Evidence of meeting #39 for Industry, Science and Technology in the 39th Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was money.
A recording is available from Parliament.
Bloc
Paule Brunelle Bloc Trois-Rivières, QC
Are you the only lending institution having a fund for female entrepreneurs?
Exectutive Vice-President, Investments, Business Development Bank of Canada
I do not know about the others but it is one of our concerns. We want to make sure that everyone has an equal opportunity to become an entrepreneur and to get funding for their company.
Bloc
Paule Brunelle Bloc Trois-Rivières, QC
Mr. Mothersill and Mr. Heller, I have a question for both of you: do you invest in Quebec?
Do you do anything relating to networking, at the BDC, that is to say a sharing not only money but also experience, with experienced entrepreneurs when people want to start a new company? Does that exist at the bank?
President, National Angel Organization
That's an excellent question. It's interesting that I'm leaving this meeting to go to speak in Montreal along with a group called Anges Québec, which is the newly formed angel group in Montreal. I'm speaking before 175 entrepreneurs in the province of Quebec about how to attract and build financing.
Angel groups co-invest with a lot of other angel groups in various provinces. So it's a direct effort, it's a co-investment effort between angel groups right across Canada.
It's an excellent question. We're very much involved in the province of Quebec.
General Partner, VenGrowth Asset Management Inc.
We currently have only a couple of investments in Quebec, and that's just due to the nature of the rules governing the pools of money we manage. We are currently out trying to raise a specialty life sciences fund, and as part of the terms of that fund we plan to open an office in Montreal and make some life sciences investments in Quebec, because there are great opportunities there.
Conservative
Conservative
Bruce Stanton Conservative Simcoe North, ON
Thank you, Mr. Chairman.
Thank you all for painting a somewhat grim but nevertheless very definitive picture of what we face here.
I would first like to thank Mr. Wilkes and Mr. Mothersill for giving a very comprehensive report here with some suggestions. I'm going to leave that as it stands and move on to some other questions, but well done.
First, to Mr. Johnston—I want to bring you in here for a second—as an organization that really deals with bridging this gap over this so-called valley of death, do you have any comment on what that picture looks like in Canada relative to where Canada sits? What does the landscape look like outside of Canada compared with the kinds of circumstances we're facing here in terms of bridging that gap?
Paul Johnston President and Chief Executive Officer, Precarn Incorporated
There are two parts to the answer. One is in direct relation to the comment by Monsieur Simoneau. That is, the cliff in public funding, especially for smaller companies that are trying to get to a prototype stage or are trying to get to the technology demonstration stage, is exactly the kind of thing that we try to provide. Therefore, it would tie in perfectly.
As I say in my paper, beyond public research in universities and hospitals, to the point where venture capital firms should come in, is the place we operate. So our view is the same, that there is not the balance right now in Canada.
Conservative
President and Chief Executive Officer, Precarn Incorporated
It's interesting that you ask that--and I didn't even plant this. Between Tuesday and today, I discovered that in the United Kingdom--and staff probably already knows this--the Technology Strategy Board has just released a paper on innovation in the U.K., and it's a billion-pound investment, 711 million pounds of which is to go directly to programs for business. For example, the first three in one of their descriptions is exploratory awards--so very early awards to smaller companies--proof of concept, and then collaborative research and development. These are exactly the kinds of things we're talking about as well.
They're also going beyond these 711 million pounds and they're coordinating that with some 120 million pounds from the granting councils and another 111 million pounds from other places. So they're trying to put together a new billion-pound initiative to support innovative businesses in the U.K.
Conservative
Bruce Stanton Conservative Simcoe North, ON
Thank you very much.
Mr. Heller, I think you've again painted a very specific picture here. What specific things would your organization recommend that we look at doing, or that a government or the business of commercializing R and D look at, to begin to put this bridge together? Are there a few concrete things you would recommend we consider doing here?
General Partner, VenGrowth Asset Management Inc.
I do have some ideas. First, partially to protect my precious five minutes, I specifically didn't put any recommendations in my presentation, but I think it's important that there become a broader general awareness of how bad the problem is before we lose ourselves in specific recommendations. I think if this committee can take that away, that is the most important thing, rather than specific recommendations.
I think there are a host of ideas, and I would look at it as what are the sources of money. How can we get more out of government, out of institutions, out of retail, out of foreign investors? And there are small programs that could work on all of them. From retail investors there's a focusing, re-invigorating labour sponsor fund program and facilitating the angel programs from institutions. The Government of Ontario has a small program to encourage institutions, like pension funds, to do more in venture capital that they're just rolling out. It's a good idea. Unfortunately, it's a small program, but with some federal dollars behind something like that, it would be fantastic and probably complementary to what Mr. Simoneau is working on at BDC with his $75 million grant.
Then for foreign investors there are a number of measures that the government can take to encourage the flow of foreign capital into this country, some of which were enacted in the last budget, but there are more to come. The CBCA has spoken to those in front of this committee, I believe.
Conservative
Bruce Stanton Conservative Simcoe North, ON
Thank you, Mr. Chair.
Mr. Simoneau, in terms of BDC's business and how it would be allocated, compared with 2002, say, how much of your work is in venture capital, as compared with traditional lending? I have some familiarity with BDC, but how has that changed in the last five years?
Exectutive Vice-President, Investments, Business Development Bank of Canada
Well, venture capital has increased gradually since 2002 with the new mandate that was given to BDC to invest in knowledge-based industries. So we've increased the venture capital from a much smaller number at the time. I don't have the accurate figure right now, but I would say in the order of magnitude of $100 million at the time. Right now, we have about $700 million engaged in venture capital. That compares with about $10 billion in loans to SMEs that are operating SMEs and not technology-based SMEs.
Conservative
Exectutive Vice-President, Investments, Business Development Bank of Canada
Yes, it's about that in terms of dollars.
Conservative
Bruce Stanton Conservative Simcoe North, ON
You may not have enough time to do this, but you raised the idea or the notion of tax-free exits. I wonder if you might be able to give us a little bit more information drilled down on that idea. What does that mean?
Exectutive Vice-President, Investments, Business Development Bank of Canada
Briefly, sir, it could be to encourage people to get out of their technology investments. It's a matter of rebalancing risk and reward. So you're selling the investment at a given price. If the investor can keep more, you're rebalancing the risk that they've taken at the beginning.
Since the main metric you can use to measure that an industry is not doing well is the return, if we could do something to rebalance that in the meantime, while the industry recuperates, it would be great for the industry and more money would flow in.
Conservative
Chairman, Board of Directors, National Angel Organization
Can I add something?
Chairman, Board of Directors, National Angel Organization
One of the previous finance ministers asked us about five years ago what was the one thing that the government could do for angels to get them to put more money to work. They looked at this idea of being tax-free at the end, and they said it wasn't the issue; the issue to attract capital was the tax credit at the beginning.
So we have a different view of surveying the private individual investors.
Conservative
The Chair Conservative James Rajotte
Thank you.
Thank you, Mr. Stanton.
We'll go to Ms. Nash, please.