BDC pledges $50 million to help women entrepreneurs buy businesses from aging owners

As a wave of aging Canadian entrepreneurs retire, the Business Development Bank of Canada (BDK) has launched a new $50 million fund aimed at giving women entrepreneurs the capital and support they need to buy and grow the companies of outgoing leaders.

“This is a tremendous opportunity to balance equity and ownership between men and women.”

BDC Capital's Entrepreneurship Through Acquisitions (ETA) Fund includes $10 million of indirect investments in private equity (PE) funds that fund search funds for women-led business acquisitions. It also offers $40 million for direct investment in search funds, management buyouts or self-funded ETA hunts.

The Thrive ETA Fund will include an accelerator designed to provide women entrepreneurs with the training and mentorship they need to not only find and close these deals, but also to take over and run these companies. The goal is to help more than 60 Canadian women pursue acquisition-based entrepreneurship.

The launch comes at a time when many Canadian entrepreneurs are preparing to sell, transfer or close their businesses. A report for 2023 Representatives of the Canadian Federation of Independent Business (CFIB) described it as a “tsunami of succession.”

The CFIB found that 76 per cent of small business owners in Canada plan to exit their business within the next decade, with three-quarters of them retiring. However, the CFIB report found that only one in 10 had a formal succession plan, while the majority said finding a suitable buyer or successor was the biggest hurdle.

Sevrine Labelle, managing director of the Thrive Lab for Women BDC, called the change a “once-in-a-lifetime” chance to promote women’s entrepreneurship across Canada. In an interview with BetaKit, Labelle discussed a recent analysis conducted by Statistics Canada which indicates that less than one in five private businesses in Canada are owned by women.

“This is a tremendous opportunity to restore the balance between justice and property between men and women,” LaBelle said.

Earlier this summer, BDC launched a separate but similar project. $100 million co-financing initiative with the First Nations Bank of Canada (FNBC), dedicated to helping First Nations groups finance ETA transactions. LaBelle said she believes ETA and the transition to business “will be at the center” of BDC's strategy over the next few years.

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BDC is an independent Crown corporation wholly owned by the Government of Canada. Its mandate is to support Canadian entrepreneurship with a focus on small and medium-sized businesses and act as a complementary player in the market. The bank provides loans, equity financing through its investment arm BDC Capital, and advisory services to companies and funds throughout the country.

According to BDC latest annual reportThe bank has directly supported 21,586 women entrepreneurs in Canada and plans to reach nearly 23,000 by fiscal year 2027. In recent years, the bank has strengthened its support for women through initiatives such as its 2022 commitment $500 million to Canadian women-led startups and funds through BDC Capital's Thrive platform. Labelle, who joined In 2023, the Thrive Lab BDC said the Thrive ETA Fund is the final “missing piece” of that envelope.

“Our role is to play where others aren’t playing yet” and put more capital into that space, LaBelle said. “That's what we do with [Thrive] ETA Foundation.

Most Canadian ETA search funds still raise the majority of their capital from U.S. investors, LaBelle said. “We hope to change that,” she said.

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Labelle said more ETA-focused funds and accelerators have been created in the U.S. and Europe recently. She said now is the right time for the bank to help develop Canada's own ecosystem of ETAs and search funds.

Labelle said BDC Capital has already brought on Amanda Kattan as a partner at Thrive ETA Fund as she builds out the rest of the team. Among other roles, Kattan previously worked in PE, served on the board of directors of Constellation Software and served as CFO at Rippling.

LaBelle said the Thrive ETA fund will primarily target stable, established, profitable mid-market companies with earnings before interest, taxes, depreciation and amortization of $1 million to $5 million and room for growth or turnaround. This could include technology companies, but will likely be more concentrated in traditional markets such as manufacturing or services.

The Thrive ETA Foundation is committed to helping women entrepreneurs with discovery, analysis, due diligence, negotiations, business transition and post-acquisition leadership. Labelle said there is no need for entrepreneurs themselves to co-invest, calling it a “game changer” given that women have historically had less wealth and therefore ability to pursue ETAs than men.

Finding such businesses is often the biggest challenge, LaBelle said. This process usually relies on “seeker's sweat” and cold calling, although brokers and virtual trading platforms can sometimes help. Through its own network and this fund, the bank hopes to “open more doors.” In the future, Labelle sees opportunities for BDCs to potentially match entrepreneurs looking to sell and buy businesses within their own portfolio.

Image provided BDK.