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Table of contents
1. Start-up money begins to dry up..................................................................................................................

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Start-up money begins to dry up

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Abstract (Abstract):
As a result, his fund and four other provincially registered labor funds--Workers Investment of New Brunswick,
Working Opportunity of British Columbia, First Ontario and Solidarite des travailleurs du Quebec--set up the
alliance to push for a reprieve from the federal government.
Macdonald and Associates Ltd., a Toronto company that tracks venture capital in Canada, concluded last fall in
a study that venture capital is in danger of drying up because of the demand for start-up money.
Working Ventures said last week it was trying to avoid that penalty by investing half the amount in the province's
newly created Ontario Community Small Business Investment Fund.
Full text:
OTTAWA (CP)--Labor-sponsored venture capital funds are complaining that crucial rule changes in the 1996
federal budget are causing start-up money for new businesses in Canada to dry up.
They want Finance Minister Paul Martin to reverse the changes in his 1998 budget--expected as early as the
last week of February--and have formed an alliance to lobby senior government officials and MPs.
Investment funds sponsored by the labor movement work much like RRSPs with Canadians investing funds to
be used as venture capital for start-up companies in return for a tax credit.
The tax credit was cut to 15 per cent from 20 per cent in 1996 and the maximum contribution was cut to $3,500
from $5,000.
The amount of new capital raised through contributions to labor-sponsored funds fell to $670 million in 1996
from a peak of $1.2 billion in 1995.
Sherman Kreiner, president of the Crocus Investment Fund of Manitoba, said it was clear from those figures
that the new rules were discouraging investors from putting their savings into labor funds.
As a result, his fund and four other provincially registered labor funds--Workers Investment of New Brunswick,
Working Opportunity of British Columbia, First Ontario and Solidarite des travailleurs du Quebec--set up the
alliance to push for a reprieve from the federal government.
"We have found, at least in our provinces, demand for venture capital has exceeded the supply," Kreiner said.
"We put out all the money that we have and we can put out more."
Among them, the five funds invested $345.6 million of venture capital in 137 start-up companies in 1997. They
say they have created, maintained or saved 6,800 jobs. They represent two-thirds of the assets in laborsponsored funds in Canada at $1.3 billion.
Kreiner said venture capital flowing out of the five funds is currently exceeding funds going in by a ratio of two to
one.
"If we continue along that course, we're going to run out of venture capital."
Macdonald and Associates Ltd., a Toronto company that tracks venture capital in Canada, concluded last fall in
a study that venture capital is in danger of drying up because of the demand for start-up money.
Ken Delaney, president of the First Ontario Fund, said the alliance has met with officials of the Department of
Finance and the five funds believe they have a strong case.
He said the alliance members are arguing that they have been sideswiped by the well-publicized problems of
Working Ventures, a federally charged fund in Toronto, that is not in their group.
Working Ventures had to pay a $10-million penalty tax to the federal government in 1996 because it had not
invested enough funds into small and medium-sized businesses.
The fund's managers have stopped taking in new investments until it places more of its assets into developing
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companies.
It currently faces the possibility of a $30-million penalty to the Ontario government for not placing enough funds.
Working Ventures said last week it was trying to avoid that penalty by investing half the amount in the province's
newly created Ontario Community Small Business Investment Fund.
Ron Begg, Working Ventures president, said some of the decline in labor-fund investments since 1995 may be
because his fund has not been accepting funds.
But he added there is no doubt Canada is facing a serious shortage of venture capital.
Subject: Venture capital; Labor-sponsored investment funds; Investment funds; Laws & regulations;
Classification: 9172: Canada
Publication title: Daily Commercial News and Construction Record
Volume: 71
Issue: 16
Pages: A1
Number of pages: 0
Publication year: 1998
Publication date: Jan 23, 1998
Year: 1998
Publisher: CMD Group
Place of publication: Toronto
Country of publication: Canada
Publication subject: Building And Construction
ISSN: 03173178
Source type: Trade Journals
Language of publication: English
Document type: PERIODICAL
ProQuest document ID: 224249688
Document URL: http://search.proquest.com/docview/224249688?accountid=31434
Copyright: Copyright CMD Group Jan 23, 1998
Last updated: 2013-10-22
Database: Technology Collection

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