Venture Capital (VC) for Canada Initiative: B.C shows exemplary leadership, will others follow?
December 13, 2010
Members asked for input to move Canada to top ranking as a competitive Innovation Nation
Thought leaders engaged through social networks to provide advocacy guidance on how to increase the availability of Venture Capital funding for new and growing companies.
Emily Boucher, Media Adviser at firstname.lastname@example.org
, Canada's largest high tech association today launched an advocacy Campaign aimed at increasing the availability of Venture Capital funding for new and growing companies.
Known as the "Venture Capital (VC) for Canada" campaign, it is part of the industry's Innovation Nation
program, developed under the tutelage of Canada's leading entrepreneur, Sir Terence Matthews
that lays out what we must do as a nation to move us from a 13th place ranking to first place in innovation rankings.
Recent studies** point to a contraction of VC Funding in Canada, in contrast to significant growth in available funding in emerging markets, such as, China, Brazil and India... Canadian VCs find that our lack of critical mass creates a poor climate for investment and innovation, a dynamic that sets up a shift in wealth creation from Canada to the more favoured jurisdictions.
According to CATA Leadership Council Director & Senior Vice President of OMERS, John Ruffolo
, "clearly, Canadian venture capital firms are up against serious competition from emerging markets, as are their counterparts in the U.S and Europe. But with the small size of the Canadian industry, the impact of this decline is even more devastating."
Ruffolo, added "We face an urgent situation; public policy makers need to move now with measures that improve the success prospects of this vital sector here at home. We need to get more dollars into the hands of existing Canadian VCs, and also encourage the creation of more domestic VCs."
Look to B.C. for Insight, Will Others Follow?
A recent study of the BC Venture Capital program (i.e., Hellmann Schure 2010 Venture Capital Report
) offers some insight into the B.C. VC program, established to increase the amount of growth capital available to innovative early-stage small- and medium-sizes enterprises ("SME's") in that province. If the other provincial Programs were to be modeled after the Investment Capital Program (Eligible Business Corporations) operated by the Government of British Columbia, each would include:
- Credits: 30% of the invested amount, refundable to individuals / creditable against Ontario taxes payable for corporations with carry-over availability
- Contribution Limits: $250,000 per annum for individual or corporate investors ($75,000 maximum tax credit)
- Budget Size: $100 million in tax credits for direct investments (e.g., proportional to Ontario's overall population). Amount would leverage $333 million in equity investments for eligible SME's in Ontario)
- Target sectors: to be determined, but potentially focused on priority sectors Such as the bio-economy and clean technologies, pharmaceutical research and manufacturing, digital media, information and communication technologies and advanced manufacturing
- Eligible investments: SME's with up to 100 employees, a payroll where at least 75% of wages go to Ontario residents (50% for export-oriented SME's) and equity of $25,000
- Term: minimum of five years, with pro-rated refunds if sold earlier
- Eligible investors: residents and corporations
CATA CEO, John Reid
, pointed out that "Companies participating in the BC program generate more taxes than they consume tax credits, and consistently create new jobs. The overall program has a provincial tax multiplier of 1.98 and Canadian tax multiplier of 2.92."
As a first step the Venture Capital (VC) for Canada campaign is calling for the introduction as quickly as possible, of a shared federal/provincial "Venture Capital Investment Tax Credit" system based on the very successful model currently operating in B.C.
, CATA CEO, spoke to this issue; he calls for industry engagement through traditional and social media channels to advance solutions.
++ Action Item:
Social Media Engagement, MP and Community Mobilization. Please review the Venture Capital (VC) for Canada campaign communiqué and join the Conversation by offering your guidance, views and feedback on the CATA Linkedin social media site at:
MP and Community Mobilization
Please send electronically and/or print out and fax the Venture Capital (VC) for Canada communiqué and follow up with a phone call to your local MP
, media and network of contacts, inclusive of posting on your social media.
** The Global Trends in Venture Capital: Outlook for the Future Survey (March/April 2010)
was sponsored by Deloitte in cooperation with other VC associations around the world. It surveyed venture capitalists in the Americas, Europe and the Middle East, and Asia Pacific. Of the total number of respondents, 61% were based in the Americas (of which 7% or 36 firms were Canadian), 16% in Europe, and 23% in Asia Pacific.