Two main impediments stand in the way of a more active venture capital market: the availability of subsidized government financing, and a fractured and difficult securities regime.
The Atlantic premiers have proposed the establishment of a regional venture capital fund. They argue that Atlantic Canadians are deprived of sufficient access to venture capital. This would be corrected by the fund, the argument goes, with the added benefit that it could spark private sector activity by increasing expertise in the region. The fund would be managed on a commercial basis and would involve the Atlantic Canada Opportunities Agency and the major banks as coinvestors.
This paper argues that the proposal addresses only the symptom – a perceived shortage of venture capital – rather than the root causes underlying the problem. The key questions which should be addressed are:
