Venture Capital Action Plan (VCAP)

The implementation of the Venture Capital Action Plan (VCAP) was guided by a strong focus on leveraging public funds to attract private capital and formalize a market-oriented structure for Canada’s venture capital sector. VCAP was announced by the Government of Canada in 2013, with a federal commitment of $390million. The rollout began with broad consultations involving Finance Canada and the appointment of a Special Advisor on venture capital. These consultations helped identify key barriers to private sector participation and informed the design of the program.

A core implementation step was the selection of professional, private sector-led fund managers through a competitive process. The Department of Finance Canada, with the support of external legal counsel and a VC Expert Panel, oversaw the design of eligibility criteria and managed the fund selection process. Transparency and market discipline were emphasized, with managers required to raise at least twice as much from private or provincial sources as provided by federal funding, ensuring strong private sector buy-in.

VCAP ultimately established four large-scale funds-of-funds—Northleaf Venture Catalyst Fund, Teralys Capital Innovation Fund, Kensington Venture Fund, and HarbourVest Canada Growth Fund. These vehicles pooled government, private, and provincial investments, then allocated capital to underlying venture capital funds across Canada. In parallel, four existing high-performing VC funds were recapitalized to maintain continuity of investment in promising startups.

Management and oversight were shared responsibilities. The Business Development Bank of Canada (BDC) acted as the government’s agent during implementation, providing independent expertise, assisting with selection, and managing performance reporting requirements. Finance Canada coordinated negotiations and documentation, working closely with Innovation, Science and Economic Development Canada (ISED). BDC was also accountable for monitoring program progress and reporting on performance to relevant departments.

A key element of the VCAP implementation was the use of a fund-of-funds “waterfall” structure, where government investors (Class B) assumed more investment risk and were only repaid after private investors (Class A) reached a certain return threshold. This structure provided an incentive for private sector participation, while encouraging professional, independent investment decision-making and minimizing the risk of government “picking winners”.