CATAAlliance, Canada’s largest high tech association has sent out a statement about the launch of its 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 such as The Global Trends in Venture Capital: Outlook for the Future Survey (March/April 2010) 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. The study 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.
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.”
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, these programs 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, calling for industry engagement through traditional and social media channels to advance solutions, 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.
The CATAAlliance invites you to 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 as well as sharing electronically and/or printing out and faxing 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 own social media accounts.