Montreal: Quebec’s cultural industries have a new multimillion-dollar funding source to tap into.

Fonds d’investissement de la culture et des communications, a $15-million risk-capital fund, will make syndicated equity investments in certified Quebec companies in the cultural industries sector, and once the $15 million is invested, Marcel Choquette, the fund’s president and ceo, says its principal sponsor, Fonds de solidarite des travailleurs du Quebec (ftq), will recapitalize the fund up to $60 million within an unofficial time period of five years.

‘We are going to have to recoup 100% of our investment because it is risk capital. On top of that 100% we want a return on our investment,’ says Choquette.

No firm guidelines on returns have been set, but Choquette, a former director of multimedia and new technologies at Telefilm Canada, notes returns for the ftq mutual fund have averaged 8% in past years and double that last year. Depending on the proposal, the expected return could be as high as 40%.

The fund was created last October at the initiative of Quebec Culture and Communications Minister Louise Beaudoin with the goal of capitalizing cultural companies and ensuring their development and competitiveness.

At the launch, Beaudoin pointed out Quebec’s cultural and communications industries directly employ 34,000 people and have annual revenues of $3.3 billion.

Of the initial $15 million in capitalization, $10 million originates from the ftq’s Fonds de Solidarite and $5 million from sodec, the Quebec cultural funding and certification agency.

The fund’s 17-member board of directors consists of representatives from five founding organizations including three performers guilds, Union des Artistes, Union des Ecrivaines et Ecrivains du Quebec and Guilde des Musiciens du Quebec; sodec, the ftq, and two additional members.

Choquette says he’s receiving as many as 40 calls a week although no decisions have yet been rendered. The fund expects to make its first investment sometime this spring, and Choquette expects the rate of successful applications to be in the order of 10%.

Syndicated with other partners

Choquette says there is no cap per company ‘in principle, because all investments will be syndicated with other partners.’ In practice, the fund’s maximum investment is limited to 5% of the current balance, or $750,000. Potential syndicators could include the Caisse de depot and banks, the ftq, loan guarantees from sodec and/or Telefilm Canada, other production investment sources including venture capital funds, and the Business Development Bank of Canada.

‘There are two objectives here; to share the risk and analysis, and also to develop links between companies (the fund’s clients) and the financial world,’ he says.

In the film, tv and multimedia sector, incorporated production and distribution companies are eligible as well as technical support and service operations, and software companies with a ‘cultural’ component. Non-profit organizations do not qualify. ‘The upper end is very high-tech. The lower end is very cultural,’ says Choquette.

The ftq’s recapitalization will depend on the fund’s performance, he says, but the target is to go up to $60 million.

The fund’s participation will take the form of an equity investment (stock purchase) in a company (not a project) and must be completed by a loan guarantee, debenture or preferred share option.

General funding criteria include financial return weighted against ‘social-economic’ factors such as industrial (sectorial) impact and development and job creation.

‘The second question is the quality of the management, their strategic vision, and their expertise in the core business,’ says Choquette. ‘The other thing is the company’s financial situation and the quality of the product.’

All applications should be directed to Choquette who will head a four-person investment committee chosen from among the fund’s board of directors.