Long-awaited venture capital fund restart

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The Manitoba business community reacted with a mixture of happiness and relief when the Progressive Conservative government included in its recent provincial budget the creation of a new venture capital investment fund. The happiness that there would be a new source of capital for start-ups; relief that the provincial government is finally back in the venture capital game.

For much of the past 17 years, most business lobbies have insisted on the urgent need for some sort of government-sponsored venture capital fund to replace the infamous Crocus investment fund, which collapsed. under the weight of controversy in 2005.


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The Crocus fund has launched many successful local businesses.

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The Crocus fund has launched many successful local businesses.

For most of its existence, Crocus has been the darling of Manitoba investors and businesses. The former liked the idea that there were strong federal and provincial tax credits that came with any purchase of Crocus stock; the latter applauded a local source of capital for businesses born and raised in Manitoba.

In the fund’s first four years, it raised and invested more than $200 million in what would become some of Manitoba’s most important local businesses. As an added benefit, many of these companies agreed with Crocus to create in-house equity programs that allowed rank-and-file employees to acquire stock in the companies they worked for, generating enormous wealth that would otherwise have been inaccessible to these employees.

It all came crashing down in 2004 when the fund, amid a bitter internal battle over its management, issued a cease trade order over concerns that some of the investments were overvalued. An investigation by Manitoba’s Auditor General confirmed these concerns, but apparently ignored the successful investments Crocus had made.

History clearly shows that Crocus helped incubate and grow some of Manitoba’s most important companies, including Wellington West Capital (a private wealth management company with tens of millions in assets, later acquired by National); Truth North Sports and Entertainment (owners of the NHL’s Winnipeg Jets, AHL’s Manitoba Moose and the Canada Life Center in downtown Winnipeg); and CWB National Leasing (one of the largest equipment leasing companies in North America).

The most consistently told version of local history suggests that Crocus was a fatally flawed plan; business insiders, however, know that its winners far exceeded the number and value of its losers. It is largely for this reason that many groups in the business community mourned the loss of Crocus and demanded that the provincial government create a replacement.

The most consistently told version of local history suggests that Crocus was a fatally flawed plan; business insiders, however, know that its winners far exceeded the number and value of its losers.

For many years, governments on all sides have been reluctant to do so for fear of being accused of trying to resurrect Crocus. This year, however, Prime Minister Heather Stefanson made a bold move: while her predecessors had all shied away from the topic of venture capital, she had the courage to step forward and respond to the business call.

The new fund, which begins with $50 million in seed money from taxpayers, will grow with investments from other venture capitalists. Professional fund managers who bring capital to the table will be rewarded with government investments on an individual basis. There is also a vague promise that individual investors could participate in the new fund and receive a 45% provincial small business tax credit.

Ms. Stefanson’s commitment to a new venture capital fund scratches an itch that the local business community has felt for a very long time. Now is the time for fund managers and entrepreneurs to show that all that new money can be put to good use.

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