When Canada’s leading venture capitalists gather in Halifax this week, one hot topic will be a $750 million tug-of-war over the best way for Ottawa to support the innovation economy.

The Canadian Venture Capital and Private Equity Association, or CVCA, is hosting its annual Invest Canada conference in Halifax Tuesday through Thursday. It will be the first time the CVCA has met on the East Coast since Tom Hayes, then the head of GrowthWorks Atlantic, chaired the conference in Halifax in 2007.  It’s also the first Invest Canada conference to be held since Benjamin Bergen, the former President of the Council of Canadian Innovators, became the new Chief Executive of the CVCA in January.

The Invest Canada meeting comes at a critical time for Canada’s innovation economy. Both the CVCA and the National Angel Capital Organization, or NACO, have released data in the past month showing a weak environment for investing in high-growth companies. And both these organizations are lobbying the federal government on the most effective way to deploy a $750 million wad of cash earmarked for startups and high-growth companies in the federal budget.

See also: Data shows angel funding is weak both regionally and nationally.

The budget in November pledged $1.75 billion to spur the country’s innovation sector. One billion dollars of that total are earmarked for the fourth iteration of a program dating to about 2010, which will now be called the Venture and Growth Capital Catalyst Initiative, or VGCCI. It’s essentially a fund-of-funds that would invest directly in venture capital funds and incentivize institutional investors like pension funds to back VC as well. The other $750 million is to be used, according to the budget, for a new strategy “to support Canadian firms facing early growth-stage funding gaps.”

The problems arise from how you define “early growth-stage”.

While both NACO and CVCA are pleased that the VGCCI will replenish Canada’s venture capital funds, they disagree on how the $750 million tranche should be used.

The CVCA defines “early growth” as Series B funding rounds or later and says the $750 million should be used to fund “champion” companies so that the country’s most successful startups can find major funding at home. In its most recent report on VC funding, the association noted an “absence” of Canadian Series D rounds or later in the first quarter. 

NACO, which held its annual Summit in Ottawa this month, wants the focus on early-stage companies, saying we can’t have large companies without first supporting small companies. It’s advocating $500 million of this figure should be used for a matching fund that would invest $1 for every $2 invested in pre-seed- or seed-stage companies by an angel investor in a recognized network.

It would like the remaining $250 million to finance a five-year operational funding initiative to develop the infrastructure needed to identify, educate and support angel investors. The goal is to develop a national framework of angel investors to support early-stage companies, which are suffering from severe funding weakness right now.

"“The $250 million is critical to seeing that the matching fund is truly national,” said NACO Chief Executive Claudio Rojas in an interview. “Angel networks bring resilience to the ecosystem. The $250 million would establish more regional strength and has the potential to bring serious multiplying power to the matching funds.”

One note from an East Coast perspective: this region does not have a broad-based angel network spanning all four provinces. NACO executives say the $250 million could help develop the operational infrastructure for a group in Atlantic Canada, which would enable the deployment of more private capital.

The waters have been muddied somewhat as a third national group, the Canadian Startup Capital Association, has emerged recently under the leadership of Saskatoon-based angel investor Jesse Wiebe. According to the Globe and Mail, it is looking for about $75 million to $150 million to encourage more wealthy people to become angel investors and develop the infrastructure needed to support them.

The Invest Canada delegates will no doubt be listening for hints on how this problem will be resolved on Thursday morning, when Finance Minister François-Philippe Champagne will be interviewed by Bergen in a fireside chat.