Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Summit 05 Presentations 12c Leduc, Marc


Published on

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

Summit 05 Presentations 12c Leduc, Marc

  1. 1. Rethinking the Government's Role NAO, Ottawa, October 2005 in the Realm of Venture Capital
  2. 2. <ul><li>The private sector’s presence is too limited </li></ul><ul><li>A costly approach for the government </li></ul><ul><li>An approach centred on economic development and job creation </li></ul>Observations
  3. 3. <ul><li>Review the mandates of government-owned corporations </li></ul><ul><li>Support the emergence of private-sector funds and attract more extensive foreign investment </li></ul>
  4. 4. Review the mandates of government-owned corporations
  5. 5. <ul><li>Overview and observations : </li></ul><ul><ul><li>The SGF’s basic mission is to take minority interests in major projects in the conventional and high-technology sectors. </li></ul></ul><ul><ul><li>In the wake of a government decision in 1998, it accelerated the pace and broadened its field of intervention. </li></ul></ul><ul><ul><li>Public funding totalled $1.3 billion between 1998 and 2002 and losses between 2001 and 2003 stood at $767 million . </li></ul></ul><ul><ul><li>The management structure was cumbersome (12 subsidiaries) and shortcomings in governance have been noted. </li></ul></ul>
  6. 6. <ul><li>Measures adopted : </li></ul><ul><ul><li>Streamline the structure by integrating the 12 subsidiaries. </li></ul></ul><ul><ul><li>Refocus the mandate on equity interests in major projects (capital outlays of over $20 million). </li></ul></ul><ul><ul><li>Self-finance operations by liquidating mature investments and reduce administrative expenses. </li></ul></ul>
  7. 7. <ul><li>Overview and observations: </li></ul><ul><ul><li>There are three VC corporations specializing in high tech in the Montréal, Québec City and Sherbrooke regions. </li></ul></ul><ul><ul><li>A fourth corporation supports innovative projects in other regions of Québec based on natural resource development. </li></ul></ul><ul><ul><li>The overall portfolio comprises 300 investments centred on firms in the start-up phases . </li></ul></ul><ul><ul><li>The government is the sole shareholder and losses totalled $232 million for fiscal years 2001-2002, 2002-2003 and 2003-2004. </li></ul></ul>
  8. 8. <ul><li>Initiatives in respect of Montréal : </li></ul><ul><ul><li>Private capital has entirely replaced public funding. </li></ul></ul><ul><ul><li>The acquisition by Coller Capital, which is committed to investing up to $200 million in new funds, was completed in March 2005. </li></ul></ul><ul><ul><li>Part of the Innovatech team has been maintained and is managing the portfolio on behalf of Coller Capital, which has opened a business office in Montréal. </li></ul></ul>
  9. 9. <ul><li>Policy directions for the other three regions : </li></ul><ul><ul><li>The corporations are being reorganized into three mixed capital corporations (private- and public-sector capital). </li></ul></ul><ul><ul><li>The government is investing the existing portfolio and using it to attract private-sector capital. </li></ul></ul><ul><ul><li>Private-sector capital is making it possible to increase the total capital available to businesses. </li></ul></ul>
  10. 10. <ul><li>Initiatives aimed at these three regions : </li></ul><ul><ul><li>The Société Innovatech Régions ressources was converted into a mixed capital corporation. The private sector (Desjardins) will contribute $30 million, which will make it possible to double the existing portfolio. </li></ul></ul><ul><ul><li>The process is under way in respect of the Innovatech corporations in the Québec City and Sherbrooke regions </li></ul></ul>
  11. 11. Encourage private-sector funds and attract more extensive foreign investments
  12. 12. <ul><li>Observations : </li></ul><ul><ul><li>Private funding is still scarce in Québec, especially outside the Greater Montréal area. </li></ul></ul><ul><ul><li>The business communities in the regions have indicated their willingness to participate in the establishment of funds. </li></ul></ul><ul><ul><li>There is a consensus that it is important to invest upstream from these funds in order to structure projects in outlying regions. </li></ul></ul>
  13. 13. <ul><li>Measures adopted : </li></ul><ul><ul><li>Regional section : </li></ul></ul><ul><ul><ul><li>support for the creation of regional funds dedicated to business start-ups ($156 million); </li></ul></ul></ul><ul><ul><li>Sectoral section : </li></ul></ul><ul><ul><ul><li>support for the establishment of sectoral funds dedicated to business start-ups ($80 million). </li></ul></ul></ul>
  14. 14. <ul><li>Regional section : </li></ul><ul><ul><li>Regional funds ($156 million): </li></ul></ul><ul><ul><ul><li>$2 in government funding for each dollar in private-sector funding (corporations, angel investors ); </li></ul></ul></ul><ul><ul><ul><li>maximum government contribution of $10 million; </li></ul></ul></ul><ul><ul><ul><li>potential to raise $234 million ($156 million + $78 million); </li></ul></ul></ul><ul><ul><ul><li>a limited partnership accredited by the government; </li></ul></ul></ul><ul><ul><ul><li>up to $500 000 in equity and quasi-equity per business; </li></ul></ul></ul><ul><ul><ul><li>five-year exemption by the government on interest and return on capital. </li></ul></ul></ul>
  15. 15. <ul><li>Sectoral section : </li></ul><ul><ul><li>Sectoral funds ($80 million): </li></ul></ul><ul><ul><ul><li>$40 million from the government and $40 million from retail funds; </li></ul></ul></ul><ul><ul><ul><li>FIER will invest one dollar for every $2 in private-sector investment; </li></ul></ul></ul><ul><ul><ul><li>maximum contribution of $10 million from FIER; </li></ul></ul></ul><ul><ul><ul><li>potential to raise $240 million ($80 million + $160 million); </li></ul></ul></ul><ul><ul><ul><li>a limited partnership; </li></ul></ul></ul><ul><ul><ul><li>equity; </li></ul></ul></ul><ul><ul><ul><li>traditional and high-technology sectors. </li></ul></ul></ul>
  16. 16. <ul><li>Overview and observations: </li></ul><ul><ul><li>As of December 31, 2004, the CDPQ had assets totalling $174.7 billion under management, making it Canada’s biggest institutional fund. </li></ul></ul><ul><ul><li>The CDPQ has made available venture capital in recent years. In October 2004, it adopted a new venture capital investment strategy by investing more extensively through private-sector partners whose performance ranks in the first or second quartile. </li></ul></ul><ul><ul><li>The CDPQ wishes to thus enhance its performance but also to help give an impetus to the Québec venture capital industry. </li></ul></ul>Caisse de dépôt et de placement du Québec (CDPQ)
  17. 17. <ul><li>Policy directions of the CDPQ : </li></ul><ul><ul><li>outsourcing of the existing $375-million portfolio; </li></ul></ul><ul><ul><li>$200 million in new private-sector funds over the next three years (20% stake); </li></ul></ul><ul><ul><li>$150 million in co-investments over the next three years (30% stake); </li></ul></ul><ul><ul><li>$20 million in technological business start-up funds (20% stake); </li></ul></ul><ul><ul><li>overall leverage effect of $1.5 billion. </li></ul></ul>Caisse de dépôt et de placement du Québec (CDPQ)
  18. 18. <ul><li>Overview and observations: </li></ul><ul><ul><li>There are three retail funds in Québec that play a key role in the industry: </li></ul></ul><ul><ul><ul><li>the FSTQ and Fondaction, which are labour funds; </li></ul></ul></ul><ul><ul><ul><li>Capital régional et coopératif Desjardins (CRCD), attached to Desjardins. </li></ul></ul></ul><ul><ul><li>In 2004, investments made by these funds accounted for 42% of all investments made in Québec. Foreign, governmental and private-sector investments trailed far behind, i.e. 16%, 15% and 8%, respectively, in 2004. </li></ul></ul><ul><ul><li>Until now, the three retail funds have hardly invested in private independent funds in Québec and to an even a lesser extent abroad. </li></ul></ul>Retail funds
  19. 19. <ul><li>Measures adopted in the latest Budget : </li></ul><ul><ul><li>Modification of investment standards to encourage retail funds to invest in local and foreign private-sector funds in order to support the government’s strategy to support private-sector funds. </li></ul></ul><ul><ul><li>The size of businesses eligible for investments from retail funds is being increased to better cover needs for more extensive financing during the growth and expansion stages. </li></ul></ul>Retail funds
  20. 20. <ul><li>Observations and measures adopted : </li></ul><ul><ul><li>The government has set as its objective to increase foreign investment. Changes in the investment standards governing retail funds and the CDPQ’s strategy are concrete examples of this commitment. </li></ul></ul><ul><ul><li>The government is also supporting an event designed to draw closer together Canadian and American venture capitalists. In 2004, 55 American venture capitalists and nearly 40 Canadian venture capitalists attended the Canada-US Venture Capital Conference. </li></ul></ul><ul><ul><li>The event’s partners want the 2005 gathering to initiate a genuine North American venture capital summit conference in which venture capitalists and pension funds participate. </li></ul></ul>North American Venture Capital Summit
  21. 21. <ul><li>Fortier Committee (development of university R&D) </li></ul><ul><li>Discussions underway on financing for start-ups </li></ul><ul><li>Follow-up to the report entitled  Finding the Key on participation by pension funds </li></ul><ul><li>Broader participation by angel investors </li></ul><ul><li>Obstacles to be removed concerning foreign investors </li></ul>