Brutal venture capital stats for H1 2007 part 3

4 responses

  1. Ian Graham says:

    Mark, the sad state of start-up funding is an issue of great importance. My first blog post of the year was related to the state of funding in Ottawa, all follow-on NO (very little) new and the trend continues.

    One of Dalton’s first orders of business was to cancel the LSIF which dried up most of the early stage money. This will have huge implications for Ontario’s economy and the cracks are starting to show. There is a report from CD Howe “Financing Entrepreneurs; better policy for Venture Capital” that essentially validates canelling LSIF. However, the premise is that LSIF were cancelled because they were a bad investment. Personally I think that is for the investor to decide if they are a bad investment rather than the government. LSIF may have needed tweaking, but cancelling them was like throwing the baby out with the bath water.

    This is an election year and start-up funding isn’t even on the election agenda. Why? No one has made it a priority for the politicians. Your post has inspired me to send a note to our good premier and John Tory asking what there strategy (and more importantly implmentation) is to improve early stage funding. Perhaps if more of your readers do the same this issue will become a brighter blip on the political radar.

  2. John Varghese says:


    Your blog is very timely and relevant. First I need to disclose to readers that I am biased and conflicted on the topic as a Portfolio Manager and Co-Owner of the VentureLink Group of Labor Sponsored funds. I am also an investor (hey isn’t this another company that has an LSIF investor)in Wellington and sit on your advisory board.

    My overall proposal: fix it, don’t shoot it. Remember, If $100,000,000 is raised, the tax cost is $15,000,000 to Ontario. Assuming $75,000,000 is available to invest, that is 5 to 1 leverage. What program comes close to replicating that?

    The facts speak for themselves in terms of the decreases in early stage investing in Ontario over the past five years. In every cycle one needs to invigorate at the early stage to drive future cycles. Failing to do so will have longer term far reaching implications on our economy and productivity. Less capital available will lead to less entrepreneurial risk being taken which will then further the gap between Canada and the rest of the world. We cannot keep pace, especially in light of more and more buyouts of Canadian companies by multi-nationals if we don’t generate more made in Canada solutions.

    Ontario, as a province and country are proud that we have a world class technology hot bed in Waterloo. We are proud of the technology market in Ottawa. The Ontario LSIF market has raised over $2.7 billion, with almost 40% of that deployed in Ottawa area. The Waterloo area has also greatly benefited from LSIF investing. I would argue that we would not have attained these centres of excellence without the investments made. Perhaps lost in the shuffle is that since being formed, LSIF’s in Ontario have invested in over 600 companies that have created over 27,000 jobs.

    Ontario is the only province that has taken away the credits. Quebec has not done so. The Funds de Solidarite FTQ is well over $6 bln under management and growing by about $500 million a year. It stands to reason that Ontario in the context of venture investing will fall behind if we stay the course. Others have pointed out that the suggested replacement solutions are not doing enough….

    It is also important to look at the program from the investors perspectives. Advisors have been able to generate RRSP’s using the incremental tax credits for people who might not otherwise have started building RRSP savings. Depending on the tax bracket, the after tax cost for a $5,000 investment would be less than $1,900. Now if they used the tax credit to make further payments to mortgages etc, then the return is even more enhanced.

    VentureLink has shown that LSIF’s can be successful. We have two funds that are providing investors a good return and thus advisors are able to use us as an effective part of their tax planning with their clients. Our financial services fund has since inception been earning 18% on the invested deals. Our Diversified Income Fund is also producing double digit returns. Not all funds are the same…

    John Varghese
    Managing Partner
    VentureLink Funds

  1. June 9, 2014

    […] monument to their interest in innovation, first and foremost (see representative prior post “Brutal venture capital stats for H1 2007 part 3” Sept. […]

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