Western Universities Technology Innovation Fund (WUTIF)
WUTIF Capital (VCC) Inc. is a novel angel fund that co-invests with angel investors in promising new technology ventures in British Columbia. WUTIF was formed in mid-2003 and made its first investments in late 2004. To date, over $10 million has been invested in over 100 companies.
WUTIF, in addition to offering above-average investment returns potential, offers substantial tax incentives available only to residents of BC. On a $10,000 investment, investors get back almost $8,000 in tax savings*.
WUTIF gives investors an opportunity to invest in, as well as contribute to, the BC economy and optionally contribute to their favorite charity for additional tax benefits.
WUTIF, unlike other professionally managed funds, has a very low operating cost. Management is compensated mainly for performance.
WUTIF’s Salient Features:
- an angel fund that has mainly angel investors and that co-invests with angels
- targets very early stage, ground floor opportunities when valuations are lowest
- 30% refundable tax credits from B.C. Government (as good as getting a cheque)
- RRSP Eligible (*combined tax savings >>80%)
- $25K-$200K typical investment range
- no management loads (mainly performance fees)
- directors of WUTIF are also investors
- directors all have technology/management/investing expertise
- shareholders are invited to all monthly angel (VANTEC) meetings
Capital Raised and Investments Made (June 2020):
- Capital Raised: >$11 million
- Number of Companies: >100
- Average investment per company: $100K
- Average size of seed rounds: $600K
- Big Winners:
Daiya Foods Inc returned 28X original investment
Neurio Inc returned 22X original investment
Zymeworks returned 10X original investment
Agreement Express returned 7X original investment
WUTIF…you could invest $10,000 and get your money back in 5 years? And, still have a great investment?
Now, you can…
- invest in British Columbia’s New Economy companies
- receive an immediate 30% cash-back from B.C.
- contribute $10,000 to your RRSP for additional tax deductions up to 49%.
- redeem your shares in 5 years and re-invest for an additional tax credit
(from realized gains in the Fund)
What does WUTIF invest in?
WUTIF invests in promising early-stage technology ventures in British Columbia, such as those being developed at B.C.’s universities and institutions. This includes communications and information technology, health and life sciences technologies, physical sciences, energy and fuel cells. The Fund will strive towards a broad portfolio without favoring any particular technology sector.
The Fund will co-invest with others (e.g. angels, founders, partners) in startup companies that are seeking their first external financing round beyond the initial “love” money stage. Specifically, the target is companies requiring less than $500,000 with valuations well under $4 million (i.e. closer to $2 million).
Early stage funds tend to out-perform most investment classes – generally doing better than mutual funds that invest in public companies. Because the risk is greater with early investments, the rewards are also much greater. By investing in many companies, those that succeed will provide returns that more than offset the losses from those that under-perform.
How do the tax incentives work?
By using a combination of tax incentives, investors can reduce their at-risk exposure to only 21 cents for each dollar invested.
There are two tax incentives:
1) the Venture Capital Corporation (VCC) tax credit provided under British Columbia’s Small Business Venture Capital Act and…
2) Federal tax credits available under the RRSP program or through charitable deductions allowed under the Income Tax Act.
How is WUTIF managed?
The Fund is managed by WUTIF Management Corp (“WMC”). WMC will partner with existing technology organizations in the Province to identify companies, perform due diligence on them, and monitor their progress. A list of B.C. organizations can be found at www.hitechbc.com. Management fees are low and management is compensated mainly by sharing in any upside gains from investments made by the Fund.
The Fund Manager will also donate up to 20% of its performance fees to Simon Fraser University.
By helping to commercialize B.C.’s mega-million dollar investment in research and development, WUTIF will be well positioned to grow as it supplies the capital markets with a source of new deals while simultaneously supporting the Province’s long-term economic plans.
B.C.’s advanced technology industry has grown dramatically over the past decade. It is one of the major – and growing – contributors to B.C.’s economy as the Province decreases its dependence on the resource sector and increases its investment in the “new economy” comprising knowledge-based companies. B.C. already has hundreds of success stories. There are more than a dozen companies generating more than $100 million in annual sales versus none just a decade ago. For more information on the technology sector in B.C., visit T-Net at www.bctechnology.com .
There was a 3.1% rise in British Columbia’s high technology gross domestic product (GDP) in 2018, to around $17.4 billion. B.C.’s high technology sector generates around 7% of provincial GDP, placing it in the same range as industries such as manufacturing and health care. Revenue reached $34.7 billion in 2018.
WUTIF provides a vehicle in which investors can participate broadly in the future growth of the advanced technology sector in British Columbia.
How and when can investors sell their shares?
There is no mandatory hold period on shares that are purchased. Although investors are free to sell their shares at any time (subject to Securities regulations), WUTIF does not trade on a public stock exchange. Instead, WUTIF offers investors redemption privileges after five years or whenever there are liquidity events within the Fund’s portfolio.
When investors qualify for a redemption, they may elect to roll-over (that is, leave in) their investment. In this case they may receive the 30% tax credit again – on the rolled-over amount. Some early investors in WUTIF have already benefited from this.
[*based on tax incentives for top marginal taxpayers in B.C.]
Shares are, subject to tax credit availability, are being offered in November, 2020.