It was called the investment attraction fund but, for years, the $15 million in public money it offered did not attract much new investment for Newfoundland and Labrador businesses.
“The fund wasn’t being used. We couldn’t seem to make it happen with $15 million. I think the most we ever got out the door is $5 million, but it averaged four or five million,” said Terry French, Minister of Innovation, Business and Rural Development, in response to questions on the latest provincial budget Thursday.
This year’s budget includes the response to year after year of having money left on the table, from the program meant to use public investment to leverage private dollars for startup companies in the province.
Having tried the route of a government program to engender companies, the province will now make the move into privately managed venture capital.
The government has opted to take money from the existing investment attraction program and place it into two separate funds.
The first will be a regional fund, where the Government of Newfoundland and Labrador will contribute $10 million towards an overall pot of $60 million.
The other $50 million will come from the other Atlantic provinces, the federal government and select private investors.
Few details were released on the second venture capital fund the province will invest in, being called Venture Newfoundland and Labrador, except to say it will be used to help provincially based technology companies and start-ups.
Also, it will be created in partnership with Growthworks Atlantic, the Newfoundland and Labrador Angel Network and other, unnamed investors.
Details on the Venture Newfoundland and Labrador fund “will be announced in the near future,” according to the government documents.
French said the announced $10 million in spending into the regional fund will be spread over five to seven years.
“The $10 million is not a $10-million cheque today,” he said. “The first portion I think is $2.9 million,” French said
A venture capital fund typically includes a limited number of investors. The idea is the fund manager then takes their money and invests it into a portfolio of select businesses, working with the companies, fostering growth, to provide returns for the investors.
“We know there’s a demand out there,” said Darryl Genge, with the Department of Innovation, Business and Rural Development.
“We don’t have a lot of private-sector investment in venture capital in the province right now,” he said, suggesting success with the public investment could draw in more private dollars, private funds.
Venture capital is considered high-risk investment. French said start-up companies supported through venture capital showed as little as a 20 per cent success rate in the long run.
However, he said, the successes can be big, with a small collection able to spur whole new business sectors.
On the new investments, French said he believed the public would be made aware of what companies were being provided public money.
But he could not promise the money put to the regional fund would ultimately go to Newfoundland and Labrador companies.
Sharon Horan, chairwoman of the St. John’s Board of Trade, acknowledged there is no 100 per cent guarantee Newfoundland and Labrador companies will benefit directly from the regional fund.
“But we think that the business ideas that have been coming forth locally — they’re as good as any in Atlantic Canada. So there’s no reason for us to believe that we can’t compete with our other Atlantic Canadian counterparts, on the entrepreneurial side, to gain access,” she said.
“The thing is that we know in order to sustain this economic boom that we have, we need diversification, we need to bring new business ideas, we need to create new industry here and the venture capital fund is going to help us.”
Horan was particularly pleased with the Newfoundland-focused fund.
And yet, despite the St. John’s Board of Trade-sponsored Newfoundland and Labrador Angel Network being named as a partner in the new fund, Horan said she was still without any details.