NACO and CVCA are asking for a seed capital matching program, VCCI update, Canadian QSBS and support for mid-cap companies.
With the Canadian government set to cut its budget in two weeks, two organizations representing Canadian technology investors are lobbying for federal agencies to “recognize the importance of a unified capital strategy” for funding innovation.
In a recent joint letter to Finance Minister François-Philippe Champagne, the National Organization for Angel Capital (NOTHING) and the Canadian Venture Capital and Private Equity Association (CVCA) argue that Canada's innovation economy is “constrained” by fragmented capital, which often forces companies to move overseas or sell assets prematurely.
NACO and CVCA argue the feds need to make supporting Canadian technology a “national priority.”
In their letter, NACO CEO Claudio Rojas and CVCA board chair Jeannette Wilts argue that the country needs to make supporting Canadian technology a “national priority.” They say Canada needs to implement a more focused policy strategy to ensure innovative companies have the funding they need to launch, grow and stay here if it is to secure its economic sovereignty.
As part of the Federal Government's pre-Budget consultations, NACO and CVCA have already shared some specific recommendations on how to achieve this. NACO also delved into what a more unified capital strategy could look like for Canada in the future. related report.
Canada's technology funding ecosystem faces some major challenges. Pre-seed and seed activities for Canadian startups continued to declineand US investors are still playing huge role supporting the growth of mid- and late-stage Canadian firms. This comes at a time when ambitious founders are leaving the country. with accelerating speedand a persistently tepid exit market has left many venture capital (VC) firms struggling to raise funds.
NACO has already recommended that federal agencies encourage increased pre-seed and seed-stage investments by launching a $450 million early-stage fund matching program complementing the Venture Capital Catalyst Initiative (VCCI), with a focus on national defense and technology. It is also seeking a $200 million investment to build a national infrastructure to activate private capital, using existing organizations such as angel networks and early-stage funds.
NAKO pre-budget presentation also asked the Government of Canada to introduce a capital gains reinvestment deferral and a 30 percent refundable national investment tax credit for investments in Canadian-controlled venture capital funds or private placements.
Own CVCA latest budget recommendations There was also a call for the feds to introduce a capital gains tax exemption on shares of early-stage domestic companies that extends to limited partnership structures to help Canada compete with tax breaks for qualified small business shares (QSBS) south of the border.
In addition, the CVCA calls on the new Liberal government of Prime Minister Mark Carney to fulfill the goals of its predecessor. obligations recapitalize VCCI with $1 billion and invest $1 billion in a fund for domestic mid-cap companies, and adopt an evergreen model for VCCI and other venture capital incentive programs. Mirror of the latest CVCA issues organization recommendations since the beginning of this year.
Image courtesy of NACO.
