BlackBerry Partners Fund a coup for JLA and RBC

In a few hours, the BlackBerry Partners Fund will be launched (see prior post “Huge VC news coming on Monday” May 9-08). With all of the fanfare will come a breath of life into the lungs of the Canadian venture capital industry.

Chatter regarding the new fund has been sloshing around for the past couple of weeks (none of it out of JLA’s team), but we wanted to let our Wellington Financial advisory council member, John Albright, announce his own news on his own timeline. Unfortunately, an embargoed news item provided to VentureBeat was released early on their end – who says the online media understand the traditional media rules? – so sites such as TechCrunch and Techvibes have been spinning it all weekend.

Nevertheless, we held off. But here is the official piece we’ve seen so far (via VentureBeat):

The fund will be used to invest in both applications and services for the BlackBerry platform, but it won’t be exclusively to support the Blackberry. Companies that support other mobile platforms in addition to the Blackberry can also apply for monies for the fund. According to our source, the fund isn’t designed to be competitive with the iFund, because it will be free to invest in applications serving that platform too.

The venture firm backing the fund is Canada’s JLA Ventures, a Montreal and Toronto firm active in mobile. That firm will co-manage the investing process, together with the investment group of Canada’s largest bank, RBC Venture Partners. RIM, RBC and Thomson are anchor investors in the fund, and will advise in the fund’s management. Jim Balsillie, Co-CEO, Research In Motion, is on the advisory board of JLA Ventures.

The capital will come from Research in Motion (RIM:TSX), Royal Bank (RBC:TSX), JLA Venture Partnes Fund IV, Thomson Reuters and at least three meaningful institutional limited partners…likely with links to JLA’s Fund IV.

This is a great shot in the arm for the Canadian VC industry, even if some claim the BlackBerry Partners Fund is only a response to Kleiner Perkins’ iFund, which was launched in March to stimulate applications for Apple’s (APPL:NASDAQ) iPhone. Fair enough (hopefully I can get you the real story on that topic). RIM CEO Jim Balsillie has always maintained that his job is not to build Waterloo’s (read: Canada’s) technology industry (see prior post “Waterloo investing trends” February 8-07), so we can’t blame him for wanting to try a more arms-length approach (and he doesn’t have to admit that he was wrong about not investing in start-ups).

In some ways, this might be seen as an admission that RIM could use some help on the app side (other than weather and Texas Hold ’em, there really isn’t much for us Rogers users to work with). For years, RIM’s various offices have been known to stimulate thinking that is focused entirely on the core product. RIM executives have never encouraged spinout technologies, and they certainly have never been known to give a couple of engineers with a good idea their own office space and some capital to spend.

To the contrary.

It would be fair to say that this “build RIM and only RIM” mantra, combined with a half-hearted M&A effort, has meant that the Blackberry Fund is now a necessity. After a decade of appearing to stifle new ideas that weren’t part of a RIM employees’ day job, RIM now needs to play catch-up.

At Wellington Financial, we’ve invested in a variety of firms that are focused on the wireless space (Airborne Mobile, BelAir, BlueStreak, Impact Mobile, Intrinsyc, OZ and WMode). All have the financial backing of VCs or corporate strategic partners. The point is, there’s plenty of venture money already around for mobile stories.

What this new fund will do is harness the talents of the VCs at JLA and RBC Ventures, and focus their minds a bit more on RIM’s needs than they might have had the mandate for in years gone by. It wasn’t that Canadian VCs didn’t want to finance software applications for the BlackBerry, but with few tuckunder M&A deals to point to (none come to mind other than Edgestone’s Fund I Slipstream) it was never really clear what the “big opportunity” was. As one VC would say: if RIM doesn’t eventually buy you, where does this go?

Develop a great enterprise software firm and IBM, Oracle, etc., might buy you one day. Do the same with a BlackBerry app and…. Until now.

The BlackBerry Partners Fund might well follow the route of Intel Capital, and be a feeder network for acquisition candidates. Except in that case, Intel more often than not doesn’t play the role of the lead VC. In the BlackBerry Fund’s case, that might prove to be more tricky.

Invest in a great BlackBerry app start-up. Connect it with all of the right people at RIM and the key Carriers. See how Thomson Reuters might assist. Grow it to $20 million or even $35 million in revenue, and decide its time to sell. Just like a normal VC deal; except it isn’t.

How do you get an auction going if RIM’s the lead LP in the venture fund that just so happens to be your lead investor? That’ll be a good question to ask our friends at JLA. They have the answer, no doubt, and here it is from Rick Segal, JLA Partner and all round super fellow. Rick is such a good fellow that he spoke to me at 10:30 p.m. Sunday night from Orlando, just to be sure that I got this right:

The Fund relationship with RIM is of a “hands off” nature. The point is to build software that is “platform agnostic”, and not solely devoted to RIM handsets. RIM executives will have no role on any BlackBerry Fund advisory board, and they won’t be involved in investor decisions about where to put the $150 million.

They will not develop companies that can only be sold to RIM, removing a key reservation that some might have had about the BlackBerry Fund concept.

It does beg the question: if you are investing in firms that aren’t all-BlackBerry all the time, why pick the name BlackBerry Partners Fund?

The answer is pretty clear to me. Which name will sell better? THE BLACKBERRY PARTNERS FUND or the Mobile Apps Venture Fund I (domain name is still available btw)?

This is exciting news for the folks at JLA and RBC Ventures (RBC COO Barbara Stymiest is on the RIM Board of Directors). John Albright’s 15 year relationship with Jim Balsillie (they were on the Descartes {DSG:TSX} Board of Directors for many years) is an excellent foundation for this new effort, and hats off to the RIM Board for having the confidence to hands the reins of this new fund to a couple of Canadian GPs.

Hopefully this will serve as a positive if not subtle message to the Canadian pension funds and others in the domestic limited partnership community that are currently aggresively closed-minded to Canadian venture capital funds (see prior posts “London’s VC Confidential” April 30-08 and “$165MM MRI Fund: blessing or curse?” December 3-07).

Mazel-tof on the formal announcement!

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MRM
(disclosure – I own RIM)