BDC Capital boosts venture financing for clean and energy technology firms

BDC Capital is rolling out its second venture fund for clean tech and energy following the successful deployment of an initial fund launched in 2011. The BDC Industrial Clean and Energy (ICE) Technology Venture Fund II will provide $135 million to highly scalable, capital-efficient companies in need of late seed, series A and series B financing.

BDC Capital is just one of several government-backed organizations available to the energy and clean tech sector. But analysis shows that early-stage financing continues to be a challenge, despite growing private sector momentum towards developing solutions in support of the transition to a low-carbon economy.

"There's a lack of venture capital in the early part of the financing continuum. Companies need early lift-off," says Tony Van Bommel, BDC Capital's senior managing partner of ICE Funds I and II. "This is the largest pool of capital we've ever had for this area."

ICE I is fully deployed, and its investments in 18 companies have leveraged more than $600 million in additional VC funding (not including non-dilutive financing) for a ratio of nearly 6 to 1. Among the companies that received ICE I funding is Bit Stew Systems, a leader in software defined operations for the industrial internet and architect of BC Hydro's smart meter analytics platform. Last month, the Burnaby BC-based firm, was acquire by General Electric Digital for US $153 million. "We're just entering the harvest period for ICE I," says Van Bommel.

The second fund was greenlit to address continuing demand from companies facing a financing gap as they work to scale up their operations and marketing.

"We're looking for companies that have a strong management team that can move from idea to international distribution and gain international competitive advantage. These are companies with pricing power that can offer significant value," says Van Bommel. "The term clean tech is somewhat limiting as it's more a theme than a sector, so we're focusing on industrial, clean and energy technologies."

The new fund is being launched at a time when yet another report is sounding alarm bells over the financing of clean tech companies. A new study by Cycle Capital Management and Sustainable Development Technology Canada concludes that Canadian clean tech is losing ground to other countries. Entitled Forging a Cleaner and More Innovative Economy in Canada, the report found that Canada is failing to commercialize high-quality research emanating from its universities, and lagging the US in both the venture capital and debt financing of firms seeking to scale up and commercialize their technologies.

"The present challenge of the Canadian VC industry is to take a larger share in later-stage rounds while continuing to support the scaling up of independent tech companies to create a Canadian cleantech industry. This role requires larger and more experienced funds able to take meaningful positions in financing syndicates," states the report. "(Funds active in the cleantech sector) have limited resources to address the double challenge of scaling up companies and the particular risk profile of more capital intensive technologies that include both technology risk and industrial scale up."

Last year, a report from Analytica Advisors made similar observations, concluding that without urgent action, Canada will continue to lose market share in the rapidly growing sector to nations where governments are implementing more aggressive policy and programmatic action (R$, June 24/15).

"If we don't do things like ICE II, we will continue to fall further behind," says Van Bommel. "We have a track record of creating large, successful enterprises and we're complementary to other programs out there. This fund has been in the works for years. We have been investing in this space for 30 years (and) have a rich partnership strategy."

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