Details have emerged on how the federal government will use its funds to help startups, announced in the budget.
Prime Minister Stephen Harper has released new details on how a budget line item of $400 million ear-marked to help startups will be spent, a Globe and Mail article reports.
With access to capital long being a commonly cited challenge of Canada’s entrepreneurial community, the federal government is looking to kick in some funds to help bridge the gap between a startup business’ business plan and becoming a self-sustaining operation. Here’s how the $400 million will be divvied up:
$250 million will create new funds led by private sector investors. These funds must have institutional and corporate strategic investors that will work with interested provinces.
$100 million will be put aside to recapitalize existing large private-sector funds.
$50 million will be invested in three to five existing, high-performance Canadian venture capital funds.
On Twitter, the Prime Minister said “Our Venture Capital Action Plan will create jobs&growth (sic) by improving access to capital by high-growth companies.”
It’s fitting the announcement was made on the set of Dragon’s Den as the government has now set the stage for private funds to give it their best pitch to get access to part of the pie. Not only will existing funds be looking to tap the government money, but experienced investors will be mobilizing to put together a consortium that can manage the bulk of the new money available.
In Canada, $400 million is nothing to sneeze at when it comes to investment dollars. It represents a significant boost to the fundraising scene and will likely find its way to dozens if not hundreds of startup firms eventually. It remains what sort of red tape funds will have to navigate in order to spend the government coin.