The investment arm of Business Development Bank of Canada is launching a $160 million fund to invest in companies that have a portfolio of intellectual property.
BDC Capital’s new fund will provide these firms with financing via mezzanine, subordinate or convertible debt, or equity to accelerate growth. Private and public Canadian companies with at least $1 million in annual revenues can tap the firm’s resources, according to Lally Rementilla, who will lead the fund.
“We have a pipeline with companies across all knowledge-based industries and sector and will start making investments in the next couple of months,” she said. Prior to joining BDC Capital, Rementilla led Quantius, an alternative commercial lender with a focus on funding companies with intangible assets.
The bank plans to lend between $3 million to $10 million to companies, and could also offer follow-up investments as the firms evolve. It is not uncommon for a company to have more value in its intellectual property than in its tangible assets, but most managers are not well-equipped to properly value the former, Rementilla said.
“We will provide capital that allows them to grow based on the diligence that we do on their IP portfolio, which gives a better perspective into their future potential and therefore we are more likely to provide larger check sizes than other financial institutions would do,” she said.
While many of the most promising companies are built on intangible assets, especially their patents, trademarks, and brands, they often struggle to access capital, according to Jerome Nycz, executive vice president at BDC Capital.
“Our goal is to lead by example and fill this gap by providing the capital IP-rich companies need to enable commercialization, increase competitiveness, and expand globally,” Nycz said.
BDC’s new team has five people and is looking to hire a partner in Montreal and another in Vancouver.