Prime Minister Stephen Harper announced today the Government’s Venture Capital Action Plan to improve access to venture capital financing by high-growth companies.
Included in Harper’s Economic Action Plan 2012 is $400 million to help increase private sector investments in early-stage risk capital, and to support the creation of large-scale venture capital funds led by the private sector.
“Our Government understands that Canada’s long-term economic competitiveness in the emerging knowledge economy needs to be driven by globally competitive, high-growth businesses that innovate and create high-quality jobs,” explained Harper. “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.”
Over the summer, the Government conducted consultations with stakeholders on how to structure this support and on how to ensure that the support contributes to the creation of a sustainable, private sector-led venture capital sector in Canada.
Based on the results of the consultations, the Government will pursue a action plan for deploying the $400 million in new capital over the next seven to 10 years. The Government’s approach recognizes the need to demonstrate that Canada’s innovative firms represent superior return opportunities, and that private sector investment and decision-making is central to long-term success.
With this in mind, the Venture Capital Action Plan will make available:
- $250 million to establish new, large private sector-led national funds of funds (a funds of funds portfolio consists of investments in several venture capital funds) in partnership with institutional and corporate strategic investors, as well as interested provinces
- Up to $100 million to recapitalize existing large private sector-led funds of funds, in partnership with willing provinces; and,
- An aggregate investment of up to $50 million in three to five existing high-performing venture capital funds in Canada.
Private sector expertise will be sought in the coming weeks to advise the government on the selection of the private sector management of the large-scale, national funds of funds, and on the selection of the high-performing venture capital funds to receive capital from the Government. The government is currently asking potential investors to signal their interest in co-investing in new or existing funds of funds. More information is available here.
Canada’s Venture Capital and Private Equity Association, for one, approves the government’s plan. The CVCA’s Peter van der Velden believes that Harper’s plan “recognizes and provides active support for the vital role of venture capital and venture capitalists, in helping to support the growing number of best-in-class Canadian entrepreneurs as they seek to create and build world-class companies in key innovation sectors such as information technology, media, clean tech, biotechnology and life sciences.”
“During the past decade, Canada’s venture capital industry has gone through a fundamental maturation process that is similar to that currently underway in the United States and elsewhere around the world,” van der Velend continued. “This process has led to the emergence of the next generation of Canadian venture capitalists who are have and who continue to demonstrate their ability to succeed not just in Canada but also around the world. Despite this transformation, and the successes generated, the domestic pool of capital allocated and available for venture capital has decreased and significantly lags the demand for venture capital, and as a result, far-reaching measures, such as those announced today, are called for.”
Photo credit: Chris Young, The Canadian Press