Taking part in the federal election process, the Canadian Venture Capital and Private Equity Association is pleased to offer its views on priorities ahead of the 2019 Federal Election.
The Canadian venture capital and private equity industry plays an instrumental role in improving the standard of living of Canadians by catalyzing the investments required to accelerate job creation, innovation and productivity from coast to coast. As the authoritative voice of the industry, the Canadian Venture Capital and Private Equity Association (CVCA) appreciates the opportunity to relay the priorities of our members for the 2019 Fall Election.
The CVCA represents over 1,500 individual members and over 260 member organizations. As Canada’s ultimate resource for data on Canadian private capital investments, the CVCA proudly links venture capital and private equity firms, debt and equity providers, international investors, institutional funds, government entities, angel investors and family offices. We bring all the pieces together to keep our industry engaged, fluid and strong.
Our members invest in Canadian companies at every stage of their development: from start-up, through scale-up and international expansion, to exit. In addition to investment, our members also provide Canadian companies with the key ingredients to business growth, including the talent, management, connectivity, experience and know-how that Canadian entrepreneurs require and rely on to succeed in a competitive global marketplace.
The strategic impact of our industry is supported by the results its produces. Simply, Canadian venture capital-backed companies have stronger sales growth, revenue growth, employee growth, asset growth, wage growth and R&D expenditure growth than their non-venture capital-backed counterparts. The same assertion holds true on the private equity side. Buyout transactions also have significantly outsized positive and lasting impacts on innovation through patents, productivity, governance, wage increases and management practices.
Recognizing the importance of the venture capital and private equity industry, the Government of Canada has taken several steps in recent years to improve the ecosystem for private capital. Specifically, the CVCA applauds the government’s actions to improve access to global talent, stimulate innovation and increase public funding for strategic investments in Canadian entrepreneurs and small businesses.
However, in a highly competitive global marketplace, no nation can afford to rest on its laurels. This is especially true for Canada, as we compete with our neighbours to the south for global investment, talent and brand recognition. It is in this context that the CVCA shares with you our priorities for the 2019 Fall Election:
Globally Competitive Tax & Investment Regime. To attract and retain domestic and global investment Canada must maintain and continually enhance its tax regime. This is especially true as we compete directly with the U.S. for venture capital and private equity dollars. To improve Canada’s competitive posture, the CVCA recommends that your Party:
Ensure the Canadian corporate tax rate remains competitive, specifically in relation to the U.S., so that Canadian business can reinvest in its people, technology and export potential.
Evaluate the impact of any potential changes to the interest deductibility rules on the international competitiveness of Canadian companies. These changes could have a detrimental impact on many Canadian companies, which could impact jobs and the growth of these businesses in Canada.
Move towards a more competitive personal tax rate, specifically in relation to the U.S., so that Canadian businesses can attract and retain the highly skilled talent required to grow and scale their businesses.
Maintain or enhance the capital gains tax regime to ensure it is competitive with the U.S. and designed to encourage and reward investment – investors take risks when allocating resources to start-up, scale-up and growth companies and, accordingly, they should be incentivized and rewarded for such risk.
In regard to outbound investment, work with the industry to ensure that barriers to Canadian foreign investment are addressed in a coordinated and comprehensive fashion (e.g., collaborate with industry to mitigate the potential negative impact of the current proposed regulations related to the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) that will expand the powers and application of the Committee on Foreign Investment in the United States (CFIUS) process).
Attract and Retain Global Talent: The competition for global talent is fierce. Human capital is paramount to translating investment capital into market value. Without the right people, the full potential of our business and innovation ecosystem will not be realized. Canada must be vigilant in producing home grown talent, while attracting and retaining the best and brightest from around the world. To accomplish this the CVCA recommends that your Party:
Maintain and build upon the success of the Global Talent Stream Visa Program. This program enables Canadian companies to access the highly skilled global talent required to grow and scale their businesses. A demonstrable example of the success of this program is Vanhack, a Vancouver-based online recruitment platform, which has had 65% of their global tech talent placed in Canada, directly benefitting from the Global Talent Stream program, compared to only 2% of their placements in the US.
Maintain and expand upon the Start-up Visa program that enables our members to confidently facilitate the entry of skilled entrepreneurial talent into Canada, thus delivering important growth and partnership opportunities to Canadian entrepreneurs and small businesses. The Venture Capital stream of the Start-up Visa program has experienced steady growth, with the CVCA and IRCC now supporting 22 funds across 5 provinces.
Invest in regional and national professional networks to cultivate and retain the senior domestic talent required to grow and scale successful start-ups into global companies. Current skills requirements expand well beyond the CEO – there is need for senior sales and marketing leaders to work in, with and mentor our successful entrepreneurs and start-ups.
Increase Canadian Venture Funding: The Venture Capital Catalyst Initiative (VCCI) and its predecessor the Venture Capital Action Plan (VCAP) have significantly strengthened the Canadian venture capital ecosystem, while also yielding significant returns for both the Government of Canada and the private funders. Additionally, these programs have been leveraged to encourage investment in sectors that require patient capital, including new fund managers, underrepresented groups, women and cleantech. The CVCA recommends that your party build on this policy and investment success by:
Articulating that a healthy domestic venture capital industry is important to the Canadian economy and is a priority of your party
Committing to a long-term, strategic public investment plan for the Canadian venture capital industry to ensure we develop and sustain a robust domestic private investment industry.
Expanding strategically upon the Venture Capital Action Plan (VCAP) and the Venture Capital Catalyst Initiative (VCCI), both of which create significant leverage to attract private sector investment by focusing on sectors that require targeted attention namely health, biotech and agtech.
These are fundamental issues to maintaining and enhancing a competitive environment for the Canadian venture capital and private equity industry. In turn, the CVCA will be closely monitoring these issues in the upcoming election campaign. We would welcome your thoughts on these issues and would be happy to sit down to answer any questions you or your team have regarding the Canadian venture capital and private equity ecosystem.