I put down my pen on this topic, assuming youd had your fill of examples of the Senate of Canadas Report on the Business Development Bank of Canadas 10 year Statutory review (see prior post BDC snows the Senate part 5 Mar 18-11). But, just yesterday, BDC was back on Parliament Hill once again, expousing on the state of innovation in Canada. Different BDC team presenting this time, but the messages were familiar.

During this new hearing, Toronto Senator Irving Gerstein asked BDC Executive Jerome Nyca how much BDC capital goes directly into VC investments and how much goes into VC funds.

Mr. Nyca replied (pg. 24 from the transcript):

In our strategy going forward we expect to do about $130 million in investments. It is about $80 million to $90 million direct and the balance is indirect. In any given year, we will do between $20 and $50 million of indirect. [Editor's Note: If BDC does $130MM a year of VC investments, and $80-90MM is direct, than $40-50MM must go into funds, no? How does $20-50MM fit into that range?]

As to our role in the direct, when the investment activity level was at $4 billion, we had a smaller role to play. We had a very strong role to play at the early stage. Now that the investment activity is about $1 billion, you can do the math at $80, $100 or $130 million, we are about 10 per cent of the market.

Hmmm. Those numbers sound self-serving. Lets check the 2010 BDC financial statements, shall we?

For fiscal 2010, BDC disbursed $58.2 million on venture capital deals, while the number of BDC VC clients dropped from 159 in 2009 to 118 in 2010. Nationally, VCs deployed $1.1 billion in 2010, so BDCs VC disbursed market share was just 5.3%, about half the 10% claimed.

As for BDCs $20-$50 million into VC funds per year, you wont find those figures in the financials. What youll find on pg. 75 of the annual report is that BDCs fund investments (at cost) grew by $15.9 million between fiscal 2009 and 2010. On a fair value basis, the fund investment program grew just $7.2 million. For fiscal 2009, it was even worse, as capital invested in external VC funds actually shrank by $5 million (on a cost basis).

The good news? BDCs fund of funds managers are looking at five funds in fundraising mode right now according to the Senate testimony. If youre one of those five managers, you can rest assured the commitment is likely coming. And its going to be big! After all, they cant have backwater blogs using their own financial statements to pierce holes in their GR spin.

Therefore, the only way to paper over that embarrassment is to release some of the additional $400 million that Ministers Flaherty and Clement gave specifically to BDC for deployment in the VC sector by the middle of 2012 (see prior post Clement moves to fund BDC’s existing venture portfolio June 15-09).

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