Stephen Harper needs to remember something he used to know – government shouldn’t be in the business of picking winners and losers in the market.
It’s a recipe for wasting money, because government planners are usually not the best judges of how to allocate capital in a dynamic economy.
On Monday, Mr. Harper elaborated on a series of venture capital measures that were originally included in the 2012 omnibus budget. They basically boil down to giving $400-million to private-sector venture funds to invest in Canadian startups.
Mr. Harper claims external consultants will administer the program. But this is still government picking winners – hiring consultants and asking them to allocate money to a very narrow range of investment opportunities.
What this shows is that the Harper government still doesn’t understand the challenges facing the Canadian venture capital market. This is worrisome. There are anecdotal reports of Canadian venture funds lacking access to capital, but this is for a simple reason – investors have noticed they feature inconsistent and weak returns.
In fact, Canadian venture capital funds have trailed the market ever since the dot-com crash, and attractive venture investment opportunities are scarce. All this $400-million will do is suppress returns even more, and crowd private dollars out of the market.
Programs such as this Venture Capital Action Plan, with their flashy price tags, are a distraction so that Canadians don’t notice the Harper Conservatives have very few ideas to improve our economy and productivity. They ignored the incremental, everyday work of government on which businesspeople tell us they want Ottawa to focus.
I’ve had the opportunity in my past career as a technology lawyer to work on many startups. I know what it takes to get new businesses off the ground.
For starters, we need meaningful reforms to the Research and Development (R&D) credit, which the Mr. Harper cut in his last budget, to make it available to more companies.
We should also be exploring innovative ways of encouraging our young people to take risks and follow their dreams: for instance, we could increase the R&D credit for companies controlled by entrepreneurs under the age of 30. Or we could grant entrepreneurial young people grace periods in paying back their student loans so that they have the time to build exciting new companies.
What we need more of is not necessarily venture capital, but more successful entrepreneurial ventures in the first place – then the capital will follow. We need to encourage startups spinning out of universities and colleges that take the research from the lab they just graduated from, and then deliver the development to solve real needs for customers from around the world.
Governments can play a key role here in bringing people with diverse experience and expertise together. Let’s look abroad and build better bridges with expat Canadians in startup hotspots like Silicon Valley, Israel and India – we need them to stay connected here, mentor our new entrepreneurs, and, yes, invest private venture capital.
For a good example of building connections at home, look at the Digital Media Zone at Ryerson University – a great place for budding entrepreneurs to seed their new businesses, creating real products and services.
Hiring consultants to throw our money around isn’t the answer. World-class companies are forged in basements and garages, and that’s where policymakers should focus in order to build a better Canadian economy. That’s how to make Canada can work better.
George Takach is a candidate for the federal Liberal leadership.