As someone who waves the flag for Canadian startups, the injection of more capital is always a good thing.

But the question is whether the money should come from the Canadian government. With the launch of the “Venture Capital Action Plan”, the federal government plans to inject $400-million in new capital over the next seven to 10 years, which works out to $40-million to $57.1-million a year for the accountants out there.

The $400-million breaks out this way:

- $250 million to create new, large private sector-led national funds of funds in partnership with institutional and corporate strategic investors, as well as provinces that want to get into the game.
- Up to $100-million to recapitalize existing large private sector-led funds of funds, in partnership with interested provinces.
- Investment of up to $50 million in three to five existing high-performing venture capital funds in Canada.

Now, there are people who don’t believe public money should be spent this way. After all, why should taxpayers’ money flow into privately owned companies. Isn’t that the responsibility of the private sector?

Personally, this is not a huge issue given the federal government already supports startups through vehicles such as the R&D tax credit program. And then there’s the Business Development Bank of Canada, which has an active venture capital arm putting money into dozens of startups, and the FedDev program.

But, more important, anything that can jump-start the startup ecosystem is a positive development.

As much as everyone likes the idea of Canada transforming itself into a New Economy player, startup entrepreneurs are still struggling for financial support to turn ideas into companies into well-paying jobs. While there are many good things happening, more can be done to support startups across the country.

In addition to government money, it would be good to see institutional and corporate capital flow into startups. For the most part, institutions are still sitting on the sidelines, licking their wounds from a 10-year period in which they had terrible returns from VC investments.

But times have changed, the startup ecosystem has become more active, multi-faceted and mature, and the time is right again for investors to explore the landscape.

What do you think? Should Stephen Harper be in the VC business?

Links:

- iNovia’s Chris Arsenault applauds the federal government’s decision for revitalizing the VC sector.

Source:  here