This is a great time to be building startups in Canada. Ontario and Quebec have recently announced over a $1 billion in funding for new ventures through matching funds and fund-of-funds. There may be more good news when Ontario tables its budget on March 26.
Here’s a quick summary:
- $250 million Emerging Technologies Fund which will match private investments in IT, cleantech and life sciences startups
Quebec (link to budget):
- $825 million for a fund-of-funds to invest in 15-20 VC funds ($700 million from the government, $125 million from the private sector)
- $125 million for the creation of 3 seed funds ($100 from the government, $25 from the private sector)
- 10-year provincial tax holiday for new ventures that commercialize research from a Quebec university or research centre
So how does this trickle down to startups?
- If you’re raising your first round it means there will be more seed funding sources and more money in existing funding sources. Private investors may be more willing to invest since the government is matching their dollars 1 to 1 or 2 to 1 in some cases.
- If you already have investment it means your investors may be more likely to top-up if they are on the receiving end of these funds.
- If you’re commercializing research, which Canada does a poor job of, you look a lot more attractive to investors. Not paying provincial corporate tax for 10 years has a huge effect on investor returns (assuming you’re planning on profitability).
The best part of these initiatives is that they support the existing investment ecosystem rather than trying to replace it with something government run. We already have the pleasure, privilege and intestinal fortitude to deal with the government for SRED and other subsidies. Best leave investment to experienced managers.
So is there any bad news? Timing will be an issue as nobody can deploy this much money quickly. It’ll be awhile before funds actually trickle down to companies. I personally don’t like any initiative with a geographical limitation. I understand the desire to create jobs in a particular place but technology companies can be spread out. In Canada, where we don’t have the density of markets and talent, an Ontario-only company doesn’t make sense.
But enough complaining. Does this mean that we at Flow are more likely to make investments in the near future? You bet!
(Link to more budget analysis from Chris Arsenault from Inovia)