This is a repost from the amazing video-blogger Kristina Tomaz-Young  of Venture Cap TV

Welcome to our THREE part video cast series of the Canadian Venture  Capital 2010 Conference.  And, what an event it was! Check out the must see videos below, here for the link to file of all speaker bios and here for the link to the picture gallery.

Prominent leaders from the private equity and venture capital community participated in record breaking attendance! It’s speaks much to the energy that the CVCA passionately commits to the industry.

Sleeves were rolled up, ideas were churning….you could literally feel the exciting energy pulsating throughout the crowd at the panel discussions and in the hallways. Lessons & opportunities were shared, valuable contacts were made, and fun was also most definitely had at the evening gala with their Entrepreneur of the Year Award and the hilarious Rick Mercer show, not to mention the Scotch tasting event and great mingling!

This year’s theme was Driving Innovation. And we were privileged to learn from impressive keynote speakers like Glenn Hutchins co-founder and co-CEO of Silver Lake and red carpet panelists including Jacques Bernier (Managing Partner of Teralys Capital), Chris Albinson (Managing Director of Panorama Capital & co-founder of the C100), Paul V. Lee (Managing General Partner of Vanedge Capital and so many more who shared their perspectives and sector possibilities to explore.  If you’d like a full line up of the presenters and their bios, please click here.  Conference Chair David Adderley of Celtic House Venture Partners and his organizing committee certainly put on an unforgettable, valuable conference for the private equity and venture capital community.

So if you’re raring to go…come check out:

• Part 1 features Day 1, Part 1 where we’ll meet brilliant, innovative thinking venture capitalist and conference Chair  David Adderley who shares a great recap of this incredible event as well as one of the CVCA’s highly valued sponsors, the eloquent Ann Bowman of RBC.

• Part 2 features the rest of Day 1. Come here what Chris Albinson (Panorama Capital) and KenKen Cheveldayoff (a Ministry of Enterprise at the time of the event) have to say about what our Canadian companies do very well, what we need to fix and our  opportunities here and abroad.

• Part 3 covers Day 2 looking at innovative ways to approach new markets globally, what the future holds and breeding success with entrepreneurs. Check out our interview with Jacques Bernier (Teralys Capital) about rebooting our system to be the best, what we do right  and what we need to improve. We also had a chance to meet up with Paul V. Lee (Vanedge Capital) who spoke to us about  the closing of his exciting new fund and the exciting opportunities available.

• And for those of you who’d like access to Jacques’ reboot analogy, for an entertaining depiction of our industry scenario! Ah, yes, it’s never boring with Jacques!

Before we dash, a few words of thanks for the accomplishments, kindness and generosity of our colleages..so:

• Thank you to Richard Remillard (CVCA Executive Director), Lauren Linton (CVCA Marketing Director),  the CVCA team and the conference Chair David Adderley for an outstanding event.
• A big thank you to all our featured guests for taking the time to share their rich advice and experiences.
• A special thank you Christian Zabbal of Black Coral Capital for opening doors and encouragement ever since vc-tv was a spark in my eye!
• Un gros merci beaucoup to the energetic, brilliant Chris Arsenault of iNovia Capital the CVCA’s 2008 Conference Chair (which was also a record breaker!) for being a relentless, passionate champion for the venture capital/start-up community and growing eco-system. We’re privileged to have you at the helm with your fellow leaders.
• Thank you to the video production start-up company FFwd Films for your talent and delivering on your promise to produce a professional product. Challenges, obstacles and extraordinary circumstances & all, we kept on going and we did it!!!
• Much gratitude to Embrace and your wonderful fellow sponsors for your kind sponsorship and valuable support.

And, thank YOU for visiting VC-TV. Come back again real soon!

(*Please note that out video casts are normally posted very soon after each event or interview. This was the first time we were delayed.  We’re a start-up, and like many start-ups, we ran into some start-up challenges. But, solutions were actively sought, situations were co-operatively resolved, and we’re so pleased to share our coverage of the event with you. And this time, rather than one videocast released at a time, here’s all three! We hope you enjoy them!)

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by Mark McQueen, Wellington Financial LP – originally posted on July 8, 2010

For fear that the Business Development Bank of Canada hasn’t tasked their management consulting team at McKinsey with stakeholder meetings in relation to the “BDC Venture Capital” strategic review currently underway (see prior post “Playing catch-up” July 7-10), David Crow asked me to share my simple suggestion with all of you.

I warn you: the idea isn’t all that novel. HSBC did it when they recenly spun out their six global private equity arms to the local management team. TD Bank did it when they handed TD Capital Private Equity Partners to the Toronto-based group that now goes by NorthLeaf Capital Partners. Quebec’s FTQ did it in 2008 with their 35 early stage venture capital investments. It’s not very complicated.

If BDC CEO Jean-Rene Halde is concerned about the 5% of his total assets (yes, sadly just 5%) that are tied up in money-losing VC deals, my suggestion is simple, and it works for everyone: Spin out the BDC Venture Capital arm to its management team.

Overnight, BDC VC would become Canada’s…

(please check out full post here)

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by Mark McQueen (Find the complete blog post here)

24 April 2010

Trees are falling in the forest.

The sound you didn’t hear the other day was the fracturing of one of Canada’s best known venture capital firms. One of the teams that had the experience and track record to be a survivor in the ever-shrinking Canadian VC industry. One of the firms that had been tagged to likely make it through the Star Chamber.

One of the firms that, like so many others, was once backed by some of the biggest LP names in the land. One of the firms that has had to replace those very same big LP names as folks increasingly pulled their horns in — one after another — on direct fund allocations over the past five years.

What happened?

Read on at the Wellington Financial Blog

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repost by Chris Arsenault, Managing Partner at iNovia Capital

Earlier this month I was invited by Rob Hyndman to post some of my views on the topic of: The Future of Venture Capital in Canada, as part of a series of posts at The Mark – Canada’s daily online forum for news, commentary, and debate. I ended up posting a short view of the “VC Ecosystem”, outlining only but a few key elements critical to having a stronger and most importantly a viable tech industry supported by venture capital in order to compete on a world wide basis. David Crow, added some valuable comments relating to “Creating a Venture Culture” so as did ex-VC and entrepreneur Rick Segal, tech CFO Mark MacLeod and others, participated in the discussion and shared their views on the topic. If you haven’t read the posts, I strongly suggest you give it a read.

I fundamentally believe in the early stage venture capital model that supports promising high growth tech startup entrepreneurs. And through my efforts and those of my colleagues and partners at iNovia Capital, MSBi Valorization, the CVCA, the C100 and numerous other initiatives, we are trying to make the model work by approaching venture capital the same way you one would build any other tech business: with the right people/team at the right time (entrepreneurs vs. operators); by building a strong network of knowledgeable partners with complementary skills sets and long term relationships; and by understanding what startups and entrepreneurs need from their early stage VC’s and deliver results/returns to our Limited Partners while properly managing expectations. Building an Ecosystem takes time, commitment and passion.

Building an Entrepreneurial Ecosystem requires the right culture and mindset! For the last 12 years I’ve dedicated my entrepreneurial life towards helping to build successful tech business via my role as an active early stage investor. Over this same period of time I’ve witness important changes across the Canadian VC landscape which continues to evolve and now seems to be driven by a more entrepreneurial culture, one that includes Venture Capital savvy Entrepreneurs that understands the role of VC funding more than ever before. Hopefully the pieces will continue to fall in place and we will see the next generation of successful Canadian tech entrepreneurs that will change the way we work and live be funded by Canadian VC’s.

Earlier in March I was given the opportunity/challenge to discuss Entrepreneurial Venture Capital by giving a, “fast, 15 seconds per slide, 5 minute 20 slide presentation” at Ignite Montreal. My presentation was specifically on the topic of trying to communicate how to “Make Venture Capital Work”.  I really like the Ignite presentation model, but it’s indeed a challenging concept, too bad I ended up doing the basic mistake of trying to say too much in too little time… thus not saying as much as I could if I would of said less!

So, many entrepreneurs these days are talking about “How the Venture Capital Model is Broken”, which is the wrong way to address the lack of capital Canadian entrepreneurs face! The VC Model isn’t broken because it never really worked in the first place, period!

With the exception of the 1980’ and the few last years of the Internet bubble, the model has never been successful for the masses, but has been only for a handful. And, when it comes down to Canadian numbers, we have to account for an additional level of difficulty: the fact that Canada doesn’t have the “weight” of numbers in its favor. Not only does Canada have a less mature IT and Biotech industry when compared to the US, it also has a small and nascent private equity and venture capital industry, and still only has a handful of privately managed venture capital funds today.

The stories about the highly successful technology entrepreneurs as well as those about the rockstar venture capitalists (note: over 80% of all venture capital returns are generated by less than 25% of the venture capital funds out there) created the impression that the only thing needed to build a high valued successful startups was an entrepreneur with an idea and an investor with cash! This meant that venture capitalists could blame poor returns on unsuccessful entrepreneurs while those entrepreneurs could blame their failures on the lack of capital or restrictions tied to the capital they did raise.

The math is the same for a Canadian venture capital fund as it is for a US venture capital fund. Investors in venture capital funds usually expect a high IRR (internal rate of return) – Top tier venture capital expected returns in the +30% IRR, a rate that is far above banking rates due to the high level of risk involved. A Venture Capital fund will usually has a ten year life and will require a certain level of management fees over that period. Therefore, in order to understand the type of capital that needs to be returned to the investors of the Fund (the Limited Partners) one needs to plan on generating three times (3x) return of capital to be successful and part of the Top tier firms that are able to continuously raise additional capital and funds.

In a nutshell, that means that a $100M size fund must return approximately $300M in order to generate the expected level of returns of a Top tier fund! So, knowing that for an early stage venture capital fund, one can expect it owning on average 20% of any given company in a portfolio of around 15 companies (for a $100M size fund), this would translates into $1.5 billion of aggregate portfolio enterprise value at exit, or $150M in cumulative EBITDA based on a 10x EBITDA exit valuation, needed to generate those type of returns. That’s pretty demanding! Managing expectations also sets the bar as regards the type of actions that will be put forward to achieve those expectations. Maybe it’s time we set an aggressive but achievable bar that would benefit the whole industry, no?
Reality is that entrepreneurs operate in a living “Ecosystem” that feeds itself by growing and building new connection. No party can do it alone! The community feeds itself off its own growth. High growth technology companies need venture capital to succeed and the venture capitalists need to back successful entrepreneurs to generate strong returns. Not only do we need to have better return expectations for venture capital funds, we also need better collaboration within the community to build networks strong enough to support promising technology companies and deliver high shareholder value.

The more successful entrepreneurs are, the more successful venture capital funds will be, leading in turn to more funding for entrepreneurs.
We have to learn how to expect more and know how to get more. Yes, funds and large institutional investors like pension funds and insurance companies should expect better returns from their venture capital investments. The last 10 years of Canadian venture capital returns represent -0.2%, yet expectations were in the unrealistic + 30% range, while solid manageable returns should be more in the 15% level. Large institutional investors can help themselves achieve such realistic returns by selecting fund managers with entrepreneurial backgrounds and experience with building successful companies. Managers who think and act like the entrepreneurs they back are better suited to select the ones who understand how build a successful start-up and have the most chances of succeeding.

Likewise, entrepreneurs should expect more from themselves, their teams and their investors. Entrepreneurs need to understand what is expected from the capital they raise and they can do this by selecting the right potential investors and doing due-diligence on them, by understanding the ecosystem they are operating in and making sure they surround themselves with people who are stronger than themselves, and generate stronger returns by setting themselves up for success.

High but achievable expectations create and define leaders!

Entrepreneurs are natural leaders, because they are able to execute on ideas, they transform opportunities into tangibles such as jobs, products and profits. So by having more entrepreneurs funding other entrepreneurs, we have more chances of building a sustainable ecosystem. It takes time to build a viable company, and by understanding the type of returns that are expected from the different source of funding, entrepreneurs and fund managers alike will be able to create a model that works.

The venture capital model is broken only to those who don’t understand it
those who aren’t willing or interested in investing the energy to adapt it to their reality. Like other industries, the venture capital industry will continue to evolve over time.

I’m looking forward to seeing the level of returns over the next five to 10 years as the Canadian venture capital industry begins this evolution – where entrepreneurs are funding entrepreneurs

Now, some questions for you:
- What do limited partners think of the emerging number of entrepreneurial driven Venture capital Funds?
- What do entrepreneurs think of the new breed of entrepreneurial VC’s?
- Is the Canadian market mature enough to trigger the level of collaboration required to build a strong ecosystem around Canadian technology companies?
- What is expected by the entrepreneur of the early stage VC’s (other than the obvious $)?
- How will you be part of the “make it Happen” generation?

For those interested in participating, take a look at the following few links to recent articles and you’ll get a feel for the energy and around the subject:
The Mark: The Future of Venture Capital in Canada
La Presse: Jacques Bernier, de Tralys: le goût du risque
Tech vibes: Venture Capital Funding Outlook In Canada
Financial Post: Venture capital finally gets a break
TechCrunch: Strength In Numbers: Canadian Entrepreneurs Flock To The C100
CVCA: Canadian Venture Capital Investments in 2009 – Lowest recorded in 13 Years
StartupNorth: What is being a startup really about?
Bootup Labs: Startup Visa Canada

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Following March 4th Canadian federal Budget, Deloite released a comprehensive summary (Link to full release) of the impact of the changes to the Taxable Canadian Property better knowned as Section 116, which is outlined below.

The CVCA Applauds Budget Decision to Remove Foreign Investment Barrier (CVCA release Link).

“The CVCA has long requested the elimination of Section 116 as it pertains to the venture capital and private equity industry and we wish to congratulate the federal government for taking action,” said Gregory Smith, President of the CVCA. “Many CVCA members, as well as a large number of individuals and organizations, have been actively encouraging the federal government to eliminate this section of the Income Tax Act which has had a dampening effect on cross-border venture capital and private equity transactions. Its removal provides an important signal to foreign investors that Canada welcomes their contributions to growing companies and employment.”

Note that there were also a number of highlight’s from the Canadian government’s Throne Speech and Budget that may have a direct impact on the technology landscape of Canada. TechVibes did a good job of summarizing the main Tech elements (Link to blog here)

Deloitte. SUMMARY

Government removes tax barriers and stimulates flow of capital across Canadian border

Canadian companies across the country are likely applauding today’s federal budget, which contains tax law changes that give them the advantage they need to compete on the global stage.

By amending the definition of “taxable Canadian property” to exclude shares of Canadian private companies (where not more than 50% of their value is derived from real property in Canada, Canadian resource property or timber resource property), the government has significantly reduced administrative and, in some cases, economic barriers to foreign investment in Canadian-based innovation and technology. This change puts Canada at the top of the list of places to invest globally.

“The changes in tax legislation announced in today’s budget are among the most significant changes to capital gains taxation since the introduction of taxation of capital gains in 1972,” explains John Ruffolo, Global Tax Technology, Media & Telecommunications Leader, Deloitte. “The Canadian government has listened to the financing community, understood the severity of the problem and removed the major tax barriers that have prevented critically needed international investment capital from crossing our borders.”

“At a minimal cost to the government, this amendment will have an immediate, positive and direct impact on Canada’s ability to grow a robust Canadian technology industry,” explains Terry Matthews, Chairman, Wesley Clover. “By sending a clear message to international investors that Canada is “open for business”, the government will make Canadian companies more attractive to foreign investors overnight. This will help Canadian companies raise the capital they need to achieve global leadership status.”

The change means a much more welcoming environment for foreign investors. In the vast majority of cases, non-residents who were not taxable on the disposition of their investments in such shares due to Canada’s broad international tax treaty network, are now exempt from tax under Canadian domestic law without having to apply for treaty relief.  As a result, they are no longer required to comply with the Section 116 tax clearance certificate procedure or file a Canadian income tax return. The changes also remove what were perceived to be insurmountable barriers for many venture capitalists who considered the previous administrative requirements and economic delays for each investor to be strong deterrents to investing in Canada.

“The removal of the Section 116 tax barrier is a tax master stroke by the Canadian government enabling Canada’s emerging technology companies to access deep pools of international capital and the vast global customer markets to which those pools are connected,” notes Stephen Hurwitz, Partner, Choate Hall & Stewart LLP in Boston. “I predict that over time this farsighted tax legislation will help propel Canada’s extraordinary technology into global industry leadership in numerous markets, and will likely be viewed in the future as a defining moment for the Harper government in Canadian innovation.”

BACKGROUND INFORMATION ON THE SECTION 116 TAX BARRIERS

The following describes the tax barriers that were removed in today’s budget and that are no longer preventing international investment in Canada:

• Withholding and Section 116 certificate process — The overwhelming majority of foreign VCs are not subject to Canadian tax when they sell an investment, but face a delay of many months to work through the Section 116 tax clearance process until funds can freely flow to them. Many foreign VCs are structured such that each of the investors in the VC — sometimes hundreds or even thousands — is subject to this clearance process as if they held the investment directly. This delay results in lower returns and frequently causes direct financial loss to investors. Canadians who invest in the United States, the United Kingdom and other major global markets do not face such taxes or delays from red tape.
• Requirement to file Canadian tax returns by foreigners who don’t owe taxes creates hundreds of pages of unnecessary paperwork — Canada imposed tax filing requirements in circumstances where no taxes were payable by these investors. When a foreign VC sells an investment, each investor of the foreign VC has to file a Canadian tax return even if they don’t owe any taxes. This results in literally hundreds of pages of documents that are required for signature and processing for a single sale. This tax return filing issue also applies to certain Canadian public companies.

Why Canada was perceived by VCs as having an unfavourable tax environment

A 2007 survey by Deloitte and Canada’s Venture Capital & Private Equity Association (CVCA) of 528 VCs from around the world found that 40% of U.S. respondents and 28% of global respondents cited Canada’s unfavourable tax environment as a key reason for not investing in Canadian companies. This level of concern is five times higher than for any other country in the survey and reflects the current investment crisis within Canada’s venture capital industry. The survey also found that Canada is attracting the attention of just 11% of U.S. VCs as a primary country for expansion — behind China (34%) and India (24%).

Please find the full release by Deloitte Here. EAVB_THMQKZAOUO

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Re-post by Jevon MacDonald for StartupNorth

I first met John Stokes a few years ago when he landed on to the Canadian startup scene and started talking about his new fund Montreal Start-up. In March 2008 they raised a small initial fund which they quickly deployed in to some nice deals in Montreal including Status.net and Whatsnexx.

John and the team, which includes Austin Hill, announced today that they will be taking commitments from the Quebec Government (through Investissement Quebec) at $50 milion, Solidarity Fund QFL, which is investing $33 million, and by FIER Partners, which plans to invest $17 million.

The fund still needs to raise over $8million directly from LPs, which Investissement Quebec seems to think will be a snap and done in 4 months, but I am not so sure. I hope I am proven wrong.

In case any potential LPs are reading this right now, here is my advice: Do this one. Do it because this team is going to do more than just pass the time humming over deals — you will get hustle, an aggressive attitude and a group that understands that Canada needs more hustle and less of the same old.

John and the team are connected and tuned in to the community. Early stage entrepreneurs trust this team and they are the kind of guys who can get your money in to some great opportunities.

Congrats and good luck.

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Re-post by Mark McQueen for the Wellington Financial Blog

March 3rd, 2010

Today’s Throne Speech contained a passage that will excite our friends John Ruffolo, of Deloitte, Stephen Hurwitz, of law firm Choate in Boston and Yaletown’s Steve Hnatiuk (Chair of the CVCA Tax Policy Committee). For several years, these three, along with the help of countless others in the venture capital industry, have tried to help the Federal Government understand that Section 116 of the Tax Act served as an unnecessary barrier to foreign investment.

In a nutshell, Section 116 required the limited partners of U.S.-based venture capital funds to make individual tax filings with Canadian tax authorities when a Canadian VC investment was sold, even though there would be no tax to pay as a result of bilateral tax treaties. To some, this was such a hassle that certain VC firms wouldn’t look to invest in Canada as a result.

The CVCA has long lobbied to have this dealt with, as one facet in our broad Commercializtion Support Program.

In yesterday’s Throne Speech, this reference caught everyone’s attention:

Our Government will open Canada’s doors further to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need.

Continued on the Wellington blog (Link here)

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Re-Post by David Crow for StartupNorth

Mantella Venture Partners launched today.It’s a $20MM early stage technology fund based in Toronto.

“Unlike most venture funds that are supported by institutional investors, this one is backed by Mantella Corporation, a family owned commercial and residential real estate developer who has been entrenched in the GTA market since 1946. The fund is also focused on the concept of ‘hands-on capital’, ensuring that early-stage entrepreneurs get the hands-on support they need at every stage of a company’s creation and growth to help facilitate”

The main investment partners are Robin Axon and Duncan Hill. Robin is ex-Ventures West and Ducan was an EiR at Ventures West and previously had founded Think Dynamics (acquired by IBM back in 2003). They also run Basecamp Partners/Labs where they have been incubating PushLife, Chango and a couple of other startups.

It’s interesting to see an emerging breed of Canadian incubators and small funds like Mantella VP, Extreme VP/Xtreme Labs, Bootup Labs, Flow Ventures, Montreal Startup, Wesley Clover, and others. All of these have very different models and motivations. But they exhibit the need many startups have in both getting to Product/Market Fit and then the business development and go-to-market efforts. Both of these efforts require capital, and it’s great to see VCs that traditionally don’t get their hands dirty with operational details down in the weeds.

Full press release below.

TORONTO—March 2, 2010—Mantella Venture Partners announced today the formation and launch of a $20M investment fund to support early stage technology ventures in Ontario. Mantella Venture Partners is a collaboration between Basecamp Labs, a private early stage technology accelerator, and Mantella Corporation, an established family-owned commercial and residential real estate developer in the Greater Toronto Area.

Mantella Venture Partners will invest in entrepreneurs who are building early stage mobile and Internet software companies, helping them to get their ideas from conception to market. Through the Basecamp Labs accelerator, Mantella Venture Partners will provide hands-on support at every stage of a company’s creation and growth – from business development and marketing to financing and team development – to help facilitate early market traction.

Mantella Venture Partners is managed by Robin Axon and Duncan Hill, the founding partners of Basecamp Labs, experienced venture investors and company creators who have been involved in multiple successful venture exits to companies like IBM, Intel, Microsoft and Siemens.

“For the past few years, we’ve seen a steady decline in Canadian venture capital deal flow, the number of VC-backed firms, and the average investment size,” says Axon.  “In fact, according to a recent CVCA report on the industry, investment levels in 2009 were the lowest they’ve been in 13 years.”

“But innovation is still thriving,” says Hill. “With the venture market in such a state of flux, the timing could not be better for the launch of a new fund that is focused on both early-stage investing and providing the hands-on support entrepreneurs need to ensure market success.”

The existing Basecamp Labs portfolio includes two companies: Chango, an ad buying platform for direct response advertisers; and Pushlife, a mobile entertainment platform for mobile operators.

“The value of combining capital with guidance and support from a team with extensive experience building companies, can be seen in the progress of our first portfolio companies,” says Robert Mantella, president and CEO of Mantella Corporation. “Robin and Duncan are experienced investors and entrepreneurs who are passionate about technology and know what it takes for a start-up to succeed. Together we can breathe new life into a changing venture industry.”

Duncan Hill was the Founder and Chief Technology Officer of Think Dynamics, a developer of data centre automation software that was acquired by IBM in May 2003. He spent two years at IBM driving strategy for early enterprise cloud computing. Most recently, Hill served as Entrepreneur in Residence at Ventures West; was an independent director for RapidMind (acq. by Intel August ’09); and was executive advisor to Opalis (acq. by Microsoft December ’09). He currently serves on the Chango board of directors and on executive advisory boards at Pushlife, ServiceMesh, Cirba, Embotics, and the Velocity program at the University of Waterloo.

Prior to founding Basecamp Labs with Duncan Hill, Robin Axon was a partner at Ventures West on the IT and communications team. Before that, Axon was at MD Robotics (formerly Spar Aerospace) and the Canadian Space Agency, where he helped to prepare the Canadarm2 for installation onto the International Space Station. Axon has served on the boards of a number of technology companies including: QuickPlay Media, RapidMind (acq. by Intel August ’09), AudienceView, Fortiva (acq. by Proofpoint ‘08), Chantry Networks (acq. by Seimens ‘03), Belair Networks and Instrumar.

About Mantella Venture Partners
Mantella Venture Partners is a $20M early stage investment fund with a hands-on approach to building technology companies in high growth markets.  The fund invests in founders focused on creating market-altering mobile and Internet software businesses, and surrounds them with an ecosystem of passionate, experienced operators that drive early market engagement into sustainable business success. Mantella Venture Partners will invest up to $500k at inception with the ability to support subsequent rounds as required. It is managed by Robin Axon and Duncan Hill, experienced venture investors and company creators who’ve been involved in multiple successful venture exits to companies like IBM, Intel, Microsoft and Siemens. Additional information is available at http://mantellavp.com/.

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Re-posted from Suzanne Dingwall Williams blog at Venture Law Lines

A consistent theme in Canadian innovation policy is the need to attract more foreign venture capital to underwrite our local start-ups. This is based on the theory that there is lots of venture capital willing and able to deploy cash north of the border. It’s a relativistic theory that is deeply flawed, and as yesterday’s Wall Street Journal hinted, one that becoming more foolhardy for the Canadian government to rely upon.

One of the largest sources of funds for VCs and Private equity players in the US ahs been CALPERS, the largest public pension fund in the United States. CALPERS manages more than $200 billion or so in assets and is reponsible for generating returns that will fund the pension payments to be made to retired California public employees.

In order to generate enough cash to meet these pension obligations, CALPERS typically targets investment that will generate an annual average of 7.75% return on its investments. Generating that rate of return consistently has led CALPERS over the last 15 years or so to make high-risk, high-yield investments in private equity and venture capital funds. As a result, CALPERS has become one of the largest sources of fuel for the North American venture capital industry, providing more than $25 billion to those fund managers our governmetns hope to attract up here.

However, it now appears that this fuel source may be tapping out. Last year, CALPERS announced that it was reducing the number of funds that it invested in. And yesterday, CALPERS revealed its proposal to reduce the targeted return on new investments to 6%.

If adopted, this target reduction would allow CALPERS to focus on more traditional, conservative investments – in other words, away from the venture capital funds that Ontario and the federal government are seeking to attract.

This week’s federal budget will be an opportunity to assess how self aware Canada’s Government is about what will (or can) feed investment in our innovation economy. Will the budget provide the means for local growth? Or will it dangle bait over a drying up river bed?

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