Microsoft, HP collaborate in software start-up fund

Microsoft Canada Co. and Hewlett Packard (Canada) Co. will team up to oversee an investment fund designed to give nascent Canadian software firms a boost.

The companies announced this week an agreement with Covington Capital Corp. to supervise the Covington Strategic Capital Fund, a labour-sponsored fund which will invest in select Canadian companies providing software products or services.

The venture capital fund is designed to provide active support for early-stage Canadian software companies for growth through development support. The unique arrangement would provide start-up companies support with channel distribution, implementation strategies and marketing.

Covington said it would own up to 40 per cent of selected companies with the investment ending within three to five years. Covington, with the assistance of Microsoft and HP, will actively seek out potential Canadian companies to invest in with plans to fund up to 10 start-up software companies with $5 million to $10 million in yearly sales.

Potential companies will need to be Canadian-based, privately owned companies, providing application software products or services, with “the culture and mindset to partner,” Covington said.

In overseeing to fund, both Microsoft and HP Canada will share the fund start up costs. Microsoft would also assess the technical abilities of the companies and provide any needed software development support; HP will review any new products and services with the HP Developer and Solution Partner Program and provide system engineering assistance.

According to Lynn Anderson, vice-president of business marketing for HP Canada, this marked the first time in Canada that the company has undertaken such an initiative. HP will also provide industry and viability information but ultimately it will be up to Covington to assess which companies are potential funding candidates.

The fund is available to assist company developing software for emerging markets. Wireless mobility and sectors such as health care are only a few of the many industries suited for this initiative, Anderson said.

“It’s really what value proposition that [companies] want to bring to market — what solution you want to bring and what’s the market potential for that.”

Companies selected for the fund must already have the Microsoft .Net platform embedded in their offering and commit to migrate to it. Microsoft will provide the “technology backbone and expertise to this model,” according to Microsoft Canada president Frank Clegg in a prepared statement.

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