TORONTO, Sept. 19 /CNW/ - Despite the Fraser Institute's apparent bias
against ready-made market solutions for venture capital development,
labour-sponsored investment funds (LSIFs) are a critical source of funding for
early stage innovative firms in Canada.
According to a recent Fraser Institute study, the governments' investment
in the LSIF program is not beneficial for Canadians, despite the fact that
governments recoup their costs in 13 months and the funds have provided
critical investment capital to thousands of small and medium sized companies.
Unfortunately, the author of the study has based his conclusions on weak and
outdated research and has neglected the most relevant information.
As early stage investors, LSIFS are critical to attracting follow on
investment, especially from foreign sources. Without this vital support, many
Canadian firms would not be able to raise the capital they need to
commercialize their innovative products.
Since 2005, venture capital in Ontario has been on a severe downturn, a
combined result of overall market conditions and the Ontario Government's
decision to initiate a staged withdrawal of the provincial tax credit. Since
then, sales of LSIF shares have been weak and are now at crisis levels.
LSIFs promote investment rather than 'crowd it out'
Despite a reduction in LSIF fundraising, foreign and domestic venture
capital investors have not 'stepped up to the plate' to increase their
investments. As a result, the massive decline in available LSIF capital has
resulted in a dramatic reduction in new investments and will ultimately impact
jobs and capabilities in key industries, such as health care and technology.
"History has proven the Fraser Institute's comments about LSIFs crowding
out other investments are simply untrue," said Lyall. "Despite these
conditions, fundraising by private VC firms is weaker than ever in Canada.
Even without the influence of LSIFs private VC firms are still not investing
here," Lyall said.
"Right now, we're facing a critical shortage of venture capital,
particularly in the early stage, as retail fundraising and new investments
plunge. This means fewer innovative companies are getting the funds they need
to bring their ideas to market and that's a real problem for Canada's future,"
noted Les Lyall, President of CRVCA and Senior Vice President of GrowthWorks
Ltd. "There's virtually no money available for new investments as retail funds
conserve their capital to maintain their existing portfolio."
For more information about the CRVCA, please visit www.crvca.com.
The Canadian Retail Venture Capital Association is a volunteer-based
association representing retail venture capital funds in Ontario. In Ontario
alone, CRVCA members have more than 600,000 shareholders and manage
$2.7 billion in assets in more than 550 Canadian companies employing
approximately 30,000 people. CRVCA's members help fuel the growth of Ontario's
economy and provide a stable, long-term pool of venture capital for innovative
business across Canada. For more information on retail venture capital funds,
please visit www.crvca.com.
For further information:
For further information: or to arrange an interview, please contact:
Tania Ensor, Weber Shandwick, (416) 642-7965, (416) 509-6814; Hazel Parilla,
Weber Shandwick, (416) 642-7893, (647) 444-0169