News | TMX study looks at innovation funding woes

TMX study looks at innovation funding woes

 February 21, 2017

Globe and Mail reports on roundtable recommendations to close growth funding gap.

Canadian growth companies face a $4-billion funding shortfall compared with U.S. rivals that should be filled by tapping the country’s pension plans, banks and insurers, according to a study due to be released Tuesday and backed by the TMX Group Ltd.

A roundtable made up of Canadian venture capitalists, bankers and executives from the country’s largest pension funds found that domestic entrepreneurs are good at launching leading-edge companies but struggle to scale up the businesses compared to peers in the United States and Britain, in part due to a lack of capital.

The study found that over the past decade, the capital available to Canadian growth companies has declined and domestic companies are now only able to access approximately a third as much money as their U.S. counterparts, with the gap growing as businesses get larger. The roundtable estimates $1­billion is needed to fund growth at early stage Canadian companies to match the financing available to U.S. and British businesses, and a further $3­billion is needed to boost more mature innovation companies, which are currently not growing as quickly as they should due to a lack of money for investment.

This money could be found by creating a private­ sector “innovation growth fund” backed by pension plans and large financial institutions and renewal of the government­ led Venture Capital Action Plan, which sees private­ sector capital blended with government money to fund growth companies.

“This is a call to action for institutional investors, for financial institutions, for government and for exchanges,” said Salil Munjal, chairman of the Advancing Innovation Roundtable and managing partner at Vancouver ­based venture­ capital firm Yaletown Partners. He added: “We are not trying to say that every innovation company should be funded. This must be a returns­ driven discussion.”

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Author: Andrew Willis, Globe and Mail