep tech companies in Canada. “We found, in Canada, there was a gap in the market to invest in deep tech startups,” explained Park. “There was a concern that Canada would replay the story that we’ve seen with the artificial intelligence sector back in 2008 when many researchers ended up working for other global tech companies and much of the IP went to other countries.” Park is excited by the potential this fund can provide for Canadian deep-tech start-ups. “Now we can be much more deliberate about targeting and mobilizing resources around a smaller set of potential champions rather than just spreading the butter quite thin.” With a dedicated fund just for the commercialization of R&D of deep tech, BDC Capital is hopeful their fund will bring more interest to this sector of the market as a whole.
This fund, however, differs significantly from a typical venture capitalist fund. According to Park: “What makes us different is two-fold. First, our fund-life. Rather than a standard ten-year fund life, we’ve established a 12-year fund with a potential extension of four years – we really are a long-term investor. Second, unlike other funds, we have the internal capabilities to help our portfolio companies to partner with various government agencies for real value add.” Park added that BDC Capital actually has: “the internal expertise to help startups and investors navigate various government procurement and support programs. We’re long-term investors, but we can play a role in mobilizing the government to support these startups.” By working with deep tech startups and the Canadian government, the Deep Tech Venture Fund can highlight specific businesses that would have a higher probability of succeeding in the growing industry.
With their venture capital experience, Park has a few predictions for the deep tech market. He explained that: “I think we’re going to see a lot more of the software and hardware play together. Rather than seeing a dichotomy, we’ve going to see these two be much more integrated – we’ve seen many startups” This integration is already occurring, with many businesses collaborating to combine software and hardware to develop new machines. Park added that: “we will also continue to see a number of quantum computing start-ups raising mega-rounds. These companies need to scale very quickly and the war for talent is incredibly intense in this field. It doesn’t mean that early-stage quantum computing startups have no chance – they just need a clear path on raising a lot of capital very quickly.”