Boost venture capital, business leaders say

·3 min read

The dearth of financial investment for Manitoba startups and small firms is expecting a sliver of much-awaited activity.

Under the federal and provincial budgets, unveiled just one week apart, both Ottawa and Manitoba recognized the need for capital and equity investments to kick-start economic recovery from the COVID-19 pandemic.

But stakeholders and business leaders, who believe venture capital incentives or funds could not come at a better time, aren’t so sure the new government initiatives will move many needles.

“Just because you have something that sounds great doesn’t mean people are going to step up and take advantage of it right away, especially when it comes to investments,” said Joelle Foster, CEO of North Forge Technology Exchange, in an interview.

“I think governments should really be working with the community to understand this better. Without that, there’s a big lack of understanding about where actually funding needs to be targeted for the highest level of growth.”

The Trudeau government announced a renewed Venture Capital Catalyst Initiative and Venture Capital Action Plan this week, committing $450 million and $390 million for each of them, respectively.

Out of the $450 million, $50 million will be dedicated to increased venture capital for underrepresented groups like women and racialized communities, and another $50 million will go towards investments in life science technologies.

In Manitoba, the Tories have enhanced their Small Business Venture Capital Tax Credit, increasing an investor’s maximum eligible investment from $450,000 to $500,000 and nearly doubling claimable tax credit against income from $67,500 to $120,000.

That means Manitoba is joining the ranks of provinces such as British Columbia to target companies that want to raise equity from higher-net worth individuals, with a minimum investment of $10,000 per investor. Corporations must be pre-approved to issue shares and a non-refundable Manitoba tax credit of up to 45 per cent will be provided for individuals and corporations who acquire equity capital in eligible local enterprises.

However, Foster — who is often called “Startup Mom” in the Prairies — said she’s seen many such programs come and go over the years with little success. It’s why she set up a new angel investor group last fall, which has since supported at least six Manitoba companies through North Forge.

“It’s great that the feds and the province are looking at this issue closely right now, but we don’t have enough private investors to begin with,” she said. “We need to first shake up the ecosystem and make investors understand why it’s worth putting down their funds here.”

Dayna Spiring, president of Economic Development Winnipeg, agreed. Directly addressing investors and incentivizing them is why Manitoba has been “sorely lacking in regard to capital,” she said.

“We don’t exactly know how the federal fund will work, but certainly, I do hope the provincial tax credits will help,” said Spiring. “One of the things the pandemic showed us was that we severely lack infrastructure in Canada for a number of things, and we need to look no further than vaccines to see that. I think capital investments for the future would allow us to look at that problem and be better prepared, while also expanding our economy.”

Manitoba has often “lost the fight” for investors to nearby provinces, Spiring added. “Right now, Saskatchewan companies are investing in Manitoba companies, but they want their head offices to come and move to Regina or Saskatoon.

“We need them to make Manitoba their home and the only way we can do that is if they have access to capital dollars that would allow them to grow right here.”

Marshall Ring, the CEO of Manitoba Technology Accelerator, said that’s why he’d also like to see a Manitoba-focused fund from the provincial government.

“We’re at a disadvantage here because we don’t have something geographically targeted,” he said. “For now, we’ll just have to see how these quite different programs from both governments will be working out.”

Temur Durrani, Local Journalism Initiative Reporter, Winnipeg Free Press