Venture Capital Fund for Business Start-ups in the Regions

The Venture Capital Fund for Business Start-ups in the Regions was created to support enterprise start-ups in seven regions and 21 Regional County Municipalities (RCMs) experiencing a declining population and slow economic growth by increasing their equity to levels acceptable to venture capital firms recognized in Quebec, while paying special attention to priority sectors in these regions.

Canada Economic Development will invest up to $5 million to create the Venture Capital Fund for Business Start-ups in the Regions, via the CFDCs’ Common Fund.

This initiative will be in effect from November 1, 2006 to October 31, 2007, or until depletion of the $5 million.

Submission of applications

Applications must be submitted to a venture capital firm recognized in Quebec.

Target clientele

Start-up SMEs, i.e., enterprises located in an eligible region or RCM, which do not have recurring sales and are on their first round of seeking outside investors.

Target venture capital firms

Venture capital firms recognized in Quebec that can provide the support services required for successful completion of projects.

Target regions and RCMs

SMEs serviced by Community Futures Development Corporations (CFDCs) and Business Development Centres (BDCs) in the following regions:

Abitibi-Témiscamingue
Abitibi-Ouest CFDC, Harricana CFDC,  Barraute-Senneterre-Quévillon CFDC, Rouyn-Noranda CFDC, Vallée-de-l’Or CFDC, Témiscamingue CFDC.

Bas-Saint-Laurent
Kamouraska CFDC, MRC de Rivière-du-Loup CFDC, Basques CFDC, Neigette CFDC (including Rimouski and Rimouski-Est), La Mitis CFDC, Matapédia CFDC, Région de Matane CFDC, Temiscouata CFDC.

Côte-Nord
Haute-Côte-Nord CFDC, Manicouagan CFDC, Côte-Nord CFDC.

Gaspésie – Îles-de-la-Madeleine
Gaspé CFDC, Gaspé-Nord CFDC, Baie-des-Chaleurs CFDC, Rocher-Percé CFDC, Îles-de-la-Madeleine CFDC.

Mauricie
Haut-Saint-Maurice CFDC, Vallée-de-la-Batiscan CFDC, Centre-de-la-Mauricie CFDC, MRC de Maskinongé CFDC, 3-Rivières BDC.

Nord-du-Québec
Chibougamau-Chapais CFDC, Matagami CFDC, Eeyou Economic Group, Nunavik Investment Corporation.

Saguenay – Lac-Saint-Jean
Maria-Chapdelaine CFDC, Lac-Saint-Jean-Ouest CFDC, Lac-Saint-Jean-Est CFDC, Haut-Saguenay CFDC, Fjord CFDC (including Saguenay).

In addition to SMEs in the seven eligible regions, those serviced by CFDCs and BDCs located in the following 21 RCMs are also eligible:

La Vallée-de-la-Gatineau
Vallée-de-la-Gatineau CFDC

Papineau
Papineau CFDC

Pontiac
Pontiac CFDC

Charlevoix-Est et Charlevoix
Charlevoix CFDC

Les Etchemins
Bellechasse-Etchemins CFDC

L'Islet et Montmagny
Montmagny-L’Islet BDC

L'Amiante
Amiante CFDC

Nicolet-Yamaska
Nicolet-Bécancour CFDC

L'Érable
Arthabaska-Érable inc. CFDC

Asbestos
Région d’Asbestos CFDC

Le Haut-Saint-François
Haut-Saint-François CFDC

Le Granit
Région de Mégantic CFDC

Matawinie
Matawinie CFDC

Montcalm
Achigan-Montcalm CFDC

D'Autray
D'Autray-Joliette CFDC

Antoine-Labelle
Antoine-Labelle CFDC

Argenteuil
Basses-Laurentides BDC

Le Haut-Saint-Laurent
Suroît-Sud CFDC

Acton
Région d'Acton CFDC

Potential project contributions from partners

Entrepreneur (owner's equity):

• Minimum of $125,000.

CFDC through the Venture Capital Fund for Business Start-ups in the Regions:

• Minimum - $125,000 equal to the entrepreneur’s investment up to $500,000.

Venture capital firm(s):

• At least double the amount as the total investment by the CFDC or BDC through the Venture Capital Fund for Business Start-ups in the Regions.
  
  
• Minimum of 50% to be the same type of financing as the CFDC or BDC.
  

CFDC or BDC through their regular fund:

• At least 20% of the total amount invested by the Venture Capital Fund for Business Start-ups in the Regions. In case of a loan, the interest rate will be set according to the applicable CFDC or BDC rate.
  

Type of assistance

• The Venture Capital Fund for Business Start-ups in the Regions helps to increase the capitalization of businesses (share capital or convertible debentures) to levels acceptable to venture capital firms recognized in Quebec.
  
  
• Priority is given to entrepreneurs to buy back CFDC or BDC shares at the initial investment price, at any time within a five-year period.
  
  
• Failing a buyback by the entrepreneur by the end of the five-year period, the enterprise has three months to buy back the shares, upon the same conditions.
  
  
• If the enterprise does not execute a buyback within three months, CFDC or BDC shares are converted into interest-free debt payable to the CFDC or BDC within a period of three years.
  
  
• Failing repayment of the debt, the applicable CFDC or BDC interest rate takes effect.
  

Minimum eligibility requirements

• The enterprise is located in an eligible region or community.
  
  
• The client meets the minimum criteria normally required by venture capital firms recognized in Quebec.
  
  
• The entrepreneur agrees to the support and mentoring process proposed by the CFDC or venture capital firm.
  

Mentoring

Partnership with the Fondation de l’entrepreneurship. The CFDC or BDC refers the file to the Fondation de l’entrepreneurship.

Possible additional contribution by CED

As part of this initiative, CED can contribute an amount of less than $100,000 in non-repayable funding.

Eligible costs include:

• New or used equipment (professional evaluation is required when purchasing used equipment), equipment installation, fit-up needed for the installation of equipment, professional fees.
  
  
• The contribution does not exceed 50% of eligible and authorized costs.
  
  
• The contribution can be combined with a refundable amount if project exceeds $200,000.
  

CFDC management fees

Maximum of 2%.

Evaluation

Results and impact of the fund will be evaluated by CED.