The VC Market in Canada
Effi Enterprises is a venture capital firm founded by entrepreneur, Efraim Landa. As an entrepreneur, Mr. Landa knows firsthand the struggles of starting and funding a business venture. He established Effi Enterprises in order to provide VC funding for emerging businesses that can also benefit from his many years of successful experience. A VC firm provides capital for a business that has great growth potential. This investment offers a way of helping the business succeed while offering the VC firm a substantial return on their investment when the company makes its IPO. The goal is for the business to be able to move from its inception to the Initial Public Offering inside of 10 years. By that time the company should be able to be purchased at a large profit or offer its shares on the public market. Either way the VC firm stands to make a substantial profit for its investment in the company.
History of the VC Market in Canada
During the late 70’s and early 80’s investments teams were created by several types of financial institutions. Banks, insurance companies, pension funds, asset managers and a few corporations created corporate funding. There were very few investments made in technology and most teams provided capital for traditional sectors. Very few private independent technology funds begin in Canada prior to 1990. But in the 90s the focus shifted to what was then called “the new economy” and there was increased interest in innovation. Several factors influenced increases in VC funds including government policies which encouraged investing through tax credits. Funds began to go toward technology and mainly after ’95 private funds were invested primarily in technology. The fact that venture capital funds are invested more into institutional, retail, government and corporate ventures rather than technology is what makes Canadian VC firms very different from the rest of the world.
VC Market in Canada Today
In recent years, the venture capital market in Canada has experienced rapid growth. Venture capital has had an enormous impact on the Canadian economy. A large portion of the nation’s largest private and public technology companies have been backed by VC funding and these companies generate somewhere around 150,000 jobs. VC funded companies have significantly higher growth rates than those funded by other means. Because of the impact on the economy, public policy will need to be managed carefully to design interventions that help the venture capital market in the long term. There have been many interventions to date including changes to the Income Tax Act, the VC corporations program provincial tax measures and many other programs aimed at improving the VC market of Canada. Financial regulations have also been an influencing factor in encouraging investors to enter the venture capital market and it is likely that these will continue to be a part of the securities regulations reforms.
Future Predictions of the VC Market in Canada
The venture capital market’s success in Canada will depend largely on its ability to be able to attract funding from the private sector, on making good investments in the most promising companies and on yielding substantial returns to investors. The government will play a huge role in achieving these goals by its manipulation of public policy. The government can help sustain a solid VC industry by making sure that the industry does not have to depend on public subsidies. Government will need to offer just enough assistance to see growth without pushing too far, too fast which can end up with negative results. It is imperative that the Canadian venture capital industry balance out and allow industry to grow inside the context of the economy’s ability to provide and sustain investment opportunities.
Posted on March 26, 2013, in Business financing, economics, financial history, investing, VC financing, Venture Capital, venture capital success story and tagged VC funding, VC history, VC market, Venture Capital. Bookmark the permalink. Leave a comment.