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A ‘Bay Street’ sign is displayed in the financial district of Toronto, Ont. (Credit: Stephanie Foden\/Bloomberg files) <\/p>\n A ‘Bay Street’ sign is displayed in the financial district of Toronto, Ont. (Credit: Stephanie Foden\/Bloomberg files) <\/p>\n
A new organization of early stage investors wants to have a say in how Ottawa doles out the $750 million it has reserved for startup support<\/a>.<\/p>\n The core mission of the Canadian Startup Capital Association (CSCA), which was formed on Wednesday, is to help founders and startups grow through greater and improved access to capital, CSCA executive director Jesse Wiebe said.<\/p>\n \u201cWhen we look at the different types of startups that are out there, there\u2019s a variety of different capital pathways that they can go down. Not everything is venture capital<\/a> and not everything needs to be the next Shopify or Google,\u201d he said. \u201cSometimes we want to be building companies that are $25 million, $50 million and $100 million in value and that\u2019s great, too.\u201d<\/p>\n The CSCA said it represents more than 3,500 active investors, from smaller VC funds to angel investors<\/a> and family offices, across six provinces and $750 million in direct early stage capital deployed. Its 19 founding members include seed-stage firms such as Boreal Venture, Audaxa Ventures Inc. and Spring Activator Inc., alongside tech and startup groups like Startup TNT, the Firehood and Antler Canada.<\/p>\n The federal government\u2019s budget earmarked $1.75 billion for the domestic startup ecosystem, directing $1 billion to the Venture and Growth Capital Catalyst Initiative (VCCI), which is managed by the Business Development Bank of Canada, and reserving $750 million for early stage growth capital.<\/p>\n Wiebe said the CSCA\u2019s members hope to see 10 per cent to 20 per cent of the $750 million directed to early stage companies through angel, pre-seed and seed funds, as well as programs that link startups with investors and customers and help them commercialize intellectual property<\/a> coming out of the universities.<\/p>\n \u201cTwo-thirds of that would be for a truly emerging fund manager pool of funds. They will still be required to have a track record, but if they\u2019re raising up to a $5-million fund, they should be able to get around $2.5 million on top from this pool of funding,\u201d he said. \u201cThat would allow a lot more solo (general partners) and micro-funds \u2026 that are doing critical work on the ground.\u201d<\/p>\n Other groups have different ideas on how to best allocate the $750 million.<\/p>\n The National Capital Angel Organization (NACO), which has more than 4,000 angel investors and 100 early stage investment groups, has proposed a $500-million pre-seed and seed-stage fund-matching program, whereby government funds will match one-third of an angel investment in a startup, and a $250-million \u201cearly stage infrastructure initiative\u201d to support 125 angel networks.<\/p>\n The matching program will allow founders to spend \u201cless time raising capital (and) more time building,\u201d Claudio Rojas, chief executive of NACO, said during a recent roundtable. \u201cThat\u2019s the difference between surviving and thriving, between a company barely making it over the valley of death or entering its Series A from a position of strength.\u201d<\/p>\n The Canadian Venture Capital Association (CVCA), meanwhile, wants Ottawa to funnel the $750 million to Series B and growth-stage companies and private equity and focus on sectors such as artificial intelligence<\/a>, quantum, aerospace and defence, it said in a letter to Ottawa in February. It said concentrating capital on these companies and industries will help scale Canadian \u201cchampions\u201d and reduce their reliance on foreign capital.<\/p>\n Wiebe said the CSCA\u2019s proposal draws from what it has heard from the government and \u201cwhat they\u2019ve indicated they intend for the funding to go.\u201d<\/p>\n Government support for startups also needs to be supplemented by the private sector, according to VCs and startups. Pension funds and high-net-worth individuals and families in Canada should \u201cabsolutely\u201d be tapped, he said, adding that more awareness on investing in Canadian innovation could create more early stage investment.<\/p>\n \u201cThe pool is so large that we should be seeing far more angel investors, limited partners, family offices and emerging fund managers in Canada,\u201d Wiebe said. \u201cIf we\u2019re going to build a better Canada, we need to be investing more of our capital here at home.\u201d<\/p>\n