Thank you.
Good afternoon. My name is Les Lyall and I am the president of the Association of Labour Sponsored Investment Funds. I'm also a senior vice-president of GrowthWorks Capital, based in Toronto. Thank you for the opportunity to speak to the committee today.
Today's presentation is specifically about three key items. Number one, I want to let you know how successful the retail venture capital program has been for Canada. Secondly, I'd like to then give you a brief update on the current market conditions and other factors that are leading to a serious gap in venture capital funding. Finally, I'm going to go over our recommendations to the committee to enhance their retail venture capital program in Canada.
Given the complexity of today's topic, at a later date we will also provide your offices with more detailed information on retail venture capital funds.
I'll provide a brief explanation of the funds and how they operate. We generate 70% of our capital from private sources; 15% of the remaining 30% is raised from tax credits, both from the provincial and federal government levels. We raise money to help high-tech and life science companies undertake research and development, commercialize innovative products, and expand operations to global markets. There are about 30 funds in Ontario, and together we have about $2.7 billion in assets under management in Ontario.
Ontario retail venture capital funds have exceeded their original policy objectives under the program. Ontario labour-sponsored funds add about $2.6 billion annually to the Canadian economy. Again, Ontario labour-sponsored funds have added about 30,000 jobs for the period 1997-2002--those are the most recent numbers available. Again, the Ontario program provides a 13-month payback for the federal government portion of the program, and that, I think, is mirrored across Canada in all other jurisdictions.
Investing companies exceed the national norm benchmarks when compared to traditional companies. These companies have doubled the amount of expected exports from $612 million to $1.2 billion; tripled the employment, based on the national norm, from 32,000 jobs versus 10,000; and quadrupled their R and D spending from $178 million before the ALSIF investment to $703 million after investments from the program.
Since the late 1990s and 2000, extraordinary circumstances have begun to shape our industry. The technology bust that most of us are familiar with, which occurred in 2000, occurred on a global basis. The effect has been that we've seen reduced merger and acquisition opportunities, a very limited IPO window for our exits from our investments, and longer investment horizons for the funds as a consequence. Finally, in Ontario we have faced the Ontario government's 2005 decision to phase out the program in Ontario by 2011.
As a result, Ontario is now experiencing dramatically reduced fundraising. In 2005 fundraising sales were down 19% compared to 2004; in 2006 our fundraising dropped a further 30% from the previous year. This means that virtually no new deals are taking place in Ontario. We can't invest in new start-ups because we may not have the funds available to take the company through to a profitable exit. Money we generate is reserved for follow-on investments for our current portfolio.
Retail venture capital represents 50% of Ontario's venture capital technology investing and about 80% of life science or biotech investing in the province of Ontario. Venture capital investing in Ontario is declining. Ontario alone experienced a decline of 37% in the second quarter of 2006. We need to stabilize the venture capital sector in Canada and ensure the government's return on investment for the tax credits is realized.
We have one key recommendation to the committee, and that is to increase the size of the ticket from the current $5,000 for individual investors to equal the maximum RRSP contribution.
Thank you for your patience.