Time for parties to talk about venture capital

Hey there, time traveller!
This article was published 07/12/2015 (3642 days ago), so information in it may no longer be current.

A n election — particularly one such as the provincial election in April — can be an excellent opportunity to forge new paths.

There is an appetite for change among the electorate. That doesn’t necessarily mean the incumbent NDP government is doomed; only that it’s a safe bet voters do not want business as usual.

You can see Premier Greg Selinger trying to reflect this in his government’s policies. Bold pledges, including a plan to relocate the central Canadian Pacific Railways yards from downtown Winnipeg, are a clear sign Selinger is trying to convince voters he has a new outlook.

What else could Selinger or his rivals — PC Leader Brian Pallister and Liberal Leader Rana Bokhari — do to shake things up? How about finding a new source of predictable venture capital for new and expanding businesses?

In case you didn’t know, Manitoba is bereft of venture capital at the moment.

It’s not the biggest problem facing the province, but it is one of the most profound challenges facing business in this province. And it’s an idea that could resonate with an influential constituency within the broader electorate.

At the moment, there is virtually no made-in-Manitoba venture capital solution. Following the collapse of the Crocus Investment Fund in 2004, it has been tough to find Manitobans willing to lend to Manitobans. It’s also proving difficult for Manitoba businesses to go elsewhere for money; many of the needs here are modest and thus of little interest to big venture capital players in other provinces.

The Winnipeg Chamber of Commerce has advocated for several years now for the province to create a new $100-million venture capital fund for Manitoba businesses. Chamber president David Angus said this fund could be easily created with tweaks to the small-business venture tax credit.

Currently, smaller businesses that register with the province can offer investors up to a 45 per cent tax credit. It’s an admirable program, Angus said, but inefficient; the province rarely spends all of the money it has budgeted for the tax credit. The chamber has asked the province to create a fund whereby investors could access the tax credit by investing in a new venture capital fund, rather than a specific business.

Angus said the chamber has asked the province to consider creating an investment fund that would channel capital to businesses from the investment portfolios of Manitoba Public Insurance and the Workers Compensation Board, along with the big public-sector pension plans.

Unfortunately, Angus said, the NDP government has shown little interest in either idea.

“This government has not gotten over Crocus,” Angus said. “It is making them really risk-averse to any idea that would help improve the venture capital idea.”

How risk-averse is the NDP?

In 2004, then-premier Gary Doer and his finance minister, Selinger, did not walk away from Crocus when it imploded; they ran away from it. This despite the fact the government had little role in the forces that brought down the fund.

Crocus collapsed after concerns were raised about the valuation of its investments. In later years, however, there has been some evidence the collapse had more to do with an internal battle over control of the fund and not necessarily the strength of its investments.

Crocus did invest in some questionable companies. However, the core investments were bona fide home runs, including Wellington West Capital, True North Sports & Entertainment and National Leasing, to name a few. Nonetheless, more than a few grudges are left from the Crocus debacle, some of which resonate today.

It deserves to be mentioned that when Crocus fell apart, the original management team was preparing to get out of selling to individuals and was looking at creating an institutional fund that proponents called “son of Crocus.” Just as Angus described in the chamber’s proposal, this fund would have channelled money from the investment portfolios of Crown entities to Manitoba businesses desperate for startup or expansion capital.

It is certainly plausible the NDP, having mostly escaped political blowback from the Crocus collapse, is not interested in doing anything that would recall that debacle. That is not a good excuse for ignoring the shortage of venture capital in Manitoba, but it’s an excuse.

Could the NDP or one of the opposition parties benefit from a new venture capital fund based on the chamber’s recommendations? It’s unlikely this issue will resonate with a broad swath of the electorate. However, it will be greeted enthusiastically by business people. And what they lack in sheer numbers they more than make up for in influence.

The business community is deeply involved in politics. Business people donate money and work on campaigns. They press the flesh and twist some arms. They are, in any province, major opinion leaders in the electoral marketplace.

That should provide one of the parties with the motivation to make some sort of move on venture capital. It’s a small but nearly perfect political pledge — necessary, justifiable and extremely popular with an influential strata of the electorate.

Of course, the competitors in April’s provincial election could follow Selinger’s lead and decide it’s simply too close to Crocus to pursue. That would be a silly and short-sighted perspective, but it’s certainly within the realm of possibility.

Let’s hope one of the party leaders understands it’s been more than a decade since Crocus collapsed. And that despite its foibles, it actually helped build some of Manitoba’s most dynamic companies.

The bottom line is people want some change. Wouldn’t it be great if one of the parties involved in the next election decided to give us all a bit of that?

dan.lett@freepress.mb.ca