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When Caisse de Dépôt et Placement du Québec announced that it was launching a new venture capital fund — along with the Fonds de Solidarité FTQ, and the Quebec government — people were understandably excited, especially when they found out that Teralys Capital Fund, headed by Jacques Bernier, would be infused with $750 million of capital, making it the largest fund of its kind in Canada.
Its mandate is to focus on tech sectors including IT, clean tech and life sciences, but because it's just over a month old — it officially opened its doors for business on April 27 — Bernier has yet to invest in anything. However, it's only a matter of time he says, pointing out that the fund isn't actually closed yet, but will be by the end of June.
We spoke to Bernier to find out what exactly he has in store for this massive fund of funds.
What is the greatest challenge currently facing Teralys Capital Fund and what are you doing about it?
The amount of capital which is available in Canada is a challenge. VC funding is really limited, so it's going to be tricky for me to fund investments. Though, we will try to augment the $750 million with another $150 million or so over the next two years. I know a lot of people in the market, so we're all discussing how we can work together across the whole Canadian landscape. That will be key.
Another challenge is that historically in Canada, the VC capital industry has not provided the types of returns investors want. So everyone is shying away from the asset class. All major institutions have shied away because the returns weren't there. The challenge will be to help the new VC to succeed.
Who else — person or company — do you feel is doing innovative work and in what way?
In terms of fund of funds the work is typically the same in theory. The difference between all of us isn't much, though we will be in a better position because we're by far the leader in terms of size. But there is a small fund called Montreal Start Up that is interesting. It was created by people in the Internet world, with roughly 20 to 25 angels. They invest in seed rounds for Internet companies. The interesting part is having angels around that have a lot of experience in the Internet world — they're helping companies quite a lot.
How would you describe your leadership approach/style?
I know where I'm going but have you be comfortable with that vision. You will join it, but I won't force you. The main point is I know where I want to go, and I will convince you to follow me. I try to show you the different point of view and convince you.
Why is now a good time to launch a Teralys, especially since you said VC financing is hard to find and, of course, the economy's still in trouble?
It's the perfect time. Despite the financing issues, the next couple of years should actually prove to be the best years to invest. When you look back over the last 50 years of investments and buyouts there seems to be a cycle of seven to ten years for both of them. For seven years buyouts are making a lot of money and VCs are no where. Then buyouts drop and VCs make money for seven to ten years. We just went out of the cycle of buyouts so the next eight years should be the time of VC.
There's also a lot of new innovation coming out and more choices. So I'm quite bullish about the timing and the space.
What do you think of the Buy American policy that the U.S. government has implemented, and the Buy Canadian response from some of this country's mayors?
Protectionism has always been the wrong approach, especially in the tech and innovation worlds. The current cover of BusinessWeek talks about America's failure to capitalize on innovation and that's hurting the economy. Normally, with innovation you see a light bulb that's on, but on the magazine cover it's dark. That's the whole point. We'll need innovations over next few years and when you create an environment of protectionism you lose a lot of that innovation.
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