Canada sets plan to resuscitate venture capital sector

Mon Jan 14, 2013 4:33pm EST
 
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By Leila Lemghalef

MONTREAL (Reuters) - 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 said.

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 provinces;

- Up to C$100 million to recapitalize existing large private sector-led funds of funds in partnership with willing provinces;   Continued...

 
Canadian Prime Minister Stephen Harper walks to the stage for a news conference in Montreal, Quebec, January 14, 2013. REUTERS/Christinne Muschi