Canada’s Venture Capital and Private Equity Association (CVCA) expressed concern about the federal budget proposal to end labour-sponsored venture capital corporation (LSVCC) tax credits by 2017. CVCA president Peter van der Velden said the measure “poses a severe risk of constricting the supply of venture capital in Canada.” Retail funds, dominated by LSVCCs, have invested over C$560 million in venture capital in Canadian companies since 2010, reports Thomson Reuters (publisher of peHUB Canada).
CVCA Concerned About Contradictory Signal Proposals From Ottawa on Venture Capital
Toronto, March 27, 2013: CVCA- Canada’s Venture Capital and Private Equity Association, while pleased with the Budget’s support for innovation and small and medium-sized businesses, did today express its disappointment with the 2013 Federal Budget proposal to eliminate retail investors’ ability to access tax credits for their investments in labour-sponsored venture capital corporations (LSVCCs).
“We are puzzled at the Federal Government’s actions on tax credits for LSVCCs,” said Peter van der Velden, President of the CVCA and Managing General Partner of Lumira Capital. “Over the past several months the Federal Government has consulted with the CVCA on the Venture Capital Action Plan (VCAP) which is projected to increase the supply of venture capital available to fast-growing small and medium-sized companies in Canada. Unfortunately the Federal Government elected not to consult with the CVCA or its members on the specific question of the current role and impact of LSVCCs in the market and it is the CVCA’s view that this budget measure poses a severe risk of constricting the supply of venture capital.” added Mr. van der Velden.
There are two impacts of this Budget measure which are of specific concern. First, LSVCC’s are particularly active in Canada’s regions outside the main centres of economic activity. The Budget puts this aspect of regional investment at risk. Second, the LSVCC’s play a structural role in regional and national fund-of-funds managers, private independent venture capital funds and are frequent co-investors with these funds in high growth companies across a variety of stages and sectors throughout the country. By eliminating the federal tax credit, a critical piece of infrastructure may be stripped from the entrepre neurial and venture capital eco-system. This seems contrary to the Federal Government’s Venture Capital Action Plan which encourages capital amplification and enhanced “doors” for access to capital. If anything, there is broad concern this proposed change will impede the goal of long-term sustainability for the venture capital industry.
Going forward, the CVCA intends to evaluate the likely impact of this budget measure on Canada’s global strategy and risk capital eco-system, particularly as it relates to jobs, manufacturing, entrepreneurs, and small to medium-sized businesses.
The members of the CVCA want to engage the Federal Government and the Department of Finance in a formal consultation process on this matter.
The CVCA – Canada’s Venture Capital & Private Equity Association, was founded in 1974 and is the association that represents Canada’s venture capital and private equity industry. Its over 2000 members are firms and organizations which manage the majority of Canada’s pools of capital designated to be committed to venture capital and private equity investments. The CVCA fosters professional development, networking, communication, research and education within the venture capital and private equity sector and represents the industry in public policy matters. www.cvca.ca
To arrange an interview with Peter van der Velden, President of the CVCA and Managing General Partner of Lumira Capital Corp, or Richard Rémillard, CVCA’s Executive Director, please contact Lauren Linton, Director of Marketing, firstname.lastname@example.org .