* The C$400 mln was announced in budget
* Ottawa wants to keep entrepreneurs, woo back investors
* Venture fundraising has dropped since dot-com bubble
* Gov't wants to attract foreign expertise and capital
By Leila Lemghalef
MONTREAL, Jan 14 Canadian Prime Minister Stephen
Harper announced a plan on Monday to provide C$400 million ($408
million) in venture capital to stem the loss of young
entrepreneurs to the United States and to rekindle investor
interest in providing start-up funds for new ventures.
The money comes in response to consultations that showed
venture capital returns have been poor across the world and
venture-capital fundraising in Canada has declined since 2001
following the burst of the dot-com bubble.
Governments have been the dominant source of venture capital
funding in Canada recently, and a government statement on Monday
said the consultations found that reasonable government
incentives would be needed "to attract institutional investors
who have left the asset class in Canada over the past decade".
"We will provide the resources needed to put Canada's
venture capital industry on the path to sustainability and
ensure Canada's high-potential firms have the resources they
need to succeed," the statement quoted Harper as saying.
One of the goals is to deepen the pool of experienced fund
managers in Canada, "including by attracting foreign expertise
and capital to Canada's venture capital market," the statement
The overall amount was announced in the March budget, but
the government has now decided how to allocate the funds over
the next seven to 10 years. The breakdown is as follows:
- C$250 million to establish two new, private-sector-led
national "funds of funds" that will invest in other
venture-capital funds, in partnership with institutional and
corporate strategic investors as well as with interested
- Up to C$100 million to recapitalize existing large private
sector-led funds of funds in partnership with willing
- Up to C$50 million in three to five existing,
high-performing venture-capital funds in Canada.
"The principal focus here is on young entrepreneurs and the
fact that we are losing young entrepreneurs and their businesses
to American enterprises, to larger enterprises," Finance
Minister Jim Flaherty, flanking Harper at a news conference,
"We know of thousands of young entrepreneurs in Quebec and
across the country that need the kind of support that is
Montreal in particular is a hub for start-up companies
involved in video games.
The government is also planning at some point to create a
new start-up visa to attract high-tech and other entrepreneurs
to immigrate to start new companies. Venture capital funds would
identify candidates for the visas.
Harper, a Conservative who once railed against corporate
welfare, said that his philosophy was the reason the
venture-capital package is stressing that the private sector
will take the lead in the program.
"We don't want governments to choose winners and losers by
political criteria, and therefore we're working with the private
sector," he said.
Peggy Nash of the left-leaning opposition New Democrats said
the new funding would have little meaningful impact in
addressing a sector that has been underperforming for a decade.
"The prime minister's venture-capital plan amounts to just
peanuts and won't get the job done," she said.