Royal Bank of Canada is launching a new US$1-billion, or approximately C$1.4-billion, investment fund aimed at helping high-growth Canadian technology companies expand globally while keeping more ownership and economic benefits in Canada.
The bank announced the RBCx Growth Fund I on Wednesday, saying it will make direct equity investments in growth-stage Canadian technology companies with the potential to become major global players.
RBC plans to commit up to US$300 million, approximately C$416 million, of its own capital to the fund, with the remainder expected to come from outside investors.
Beyond providing capital, the fund is expected to connect participating companies with commercialization opportunities, strategic partnerships and other resources that may not typically be available through traditional investment channels.
RBC president and CEO Dave McKay said Canada has long produced successful entrepreneurs and technology talent, but many domestic companies face pressure to look outside the country when they reach the stage where substantial capital is needed to expand.
McKay said the new fund is intended to change that dynamic by providing Canadian innovators with both the financing and partnerships required to build global companies from Canada.
Foreign investors play major role in Canadian tech financing
The announcement comes amid longstanding concerns about Canada’s ability to finance technology companies through their later stages of growth.
Citing PitchBook data, RBC said Canadian investors led only 33 per cent of domestic growth-stage financing rounds over the past decade. By comparison, U.S. investors led 74 per cent of growth rounds involving American companies during the same period.
The Canadian Venture Capital and Private Equity Association has warned that the heavy reliance on foreign financing can increase the likelihood that promising Canadian companies relocate to the United States or are eventually acquired by American firms.
The association has also called on Ottawa to focus its upcoming $750-million venture capital funding envelope on growth-stage companies.
Research from the Council of Canadian Innovators has similarly raised concerns that Canadian technology firms are frequently sold to foreign buyers when they reach the point where they need significant capital to scale.
Fund to target AI, cybersecurity, defence and quantum technologies
Sid Paquette, head of RBCx, the bank’s technology and innovation banking division, will lead the new fund.
Investments will focus on several strategic technology sectors, including enterprise software such as applied artificial intelligence and cybersecurity, health technology, clean technology and agricultural technology.
The fund will also target frontier technologies, including aerospace, defence and quantum computing.
RBC says its broader objective is to retain more of the ownership, influence and economic benefits generated by successful Canadian technology companies within the country.
The bank reportedly plans to present the fund to international investors during Prime Minister Mark Carney’s Canada Investment Summit next week as it seeks additional capital for the initiative.
RBC says the fund has already generated significant interest among prospective limited partners.
If successful, the RBCx Growth Fund could provide another source of domestic growth capital for Canadian technology firms seeking to expand internationally without shifting their headquarters, ownership or strategic influence outside Canada.
