SCAN_logoTight.jpeg BLOGARHYTHMS>>> Ontario government as V.C. pt. 2

McQueen%2C%20Mark44X64.jpgPosted by Mark McQueen

I have this image of well-meaning people sitting at some big boardroom table at the Ontario Department of Finance. The topic is: how do we restart the venture capital engine in this Province?
Someone suggests, maybe at the Director or Director General level: “why don’t we call industry and ask them what would work?” The Deputy Minister frowns: “we must protect budget secrecy”.
Another public servant wonders what the staff at the Ministry of Research and Innovation would have to say on the topic. The response from the Deputy Minister is clear: “we already know what the Premier has in mind. We have an envelope of $50 million/year to spend, but we have to keep that info close to our vest.”
A third public servant makes a truly bold, if naïve, statement: “if we grandfather the four or five large Ontario-based Labour Sponsored Investment Funds, $50 million of tax credits would attract $333 million of new investment capital from retail investors to go into Ontario’s start-up and growth capital industries. We wouldn’t need any new infrastructure, the investment teams already exist, and there are dozens and dozens of great portfolio companies to use the money, not to mention all of the new ideas that are pitched each and every day. At an average of $3 million per investment, that 110 new company fundings over a 12 month period!”
The Deputy Minister will hear none of it: “In 2004, some of the traditional venture capital funds, not to mention Roger Martin, told us that LSIFs had an unfair cost of capital advantage, and that if we shut them down then the pension funds would open up their wallets and start putting new capital into the asset class. We told the Premier that the LSIF model doesn’t work, that some guys got rich off the structure, and that Pension Funds wouldn’t put new capital into the sector until we shut them down for good. That may have turned out to be the wrong decision based upon flawed data, but we can’t be accused of flip-flopping now!” Click here to read more of Mark's fly-on-the-wall perception of public service decision making.

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