by Karen Atkinson, Partner Business Tax Services, Ernst & Young LLP

Chair, ITAC Tax and Finance Committee

This week federal Finance Minister Jim Flaherty announced the selection of the high-performing venture capital funds in which the Government will invest the $50 million it had identified for this purpose in its Venture Capital Action Plan.

This announcement has some good news for the ICT sector. Two of the firms selected—Summerhill Ventures and Lumira Capital—are focused on investments in ICT. Summerhill will receive a $15-million investment and Lumira $10 million. With any luck, this stimulation will start to ease the chill in capital markets emerging companies in our sector have been feeling.

This relatively small amount of funding is part of the total package of $400 million in funding for the Venture Capital Action Plan announced in the 2012 Federal Budget. Larger allocations are targeted for other funds—for example, $250 million has been identified for a large private sector-lead fund of funds and $100 million is earmarked for the recapitalization of some private sector funds. The disposition of these allocations is still to be determined.

In our pre-budget submission this year, ITAC called for an acceleration of the action plan. We respect the fact that the Government is working hard to this much needed stimulus right. We have said and the Government recognizes that $400 million is not going to be enough. So the determination to work with private sector partners leverage this amount something truly substantive is wise. So is using the whole action plan as a communications opportunity to educate the whole investment sector on VC. But this does seem to be taking a long time. Perhaps we are being impatient. Perhaps this $25 million will herald the beginning of an uptick in VC activity.