Home Breadcrumb caret Economy Breadcrumb caret Economic Indicators Breadcrumb caret Industry Breadcrumb caret Industry News Canada’s new venture capital plan problematic: IIAC The federal government’s new venture capital plan will help determine Canada’s competitiveness, but it has its challenges. By Staff | February 15, 2013 | Last updated on February 15, 2013 2 min read The federal government’s new $400 million Venture Capital Action Plan will help determine Canada’s competitiveness in global markets, says Ian Russell, president and CEO of IIAC, in a recent letter. The plan is designed to aid high-growth companies looking to access venture capital. Russell says it aims to achieve this by injecting money into “a new venture capital ‘fund of funds’ created in partnership with institutions, corporate investors and interested provinces.” It will also support existing high-performance venture funds. Read: 3 ways to help biz owners get cash Russell has reservations, however. While he says “there’s no doubt…small and mid-size companies in high-growth industries [are important],” he wonders if the plan will effectively channel enough capital to start-up businesses. “A background paper accompanying the funding announcement pointed out Canada’s venture capital industry has been challenged by ‘persistent low returns,’ ‘the relatively small size of venture funds in Canada,’ and a ‘shortage of experienced fund managers,’ says Russell. He adds, “Given this track record, it’s not surprising angel investor networks have eclipsed venture capital funds as the dominant financiers for startup businesses in corporate Canada.” Further, he says businesses lack an effective exit strategy when it comes time to “recycle funds back into new start-up businesses.” Read: Canada’s top 50 young entrepreneurs “The typical exit point is the launch of a [company’s] initial public offering,” writes Russell. “But public markets for small- and mid-sized business have been in the doldrums since 2008 and [the past year hasn’t been] conducive to an IPO offering for small business. This eliminates the crucial exit strategy and [may] discourage initial venture capital investment.” Read more on the challenges the government will face in implementing the VCAP and in supporting business expansion. Read: Small business confidence holds steady 10 ways to build on success Staff The staff of Advisor.ca have been covering news for financial advisors since 1998. Save Stroke 1 Print Group 8 Share LI logo