BDC makes further cuts to VC team
BDC Annual Report Review Part 3
Oy-yoy-yoy!
Remember when I reported on cuts to the venture capital team at the Business Development Bank of Canada (see prior post “What happened to the VC $ at BDC?” June 18-08)? That was 2008, and it appears that the cuts have continued, according to BDC’s new financial statements (pg. 82).
Salaries and Benefits 2010
Financing group: $186.2 million (vs. $153.8 million in 2009)
Consulting group: $16.2 million (vs. $15.3 million in ’09)
Subdebt group: $12.5 million (vs. $9.9 million in ’09)
Venture Capital group: $8.5 million (vs. $9.2 million in ’09)
Got that? The salaries and benefits of every group within BDC rose last year, except for the VC area. Remarkably, BDC’s consulting team is now twice as expensive as the VC group.
It appears that Canada is suffering from a SME consulting shortage, nay crisis, right now. Who knew?
In a move we applauded, the federal government granted BDC $250 million last year to support the VC portfolio (see prior post “Clement moves to fund BDC’s existing venture portfolio” June 15-09). BDC now expects an additional $125 million in fiscal 2011 and $100 million of fresh capital in fiscal 2012 (pg. 51). Ever more cash is coming from the Conservative government, but how stretched will the BDC VC team be?
BDC spent $8.5 million on salaries and benefits in 2010 to manage a FMV portfolio of $362 million. Thanks to the Federal Cabinet, $475 million more is being made available for investing over a 36 month period.
How can that be effectively deployed with a smaller team? And if the challenge of doing new deals is fairly blamed on a lack of syndicate partners, as BDC EVP Jacques Simoneau advised La Presse newspaper a few days ago (see prior post “Venture Capital advances drop 33% at BDC in fiscal 2010 part 2” Sept 27-10), most of Minister Tony Clement’s $475 million won’t be deployed until that’s fixed.
Perhaps the solution is to redirect that new money into five or ten private sector VC funds, or spin out the BDC VC team altogether (see prior post “An idea for McKinsey & Co.” July 8-10) and let them do their jobs.
One thing’s for sure, the trend is not your friend.
MRM
You know who really IS the entrepreneur’s friend? EDC. Here is a Crown corporation who took their expanded mandate to heart, and has been investing and actively supporting start-ups since the last budget.
I am fascinated by the governance aspect of BDC’s activities. Who scrutinizes implementation of a budgetary mandate like the one handed them by Tony Clement? Why is it ok to ratchet down?