The Newfoundland and Labrador government today unveiled a two-track policy to increase the equity funding of companies in Canada’s most easterly province.
Premier Paul Davis announced the program in a statement, confirming the previous announcement that the government of Newfoundland and Labrador would commit $10 million to Build Ventures, the Atlantic Provinces’ venture capital fund created last year.
The Premier also said the government would invest $10 million in the new Venture Newfoundland and Labrador, a private-public fund that will provide seed financing for young startups in the province. BDC Capital will contribute $2 million to the fund, and it will seek investment from private individuals through the Newfoundland and Labrador Angel Network. A person familiar with the project said the goal is for individuals to eventually invest a total of $2.5 million in the fund.
“For emerging growth sectors, such as ocean technology and other knowledge-based industries, these new venture capital funds will help improve the global competitiveness of companies, strengthen high-end employment opportunities and drive economic diversification throughout Newfoundland and Labrador,” said Davis in the statement.
The government has been aware that startups in Nova Scotia and New Brunswick have an easier time
finding seed funding than those in Newfoundland because of bodies like Innovacorp and the New Brunswick Innovation Foundation. These public agencies generally make seed investments of $200,000 to $500,000 in companies’ initial funding rounds.
Venture Newfoundland and Labrador is meant to provide a similar service in that province, with some differences.
First, it will have a private fund manager in GrowthWorks Atlantic. GrowthWorks already has several investments in Newfoundland, such as Virtual Marine Technologies, adfinitum Networks and ClearRisk.
“We believe the time is right for public and private investors to create this new pool of capital for budding entrepreneurs and we are very pleased to be involved in this exciting opportunity,” said Tom Hayes, President and CEO of GrowthWorks Atlantic in the statement.
People in the community say NLAN has previously had trouble finding lead investors to identify target companies, draw up terms sheets and lead the funding. In the future, such tasks would be taken over by the fund manager.
Second, local angels will also be able to invest in the fund, and will receive a non-refundable investment tax credit to do so. The Venture Capital Tax Credit will be worth 30 percent of the investment with a lifetime cap on the credit of $75,000 per person.
This new credit will worth 30 percent of the investment regardless of where the target company is located. Previously the Newfoundland and Labrador investment credit offered a higher tax credit for investment made outside the St. John’s region.
Build Ventures so far has received funding commitments from the four Atlantic Provinces, the Business Development Bank and private investors, who together have committed a total of $65 million.
Build so far has invested in tranches of $1.5 million targeting growth-stage, so the Venture Newfoundland and Labrador fund will obviously focus on early stage investments.
Entrevestor receives financial support from government agencies that support start-up companies in Atlantic Canada. The sponsoring agencies play no role in determining which companies are featured in this column nor do they have the right to review columns before they are published.
