Federal Budget to support LSIF program?
One of the rumours one is hearing this month is that the federal government might do something to support (ie. extend) the Labour Sponsored Investment Fund sector in next Monday’s budget.
600 companies in Ontario alone have received the support of a LSIF investment (including us). According to the LSIF crowd, 74,000 people are employed at these 600 investee companies, with an annual $2.3 billion impact to Ontario’s GDP.
Sounds like something that should happen; at which point Ontario Provincial P.C. Leader John Tory will be armed to embarrass the Ontario government into doing something themselves to correct the error of their ways when they brought the sector to its knees in 2005.
MRM
Hi Mark,
In your opinion how important are LSIF to the start-up community in Ontario?
Did you notice a change in activity after the current Ontario Government cancelled the funds in 2005?
cheers,
Ian Graham
Ian. Thanks for the question. In our experience there was a dramatic shift in the number of doors that an entrepreneur (or a syndicating VC) could knock on as a result of the McGuinty decision on LSIFs. Think of it this way: about half of the firms that you would normally call regarding early stage investing lost much of their firepower overnight. Some of the larger ones still had new funds to invest, of course, but not to the same extent as they’d once had.
As a result, with less VC capital to supply into a growing economy, only one of two things could happen: valuations went down and/or fewer firms got funded.
And the torrent of new LP money that the gov’t was told would flow from the pension funds into the traditional Venture GP structures never happened. To the contrary, institutions such as OMERS for example stopped their Canadian venture GP investing altogether after key folks left and OMERS disbanded the rest of their investing team.
So, a double whammy in fact.
MRM