A little more than 20 years ago, venture capitalists made a $1.6-million bet on a small Waterloo startup called OpenText.
Without it, the company would likely not be what it is today: Canada’s largest software company; a global leader in helping businesses manage their information, with 100,000 customers, 8,000 employees worldwide and a market capitalization of $5.8 billion.
It was fitting, then, that OpenText was front and centre Tuesday for a pair of major venture capital announcements in the heart of what is still its hometown, Waterloo Region (full video of the event can be viewed here).
Specifically, the federal government unveiled a $300-million venture capital “fund of funds,” the first of four pools of startup investment money to be launched under the Venture Capital Action Plan (VCAP) it announced last year. VCAP followed recommendations of a federal research and development panel led by OpenText Chairman Tom Jenkins.
The Northleaf Venture Catalyst Fund, as it is called, will include investments of up to $50 million each from the federal and Ontario governments, with the remainder coming from private-sector partners including OpenText.
The fund, which has already raised $217 million, will be managed by Toronto-based Northleaf Capital Partners, which will in turn invest the money in other venture funds that support companies at the early and mid stages of growth.
Putting even more money where its mouth is, OpenText further announced the $100-million-plus OpenText Enterprise Applications Venture Fund, in which it and several partners will invest in early-stage companies that develop business software applications.
Under a crisp blue sky and bracing winter winds, top dignitaries from all levels of government filed into the Tannery Event Centre, in the same complex as the Communitech Hub, to join a crowd dotted with OpenText executives and entrepreneurs who stand to benefit from these new injections of risk capital.
“This is an idea whose time has come,” Gary Goodyear, Minister of State (Federal Economic Development Agency for Southern Ontario), told the audience in announcing the Northleaf fund. “There is no reason why Canada and our firms should continue to lag our OECD partners in private-sector innovation performance or productivity improvement.”
Saying Waterloo Region is “well-known as a vital centre of innovation,” Minister Goodyear credited its people with “strengthening all of Canada’s competitiveness on the global stage, which in fact is really the only stage where it matters these days.”
Minister Goodyear said the government’s venture capital initiative “is about bringing the right people together, at the right time, to do the right thing for Canadians.”
When Ontario Premier Kathleen Wynne took the stage, she remarked on the surroundings – a re-purposed tannery – which she has visited before to see Communitech’s ecosystem in action.
“We’re in an old building filled with new ideas,” she said. “We’re here to facilitate your process because we know that you’ve got the ideas.”
Premier Wynne called Communitech “an illustration of Ontario’s rich culture of innovation, and it’s no surprise that it’s located here in Waterloo Region – no surprise at all.”
Ontario partnered with private investors to start its own venture capital “fund of funds” in 2008, to considerable skepticism, the Premier said. But the province’s $90-million infusion ended up leveraging $870 million in private investment and spurring creation of 1,500 jobs by enabling fledgling companies to scale.
Further venture capital investment of the type announced Tuesday is about “making sure we’re an environment that draws companies here and keeps them here…we want your companies to be able to thrive here, to grow here and to create more good jobs here, because the quality of life here is so high, and you contribute to that.”
Before he announced his company’s leadership of a new venture fund for enterprise app development, OpenText CEO Mark Barrenechea – a transplanted Californian – cited three key attributes of a successful tech hub: access to talent, environment and capital.
Barrenechea lauded Waterloo Region on the first two of those attributes, saying “there’s no shortage of talent” and that Communitech provides the right environment for entrepreneurs to chase innovation without fearing failure.
On the third, capital, the new Northleaf fund and OpenText’s app fund should go a long way to leveraging the strengths of the first two, he suggested.
“We want to massively grow the ecosystem for applications here in Canada, so that’s why we’re doing this,” Barrenechea said, describing OpenText as “a ready-made global channel” to bring developers, startups and entrepreneurs to a huge market.
Communitech CEO Iain Klugman, who drew high praise from Barrenechea for leading development of such a vibrant innovation ecosystem, said Tuesday's announcements go a long way to providing the "last piece of the puzzle" in building a world-class ecosystem.
“We’ve got a phenomenal place in Ontario and Canada; we’ve got access to the largest market in the world; we’ve got tremendous talent; we’ve got a rich and robust history of entrepreneurship,” Klugman said. “Today, of course, is the beginning of that last, final piece, which is the capital necessary.”
