Canada wants startups. Each province begs entrepreneurs to launch tech companies on their soil through tax breaks, grants, mentorship programs, “incubators” and “accelerators.” What they can’t offer is capital.
Canada doesn’t have a lot of venture capital firms, and the VCs we do have are known for being fickle, thrifty, conservative and nervous. Compare that to Silicon Valley, where the hot strategy is to throw caution to the wind, seeding dozens of ideas with a little bit of cash instead of pumping millions of dollars into a few cherry-picked concepts. No wonder why our best developers head down south to launch their ideas.
There’s no way for government to suddenly compel an investment firm to loosen up and grow a pair, but there is one thing legislators can do to turn the VC tap on: legalize equity crowdfunding. If any Canadian could buy a small piece of a nascent startup, hundreds of millions of dollars in private capital might be quickly released into our startup ecosystem. Last week, Brad Duguid, Ontario’s Minister of Economic Development and Innovation, announced his intention to make it happen…..eventually. Current securities regulations (throughout Canada) prevent private companies from soliciting funding from (non-wealthy) individuals, as these companies aren’t subject to the same scrutiny as publicly traded companies. Equity crowdfunding will require exemptions from these laws, province by province. In Ontario, Minister Duguid promises a consultation document on the issue early next year. Actual implementation could take years.
Until then, if you live in Ontario (and you are not a millionaire), here are some investment options: you can gamble all of your money on the stock market and you can gamble all of your money on a business launched by a friend or family member. But you cannot buy a $100 stake in a company launched by a stranger with an amazing idea. It’s for your own good.
Follow Jesse on Twitter @JesseBrown
Tuesday, December 4, 2012