Western seed fund seeks federal support roll-out unique investment model

The Western Life Sciences Venture Fund (WLS) is seeking provincial and federal assistance to expand its scope throughout all four provinces and enhance its role as a key seed investment player in Western Canada. With $45 million under management, WLS hopes to raise another $55 million for its inaugural fund targeting life sciences technologies in Manitoba and Saskatchewan. Negotiations are underway to secure support for a similarly sized fund for Alberta and British Columbia, for launch in 2005.

Managed by Winnipeg-based Lombard Life Sciences, WLS has leveraged $15 million from the Saskatchewan and Manitoba governments to attract an additional $30 million in private sector capital from Keystone Technologies Inc, Biovail Technologies West and a group led by ENSIS Management Inc. The first tranche of $45 million is 75% committed in 10 investments with an eleventh prospect currently in negotiation.

“We need enough money to follow the winner, which can be up to $10 million for each company. For 10 companies that’s $100 million,” says Lombard president/CEO Kevin McGarry. “We would hope that the money allocated in the (last federal) Budget for seed investment is accessible for funds like us.”

Unlike most other early-stage funds, WLS plays a hands-on role in supporting promising technologies through to Phase I clinical trials. It’s a strategy that addresses the critical early-stage gap in the commercialization process — an area where private venture capitalists are reluctant to tread without incentives to mitigate risk.

“What we’re doing is real pioneer stuff. We are the management for our investments,” says McGarry. “We have a very good deal flow and we also look at technologies in other jurisdictions globally and if they fit we bring them back to Saskatchewan and Manitoba.”

McGarry contends that there is a critical public role for risk mitigation of seed-stage investing and while he is encouraged by recent federal pronouncements on the subject, he’s less enthusiastic about what’s been accomplished to date. McGarry recently visited Ottawa to explain the WLS concept to federal officials and gauge potential support for additional financing. The trip was preceded by a letter addressed to Finance minister Ralph Goodale requesting a meeting and addressing what McGarry views as a disconnect between the needs of early-stage firms and venture capital providers like the Business Development Bank of Canada (BDC).

“New technologies emanating from Canadian research institutions and universities cannot reach this ‘early stage’ without very significant financial resources and an experienced management team,” states the letter. “The investment mandates and risk management structures of BDC ... appropriately (do) not allow them to invest in the area where investment is most urgently needed.”

McGarry says he was unable to meet with either Goodale or Industry minister Dr David Emerson although he has received replies from both offices expressing a willingness to schedule meetings in the future.

In the meantime, McGarry is speaking with his founding investors —Manitoba Development Corp and Investment Saskatchewan — to double their original investments. But he says federal funds will still be required to reach $90 million.

“If we don’t get additional funding for the first fund, it will stall,” he says.

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