To address these challenges, our deep tech fund team will focus on deficiencies at both the firm and ecosystem levels to help companies realize their market value in a more compressed period.
1. Improve coordination among government departments
Many countries have made it a priority to develop strong deep tech ecosystems. Canada is no exception. Numerous federal departments and agencies are keen to increase collaboration with deep tech firms. However, government players often have a hard time engaging with the private sector, while start-ups struggle to access public procurement programs.
BDC Capital’s Deep Tech Venture Fund team will try to act as a matchmaker between government and start-ups. Our goal is to connect departments and agencies with leading technology companies.
For example, quantum company Xanadu recently secured a $150,000 federal research project and a follow-on $1 million prototype project. We believe that this kind of industry-government collaboration can go a long way to helping commercialize these technologies in Canada.
2. Strengthen links to corporations
Large corporations are not investing enough in Canadian R&D and, as a result, our country is losing talent and important IP to other countries. While many large local and foreign corporations are eager to collaborate with Canadian deep tech firms, start-ups are often ill-equipped to explain their value proposition and generate interest. In general, the ecosystem is still young and needs to do more outreach to corporations.
Our deep tech team has a successful track record of building relationships with the senior management of leading corporations interested in supporting the development of Canadian firms. The fund will work to encourage corporate support for Canadian deep tech firms by becoming major customers and/or development partners for them.
3. Bolster technical and managerial support
The development of start-ups is often slowed by gaps in technical and managerial expertise. Because the ecosystem is so young, there is also little engagement and coordination between deep tech communities in Canada. Instead, deep tech clusters tend to coordinate more with foreign markets than with each other.
Our team we will provide technical expertise, insights on specific segments and facilitate market entry to portfolio companies. We will also provide them with coaching, networking opportunities, market insights and access to potential customers. At the ecosystem level, we have many partnerships that position us well to cultivate a Canadian deep tech community, bringing together a diverse set of participants from different industries for mutual benefit.
4. Compress the runway to commercialization
Deep tech firms typically have a longer timeline to maturity than other VC-backed firms. Besides their novel technologies, applications often have a hardware component, which requires a longer development period. Additionally, a lack of funding for Canadian deep tech companies has tended to slow their development.
We recognize the longer development timelines for these industries and that’s why our fund’s life is 12 years in contrast to the usual 10-year life of a general VC fund. We will be a patient partner for firms, investing enough capital in successive funding rounds to allow them to scale up and develop their products. Nevertheless, we believe that with better funding, stronger links to government and private sector actors and better access to technical and managerial support, start-ups in this domain can substantially accelerate their timeline to commercialization.
On the path to a vibrant deep tech sector
As BDC Capital, we are confident that Canada has everything it needs to build a vibrant, globally competitive deep tech sector. However, much work needs to be done to ensure that start-ups have the support they need to turn exciting discoveries into transformative products and services.
Our new Deep Tech Venture Fund knows bringing Canadian innovations to global markets will take more than just dollars. That’s why we will play a leading role in nurturing partnerships between government department and agencies, private sector players and start-ups to grow international champions for the benefit of Canadians for decades to come.