Tories earn points for venture capital promise

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This article was published 11/04/2022 (990 days ago), so information in it may no longer be current.

Manitoba has finally found its way out of the venture capital desert.

In its budget on Tuesday, the provincial government said it will make available $50 million for a venture capital program that will be managed by third-party professionals.

Details were sparse, including how it will work, how many separate funds will be created, who will manage them, or even eligible target investments, but Finance Minister Cameron Friesen was clearly enthusiastic in acknowledging the significance of the development.

“I can’t say too much about it but I can say I am pleased we are going to be entering back into that space,” Friesen said. “It’s going to be different this time.”

More than 15 years ago, the province’s Crocus Investment Fund was placed in receivership followed by a series of embarrassing political revelations that has made every successive government shy away from getting back into that business.

A national venture capital organization has documented that Manitoba is the beneficiary of just one per cent of venture capital invested in the country, a far less proportion than its 3.6 per cent of the country’s population.

Department officials said details on how the funds will work be announced soon; they indicated they will be managed by third-party professionals selected in a manner that one official said would be “very transparent.”

The budget also made permanent the venture capital tax credit for small businesses, which was set to expire at the end of this year. The maximum investment eligible for that tax credit has been increased to $500,000 from $450,000.

Investors in that program will be able to participate in the venture capital funds.

“This is a massive move,” said Bram Strain, CEO of the Business Council of Manitoba. “We are one of a couple of jurisdictions that do not have a venture capital fund… and other provinces have been eating lunch. This puts us on a competitive playing field.”

Friesen said the province will likely invest more over time.

Marshall Ring, CEO of the Manitoba Technology Accelerator, said, “Traditional venture capital models would see that $50 million total leveraged which would bring more than $50 million into the province.”

While the budget did raise the threshold for the hated payroll tax to $2 million (from $1.75 million in fiscal 2021-22 and $1.5 million in 2020-21), which will benefit 970 employers including the exemption of 180 employers, small business advocates were underwhelmed by the Tory government’s budget.

“In general I would give it a C grade,” said Chuck Davidson, CEO of the Manitoba Chambers of Commerce. “We were hoping to see something in the budget that might help business and give then that confidence over the course of the next number of months. It will be at least a year before most businesses are back to pre-pandemic levels. Our hope was that we could speed that up with today’s budget.”

Kathleen Cook of the Canadian Federation of Independent Business, said she was happy to see the increase to the exemption threshold for the payroll tax, but for small businesses that are already exempt, the budget does not add anything.

“If you are a small business owner, you are feeling squeezed by inflation, labour shortages and supply-chain disruptions and under a mountain of pandemic–related debt. There is nothing in this budget to help you,” she said. “Even the cost relief measures like the education property tax rebate is great for homeowners and farmers, but it does nothing for small business.”

The finance minister acknowledged the importance of skills training, as did budget documents, but no additional funds were budgeted.

Budget documents make reference to the development of a new strategy to grow mineral exploration and the mining industry, but there are no details and there is no new line item of expenditure. Industry players will be consulted.

martin.cash@freepress.mb.ca