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Backed by $500M, InBC’s first investments target Vancouver VC firms

Newly created Crown corporation earmarking between $5M and $10M for first three investments
Leag Nguyen, chief investment officer, InBC

A fledgling Crown corporation charged with divvying up $500 million in funding to the private sector has revealed its first three targets.

InBC Investment Corp. is earmarking between $5 million and $10 million to Vancouver-based venture capital firms Evok Innovations, Raven Indigenous Capital Partners and Yaletown Partners.

“We're not just looking at the financial returns, we're also looking [at] what are the impacts to people,” InBC chief investment officer Leah Nguyen said after Tuesday’s announcement.

The fund’s mandate includes securing financial returns on investments; investing in what the government describes as the low-carbon economy; and investments that result in job creation, the promotion of diversity and further reconciliation with Indigenous peoples.

Nguyen said the three West Coast VC firms aligned with different parts of the fund’s criteria: Evok’s focus on climate action, Raven’s reconciliation impact objectives and Yaletown for the innovation impact objectives.

“We will never dictate who they invest in,” Nguyen said. “But we do work with them to ensure there's a commitment to investing in B.C. and supporting the growth of our ecosystem.”

The exact amount of investment dollars each firm is getting will not being disclosed until the VC firms announce on their own sometime in the first quarter of next year.

The $500-million fund has previously come under criticism for its lack of transparency.

Information Commissioner Michael McEvoy took aim at it in May 2021 for not being subject to the province’s Freedom of Information and Protection of Privacy Act.

Instead, the Crown corporation faces annual reporting in addition to staggered independent audits.

“Its annual reports are to be in a form and manner specified by the minister and external reviews will occur only every five years,” McEvoy said at the time, referring to B.C.’s minister of jobs, economic recovery and innovation.

“These accountability mechanisms fall far short of what is needed and lack the ongoing transparency afforded through the access to information regime.”

B.C. Innovation Minister Brenda Bailey told BIV last week it’s normal procedure to set up of a fund of this nature in such a manner.

“It's certainly not a fund that I would have guidance on in regards to investment decisions. That's very clear to me,” she said.

Bailey’s predecessor, Ravi Kahlon, said last year InBC’s chief investment officer was not to have contact with him or anyone else in government to avoid concerns government was influencing funding decisions.

Nguyen is also not to have contact with InBC’s board, which includes deputy finance minister Heather Wood and former BC NDP finance minister Carole James.

But Kahlon, who now serves as housing minister, acknowledged in October that he’d met with Nguyen three times since the fund was created “but never had discussions about any of these [investment] topics.”

Nguyen said she feels strongly about maintaining the independence of her investment decisions.

“We obviously have a responsibility from a reporting perspective … and ensuring that our investments are aligned to the broader strategy and mandate of InBC,” she said. “But as it pertains to like, ‘Hey, nudge, nudge, go look at this company’ – that is not the case.”

Nguyen said anyone interested in funding opportunities are being told to go through the same standard process and not to email InBC workers directly.

“And that includes referrals from people that we know within our network and other stakeholders,” she said. “So that, again, everyone has a fair shot at it versus being based on who you know.”

Beyond venture capital firms, InBC will begin investing directly in companies in spring 2023. Those investments are being guided by the same criteria that landed Evok, Raven and Yaletown Partners their investment dollars.

InBC is making its first investments during an unusual economic period in which labour markets remain tight and inflation is unusually high.

The province’s Economic Forecast Council sees growth slowing significantly, from 2.9 per cent in 2022 to 0.4 per cent in 2023.

Meantime, venture capital funding in Canada dropped to US$1.4 billion in the third quarter of 2022 – down significantly from the US$2.5 billion raised during the same period one year ago, according to an October report from KPMG.

There were rumblings early on in the fund’s creation that it was aiming for a five per cent return on investments. Nguyen would not specify what exact ROI she was expecting moving forward but said InBC was looking for a “risk-adjusted market return.”

“We want to ensure that beyond covering the cost of capital, we're generating enough returns to be able to reinvest in continuing the work that we do,” she said.

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