Home-Grown Private Equity/Venture Capital?

Once again, big thanks to a spectator for alerting me to the newly launched Cape Breton Capital Group website and for their useful comments and questions about this operation, some of which I will reproduce here today, being careful to give credit where credit is due.

The Cape Breton Capital Group (CBCG) is an “early-stage venture capital and private equity” fund which, like all investment funds, is intended to generate profits for its investors.  It is open about this even while also trying to present itself as some sort of community development agency whose “purpose” is to:

…bring together a group of experienced Cape Breton entrepreneurs and investors to seek out investment opportunities that will help established businesses maintain local ownership and seed new companies based on Cape Breton Island. CBCG will focus on equity investments in businesses with growth potential, be it through expansion or innovation. The group of community minded investors will aim to provide investment and mentorship opportunities to prospective companies.

“Purpose” is a word I heard — usually paired with “profit” — in pretty much every single episode of Annette Verschuren’s Bet On Me podcast and sure enough, look who tops the list of CBCG partners (albeit with her name misspelled):

Cape Breton Capital Group Partners



This fund puts me squarely in “the food here is awful — and such small portions” territory because while I’m immediately put off by the notion of these “community minded” entrepreneurs trying to make money off the backs of their fellow entrepreneurs, I also have to laugh at the scale of their operation. The fund size is $1.5 million. When I, for my sins, was a business reporter, my boss forbade me interviewing anyone managing less than $100 million on the grounds that no one would care.

If each of these “partners” made the same initial investment (which is probably not the case), then they’ve each invested $75,000, and while that’s a lot of money for the average CBRM resident, it’s peanuts in the investment capital game. (I mean, it wouldn’t meet the minimum investment requirement for most funds.)

And to underline how deeply unserious they are, they have hired a single employee whose job description is “Manager of Operations and Investment” and whose responsibilities, as listed in the  job posting, (back when the job title was “Investment Coordinator/Analyst”) include:

Key Responsibilities:

  • Build relationships with potential businesses and start-ups, investors, incubators and accelerators to secure a strong pipeline of high quality investment opportunities for Cape Breton Capital Group.
  • Support Cape Breton Capital Group operations, including marketing and promotion of the group, venture/business recruiting, providing business development support to the Cape Breton Capital Group investments, general administration tasks, community involvement/networking, and supporting the growth of Cape Breton Capital Group.
  • Support regular recurring meetings and status updates to Cape Breton Capital Group Board of Directors, Executive Committee, and Investors on operations

Note: As dictated by business needs, travel throughout Cape Breton will be required. Occasional travel outside Cape Breton may also be required. Evening and weekend work is also occasionally required.

Basically, they are an investment fund with a one-person front, middle and back-office — that is, one person handling marketing, investment analysis and admin support.

Welcome to Cheapskate Capital!

Although their one employee will at least catch a break when it comes to establishing relationships with “incubators and accelerators” because those relationships are already baked into this outfit.

Verschuren is board chair of Sustainable Development Technology Canada (SDTC), an “independent federal foundation” that receives millions in funding from the federal government which it turns into non-repayable contributions to eligible Canadian cleantech companies.

To be eligible for SDTC funding, a company must be recommended by an “SDTC-approved accelerator partner.” Nova Scotia boasts two such partners — Innovacorp and The Verschuren Centre. Verschuren and van Schaayk, as I’ve explained previously, are both on the board of the Verschuren Centre.

No potential conflicts of interest here, folks!



CBCG intends to make investments of $100,000 to $150,000, and what it lacks in generosity it makes up in sheer breadth of interest: it will invest in businesses at any stage (early to established) and in any sector (which is why it wanted an employee with an “[u]nderstanding of business models and drivers of success in start-ups and businesses across several verticals”).

illustration from CBCG website

Source: CBCG website

It is equally agnostic as to the type of equity investment it will make. It plans to “seed new companies” and its hard-working employee is expected to have experience with “venture capital,” suggesting this group has seen a couple of Cape Breton tech startups hit the jackpot (Marcato, GoInstant) and wants a taste.

But it also intends to “help established businesses maintain local ownership,” which I guess is where the “private equity” part of the operation comes in — maybe they will constitute the “local ownership.” Private equity, though, tends to involve buying existing companies, loading them with debt and stripping their assets, rather than ensuring their long-term operation for the good of the broader community (that’s why people love private equity so much) so, good luck with that.

The website doesn’t explain what size equity stake CBCG will require in return for its investment, it’s too busy holding out hoops for entrepreneurs to jump through — beginning with an online application that demands a description of their company, their projected revenue and profits for the next 12 months, their “key company milestones” and their plan for their CBCG money.

And that’s just to get an invitation to pitch, which may or may not result in an investment.

As my source put it:

For a Cape Breton-based fund, I find this a bit pretentious. We have to pitch and meet some unposted list of criteria. Why not just sit down, have a cup of tea and talk, like human beings do?

(They said it sounded like a local version of Dragons’ DenDragons’ Bungalow.)

Their bottom line, was to wonder why an equity investment seemed to be the only option on offer:

If community/CB building is the goal, other options such as revenue-based repayment of low interest loans should be an option as well. Equity should stay with those who do the work, not those who provide the capital.

I couldn’t agree more.