Why no flow-thru shares for Canada's Innovation economy?

The 14 year decline in venture capital funding for Canadian-based innovation companies continues, with the 2009 3rd quarter VC funding stats as bleak as people expected. What to do?

Although the Canadian Venture Capital & Private Equity Association has developed five key ideas that, as a package, could help reinvigorate the Innovation financing scene (see prior post “CVCA letters to Messers Flaherty, Clement and Ignatief” December 26-08), there’s no end of other choices for the federal government to consider in the lead up to the 2010 Budget.

Name Canada’s two strongest industries? Mining and Oil & Gas. Who has access to this unique financing tool? Mining and Oil & Gas exploration companies. Why not allow flow-thru shares for Innovation companies?

While it’s true that a clean tech company can file for a SR&ED claim, those often amount to less than $1 million in any given year, and the money must be spent before you can hope to send the filing in to CRA. But, if you’ve got a developing O&G property and investor interest for $20 million…you’re off to the races witha flow-thru offering.

Kinda explains why no one ever complains about capital contraints in that part of the economy.

I read in the Daily Telegraph this morning that Barrick Gold’s CEO believes the world is running out of new gold to find, and that ore grades have falled 75% since 1950 at the North American and Australian mines.

The Canadian economy cannot live off the land anon. We need to find new ways to create jobs and grow the economy, but our tax system is stuck favouring firms who dig things out of the ground, and not the start-up firms who create the mining technologies that make those mines and wells more efficient, extending their life.

Why the double standard?

We chatted about that very topic, along with a few others, on Kim Parlee’s SqueezePlay show last evening on BNN Business News Network. You can see the clip here. As an aside, as much as Clearwater CEO John Risley is a talented businessman, he’s also damn good on television!

I’m a fan of package deals, so how about this? An Atlantic Canada flow-thru share Innovation Fund headed by Mr. Risley?

MRM