Access to Capital

To push out into world markets, Atlantic Canada has to overcome its chronic, severe challenge in gaining access to capital. It is a complex problem, the amalgam of cultural, economic and regulatory issues. What is clear is that at every stage of the growth cycle – from seed funding, to growth capital to public and private equity markets – Atlantic Canadian companies have trouble raising the money they need.

We have seen stunning success in Atlantic Canada of firms like Radian6, Q1 Labs, Ocean Nutrition Canada and GoInstant.

– Early investors have exited with market leading financial returns that, it is hoped, can be reinvested back in the region.

– They represent what we can do, and have unleashed a wave of angel funding from inside and outside the region.

The Important Issues

BUT

Atlantic Canadian companies have trouble raising the money they need.

– Most years, Atlantic Canada receives less than 2% of the VC funding in Canada, though population accounts for 7% of total.

Atlantic Canadian companies rarely make use of certain kinds of available financing (e.g., subordinated debt or asset-based lending) – and companies tend not to consider the public markets in their strategy.

– Of the 3800 publicly listed companies in Canada, only 47 are based in Atlantic Canada (1.2%).

The Important Issues

The splintering of provincial efforts is particularly problematic in raising capital.

– The region comprises four small provinces, with regulatory patchwork providing little or no harmony among the various agencies.

– Equity tax credits offered only to residents of the particular province in which the target company is based…and the credits’ effectiveness is blunted by low caps on dollar amounts.

No industry association is speaking for the interests of start-ups and innovative high-growth companies across the region.

The Important Issues (continued)

What’s Needed

This region requires a new way of looking at how business is done which include tax

changes, partnerships and creative funding models.

This region requires a new way of looking at how business is done which include tax

changes, partnerships and creative funding models.

Create a regional equity-investment tax credit.– Change the federal tax code to create a regional ETC, because it’s easier to get one

government to move on this policy than four. – individuals and corporate entities should qualify for the Small Business Investment Tax

Credit.– maximum income tax credit should be also increased from $75,000 to $150,000/year – Labour force restrictions on the tax credit should be removed.

Banks should collaborate with federal and provincial lending agencies. In some instances governments may be providing capital to companies who are good candidates for bank and other private financing sources. This type of collaboration may lead to additional government financing in the areas which companies need to the most, the early stage of market and business development.

Our “Big Ideas”

Create an organization that can speak with authority to government, private sector finance partners and start-ups on the best, most efficient way to advance start-up companies’ ability to access capital

Work with provincial governments to unify the four provinces’ securities commissions, eliminating the four-tier fee structure for companies and brokers

Create a private-sector led organization develop an ecosystem of high-growth companies across the region to create stronger linkages to external networks such as Silicon Valley, angel investors, Canadian venture capital funds, universities, and other players in the system

Build a kind of New East Partnership among the four provinces to support a better business climate– The idea is not to give up provincial autonomy, but to create a harmonized economic

zone to allow free flow of people, goods and capital.

Our “Big Ideas” (continued)

Push for more consideration of public listings. Both private companies and governments must do more to ensure Atlantic Canadian companies exploit one of the world’s best markets for capital – the Canadian public equity markets.

Advocate immigration policies to encourage entrepreneurs to adopt Atlantic Canada as their home.

– Request governments in the region to extend the time period to set up a business to give immigrants longer to assimilate.

– Lower the bar for assets and investable assets to allow more people with entrepreneurial spirit to come.

Our “Big Ideas” (continued)

The big ideas outlined are appropriately ambitious, hopefully exciting, but they are not “blue-sky impossible” – far from it.

They will flow from the collective product of thousands of personal actions taken by committed, passionate individuals like us who want Atlantic Canada to succeed in the changing and challenging world arena.

On the following slide is a list of some things you can do, as a business leader in our region, to help create a better Atlantic Canada.

What You Can Do

Make an equity investment in a private company in your region

Contact your MLA/ Department of Finance to support the recommendation that both individuals and corporate entities should qualify for the provincial SBITC; and remove any labour force restrictions on the tax credit.

Develop stronger links with other tech and start-up communities, and encourage more events within the region

Organize or host an event to connect entrepreneurs and investors

Be a mentor to a start-up

Consider if you could be an angel investor in an Atlantic region start-ups

Include an Atlantic Canadian start-up in your RFP process

What You Can Do

Thank you for your help with this important

initiative