Commentary
Prime Minister Mark Carney means business. That much was made clear with last week’s announcement of the details of a new federal program called the Venture and Growth Capital Catalyst Initiative (Growth VCCI).
It was another initiative from the Carney government that shows the feds are serious about spurring investment and economic growth. What it also shows is that the prime minister very much believes the government—or at least his government—has a role to play in the business world and how it deploys capital.
Is Ottawa creating too many business programs too fast? Or are these necessary tools to help boost our lagging economy?
The Growth VCCI will contribute $1.75 billion of public money into venture capital via fund-of-funds, including seed-stage startup investment. These are phrases heard much more on Wall Street and Bay Street than on Main Street and Parliament Hill, although a lot has changed since an investor banker became the prime minister.
A fund-of-funds is an investment fund that only invests in other funds, as opposed to making direct investments into individual companies.
Like a lot of 21st-century financial instruments, it can all sound confusing and elaborate to the average person. But these fund-of-funds were created to fill a void in the financial world. The question is, should the taxpayer be investing in them and will it be worth our while if we do?
“My message today to our pension funds and major investors is simple: be bold about Canada,” Industry Minister Mélanie Joly said this week at the Growth VCCI announcement. “Look at the ideas being developed right here. Look at the entrepreneurs building right here. Look at the strength in AI, in quantum, in life sciences, in advanced manufacturing, and put your capital behind them.”
That’s surely already happening, though. The minister is being polite in saying our funds need to “look” at Canadian opportunities. She likely means something stronger than that—more that they ought to be outright investing in them.
That’s what this new fund, and others like it, are meant to catalyze. When the government puts money into a business, a lot of investors see that as a stabilizing force and a sign of assurance that then spurs them to jump on board.
The Growth VCCI mandates a 3-to-1 leverage rule, which means government money will only be chipped in once three times as much private capital is also unlocked. The government hopes their $1.75 billion commit will actually result in attracting close to $4 billion private capital to come along and join them.
The rapid changes happening in technology, particularly around AI, also create the need to keep innovation companies in Canada and to do so fast.
“Tech is literally changing all of society,” said Nectarios Economakis, a partner at the firm Amiral Ventures, in an interview with tech publication BetaKit. “It’s much more strategic for the country to be active in the sector than to treat it as an equivalent of financial services or natural resources. This is the moment.”
When reading the details of the Growth VCCI announcement, it’s at first a bit jarring to read over the $100 million “emerging manager stream.” The description says it’s “focused on supporting Canadian emerging fund managers, including those focused on strategic sectors and those located outside traditional VC hubs.”
It reads like the taxpayer is shelling out a nine-figure sum to help finance grads set up their first hedge funds. Most Canadians would agree this is not the traditional role of the taxpayer, to put it mildly.
The real goal here, though, is for that money to entice other cash to come into Canada—spurring investment and economic growth. We’ve seen this before, however.
Prime Minister Carney has already created a number of business development programs that add to the list programs that existed long before he came to office, and these programs have budgets much higher than the Growth VCCI.
There’s the $25 billion Canada Strong Fund, the $8 billion Strategic Industry Action Plan, the massive Major Projects Office, and the $35 billion Build Canada Homes agency.
There is no denying the Canadian economy is in rough shape. The question is how great of a role government should take in turning it around.
Investment manager Martin Pelletier had a bluntly worded response to the growth fund: “Cut ... taxes and let the market decide instead of you [government].”
The popular post certainly got to the heart of how many people view government involvement in private business.
For now, Canadians still place their trust in Mark Carney as a responsible choice to manage the economy.
They will soon though seek meaningful results that they can experience in their daily lives, or else patience for these types of programs will wear thin.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
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