Digital Media Venture Capital Fund

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Soumis par Guy Mayson 2010-07-07 20:28:15 HAE

Thème : Le contenu numérique canadien
Côte de l'idée : +5 | Total de votes : 7 | Commentaires : 1

I read the Digital Economy Consultation Paper with interest and have been impressed with much of the thoughtful comment that it has provoked. I was particularly pleased that issues surrounding the challenges of creating content were given equal space with issues of technology and infrastructure.

Improving access to financing, and venture capital in particular, is a recurring theme in the document and something that many components of the digital media industry have in common. The traditional media industry has always been seen as high risk investment and access to private investment has proven elusive for many Canadian content creating companies. Content creation funding programs have been essential to the creation of quality content but largely project driven, and most media companies are living from production to production. The economic downturn has clearly aggravated the difficulties of accessing private capital, and venture capital industry is also clearly struggling right now. At the same time, the digital economy is exploding worldwide and the opportunities are enormous. The market is now worldwide and better access to capital will be a key component in helping position our emerging media companies for that market.

I would like to see the federal government take some leadership on this issue and look at jump starting the creation of a Digital Media Venture Capital Fund, and provide a structure which would encourage Canadians to invest in it. It could be shaped around existing provisions in the Income Tax Act relating to Labour Sponsored Venture Capital Funds, which provide both federal and provincial (those who participate) tax credits, and the investment is also RRSP eligible. The government could provide a one-time capital injection (as it did with the original Working Ventures Fund) but the balance of the Fund's investment capital would be raised from individual private investments. The attraction would be tax advantages but also the possibility of annual returns/dividends from a balanced portfolio of fund investments. I think many Canadian investors would also be attracted to the idea of investing in the growth of the digital economy, and the future of their country. The mandate of the Fund would be to invest a certain percentage of its resources in digital media companies. It would be professionally managed by expert staff at arm's length from government and industry, responsible to a knowledgeable Board of Directors, and tasked with the challenge of investing the funds resources in the best possible media companies.

Clearly this is only a sketch and there is much to be studied further here. I think it is wise that the government will undertake a review of the venture capital market and its accessibility to media content companies, as indicated in the "Opening The Doors to Other Sources of Financing" section in the consultation document. I am also well aware that the Labour Sponsored Venture Capital model is seen as complex and bound by many requirements and regulations that have rendered them unattractive to investors, and undermined their success historically. It may well be that a simpler model may be more effective. What I think is useful to at least consider in the LSVCC type model is that it represents an existing mechanism within the Income Tax Act to attract private investment to a venture capital fund, which could be devoted to investing in the digital media sector; and it does so through a fiscally responsible mechanism (tax credits, the cost of which is shared, in partnership between the federal and provincial governments.

I would like to see some further analysis of this kind of approach, as the Departments of Industry and Canadian Heritage continue the development of the government's Digital Strategy. Encouraging access to private investment and venture capital needs to be a central pillar of that strategy to give our digital media companies the tools to compete internationally, and to contribute to their future growth.

Commentaire


wesleyl — 2010-07-08 23:42:42 HAE a écrit

This suggestion is somewhat consistent with an article in this month's Harvard Business Review:

The Big Idea: How to Start an Entrepreneurial Revolution (en anglais seulement)

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