Published On: Monday, 13 March 2017

Canadian Venture Capital Policy Needs Reform

Canadian Venture Capital Policy Needs Reform

- The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies through research that is nonpartisan, evidence-based and subject to definitive expert review.

CANADA - Governments across Canada need to reform their approach to venture capital policy, according to a new report from the C.D. Howe Institute.

In “Government Intervention in Venture Capital in Canada: Toward Greater Transparency and Accountability,” author Richard Rémillard argues that improving the quality of venture capital policy will provide a win-win outcome for the wider public, government and the venture capital industry itself.

“There are a plethora of government agencies, programs and tax incentives for venture capital that have mushroomed over the years,” commented Rémillard. “Unfortunately, the general public, media and legislatures do not fully appreciate the breadth and depth of governments’ venture capital initiatives largely because these policies are multi-faceted and relatively hidden from scrutiny.”

After first providing an overview of government venture capital policy in Canada, the author provides a comprehensive suite of actionable recommendations that, if adopted, will better position Canada to take advantage of its investments in the technological revolution that is underway throughout the economy. Those recommendations include:

  1. Taking the steps necessary to improve accountability, transparency and reporting of government activities in the venture capital arena, including a mandated 10-year policy and programs review;
  2. Establishing a more robust analytical framework for understanding the dynamics of venture capital by forming a national public-private Venture Capital Research Institute;
  3. Ensuring a better handoff of investments by venture capital funds into the portfolios of private-equity or buyout funds;
  4. Improving the social contract with the venture capital industry by instituting measures to enhance professional development in the industry and by encouraging the industry to adopt international best practices standards for responsible investing; and
  5. Developing a formal federal-provincial coordinating mechanism to ensure that governments across the country don’t act at cross-purposes to one another.

Rémillard concluded: “It’s crucial governments get venture capital policy right as it is a key ingredient to a successful innovation agenda.”