There’s a civil war brewing in the land of Canadian startup investments.
What happened: A new lobbying group for startup investors launched yesterday called the Canadian Startup Capital Association (CSCA). Comprised of 18 founding members, it will seek to shape the debate around how federal money should be used to support startups.
Catch-up: In last year’s budget, Ottawa set aside $750 million to bolster startups and scaleups in the “early growth-stage.” This maddeningly vague descriptor has facilitated a schism between Canada’s two top VC lobbying groups: the Canadian Venture Capital and Private Equity Association (CVCA) and the National Angel Capital Organization (NACO).
CVCA has focused on the “growth” part, arguing the money should go to startups in Series B and later stages. According to its own research, CVCA has pointed out that domestic funding in these stages is scarce, with U.S. firms typically stepping in.
Meanwhile, NACO is all about the “early” aspect, arguing early-stage startups are struggling the most. It wants Ottawa to set up a $500 million matching fund program for said startups and use the rest to “professionalize” early-stage investors.
CSCA’s take splits the difference between these two competing visions, focusing on both sides of the equation. However, the group feels that the main problem that needs to be addressed isn’t a lack of funding, but a lack of coordination between founders and investors.
Why it matters: How this debate shakes out will significantly shape Canadian innovation in the future. Underfunding early-stage startups could mean fewer homegrown companies, but neglecting later-stage gaps could lead to the most promising startups leaving town.—QH
