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Step in the right direction for Canada VC

March 18, 2010

The Canadian VC community in Silicon Valley (which may be larger than the Canadian VC community in Canada) is all abuzz about the recent changes in the Canadian tax code.

The much hated section 116, which levied a 25% tax on foreign investor gains, is about to go the way of the US hockey Olympic gold dreams (sorry, I couldn’t help myself… I’ll stop now, promise.)

But the main challenge to the whole Canadian start-up and VC ecosystem hasn’t really been access to capital. There is and has been waves of liquitiy swishing around up there through various goverment and private programs.

The main probelm, which US-based Canadian VC Rob Chaplinsky quickly alludes to in the embedded video, is that the ecosystem has suffered due to poor returns.

Canadian start-ups have been too timid to grow and Canadian VCs have been too eager to sell. The result has been small companies that have either died or sold too early at discount prices. Hardly stuff that excites people looking to invest in the next Google.

So is 116 deep-6ing good news? Yes. It is a step in the right direction? Sure. Will it change much? Maybe a little.

But if you really want to get things going, let’s start seeing some really good companies with aggressive growth ambitions that hold the promise for outsized returns.

If the returns are there, VC would flow North with or without 116.

U.S. venture capital eyes Canada as tax wall falls – MarketWatch.

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From → Canada, Technology

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