Politicians need to focus on venture capital funds

Opinion

Hey there, time traveller!
This article was published 15/04/2016 (3454 days ago), so information in it may no longer be current.

Since election campaigns are not the place to discuss serious issues, no one should be surprised neither of the leaders of the two major parties have said anything that will end the dearth of venture capital in the province.

The Progressive Conservative campaign platform includes a commitment to come up with a comprehensive access-to-capital strategy. And the NDP’s Greg Selinger spoke for the first time on Thursday about the idea of instituting a pooled fund as part of the current Small Business Venture Capital Tax Credit (SBVCTC) program.

While both Selinger and Tory Leader Brian Pallister have shown ample understanding of the depth of the problem, neither has made the plunge to full-on provincial backing of a venture capital fund.

Loren Remillard, the policy vice-president of the Winnipeg Chamber of Commerce, is not naive enough to expect literal adoption of detailed suggestions the chamber has made, but even he sounded a little agitated after the chamber-sponsored leaders debate Thursday.

“We can’t afford to say. ‘We understand it is a concern. We will work with you,’” he said. “We’ve got to start putting some details on the table.”

Irrespective of the deep scars left by the demise of the Crocus Investment Fund (that have apparently still not fully healed), there will never be any quick fix to the problem.

Manitoba is not the biggest place in the world, so the big funds are naturally going to focus on the low-hanging fruit where the largest concentrations of growing enterprises reside.

Pallister said he wants to be able to look at the issue holistically.

“Clearly what we have here is not working,” he said.

He has met with the innovation community and was uncharacteristically direct in saying he did not have the answer.

“I don’t want to draw an over-simplistic conclusion about where the gaps are in the chain from idea and innovation to market at this point,” he said. “But I would say there are some gaps there, and they need to be addressed.”

On Thursday, Selinger said it was the logical next step to create the ability to pool investments from the current 45 per cent SBVCTC, a program that has been in place in the province for a few years.

“We think pooling reduces risk for the investor and puts it under professional management and makes sure wise investment decisions are being made,” he said. “Now we can take it to the next level.”

According to the chamber’s Manitoba Bold document, from 2012 to 2014, Manitoba finished second to P.E.I. in terms of the least amount of venture capital investment in Canada and in 2014, Manitoba tied P.E.I. in terms of zero venture capital investment.

The chamber has been outspoken for some time about the issue and have held lengthy discussions with many players from along the investment chain. Their wish list for provincial government involvement is extravagant considering what’s going on now — a $50-million seed fund; three $50-million to $100-million sector-specific funds; and creative financial incentives such as payroll tax exemptions and tax-free holidays for venture capital returns that are reinvested in the province.

Paving the streets with gold would be fun, but there needs to be some streets to pave in the first place.

Chris Johnson, one of the founders of Startup Winnipeg and the CEO of one of its most promising up-and-coming enterprises, Permission Click, believes supporting the startups will increase the number of targets that will naturally attract venture capital from wherever it may reside.

“Finding ways to make it more efficient to access venture capital is important for sure, but stimulating and fostering more startups with investment potential is just as important,” he said.

“If we had enough deal flow here, and high-quality companies to invest in, the venture capital attention would follow.”

There cannot be any more waffling. Whoever forms the next provincial government must take action on the file.

martin.cash@freepress.mb.ca