Improve access to capital and continue supporting our competitive tax system and research environment
Access to capital is essential for technology companies to succeed in a competitive global marketplace.
We know that talent, research, customer discovery, and growth all depend on the availability of capital. We want to make sure that early stage companies with viable products, services, or research with great market prospects are not forced to fold or leave the province because of a lack of financing. This is a particular concern for companies in information and communications technology, life sciences, and cleantech.
We want companies to have sufficient access to local venture capital in order to realize their growth potential in the province.
We need to invest. We’ve surveyed venture capital best-practices in jurisdictions throughout the world, and we are putting $100 million toward expanding venture capital in British Columbia.
This is not a subsidy. This will be an investment. As an investor, we expect this venture capital to spur commercialization and to grow companies with the potential to provide a significant return to the province in the years ahead.
Early Stage Venture Capital Funding
We are continuing our long history of backing the province’s technology sector through investment.
In 2007, we deepened the pool of venture capital in the province with the B.C. Renaissance Capital Fund (BCRCF), a fund of funds now invested in eight private venture capital firms with a particular focus on information technology, digital media, life sciences, and cleantech. The mandate of the BCRCF was straightforward: create economic development and generate superior financial returns.
Of the original funding ($90 million), $69 million has been invested in over 30 companies, contributing to the creation of over a thousand jobs. Beyond this, the fund’s capital has been leveraged through coinvestment with other funds to the tune of over $308 million, including investment money attracted from outside of the province.
Since the fund’s establishment in 2007, the landscape of investment and venture capital has changed and so have the funding needs of technology companies. While there continues to be an active angel funding presence in the province and a significant rise in late stage investment, Series A investment has not kept pace.
In the #BCTECH Strategy, we envision having a suitable supply of local venture capital aimed at promising early stage companies, drawing outside capital into the province for co-investment.
Following consultation with industry, we are investing $100 million in a new fund to address the Series A funding gap and revitalize early stage venture capital in B.C. – we also recognize the need for access to capital at later stages for continued company growth. The capital will be available to make local investments, to leverage capital from other jurisdictions, and to enable technology companies to commercialize, grow, and prosper in the province.
The venture capital fund initiative will not only address the short term early stage funding gap in B.C., it will also build a stronger venture capital system in the longer term by leveraging capital from other investors and promoting awareness of B.C. as a robust, locally based venture capital system.
Continue our Competitive Tax Rates and Credits
Over and above a low provincial corporate tax rate of 11%, and combined federal and provincial rate of 26%, we have tax incentives for business. We want more tech companies, investors, and entrepreneurs to make use of them.
Unique in Canada, our Small Business Venture Capital Act provides provincial income tax credits of up to $33 million each year to persons that invest in shares of a registered venture capital corporation or in an eligible business. These tax credits support investment of up to $110 million annually.
The Small Business Venture Capital Act tax credits include the Business Creation Tax Credit, introduced in 2012, which provides up to $3 million in tax credits every year.
This credit supports $10 million invested in businesses that are less than two years old.
We want to increase the number of tech companies utilizing tax credits such as the Digital Animation or Visual Effects (DAVE) credit, a 17.5% tax credit designed to encourage domestic and international productions to hire B.C. talent for digital animation and visual effects projects, and the Interactive Digital Media Tax Credit (IDMTC), which offers a 17.5% tax credit on eligible B.C. labour costs for companies that produce interactive products that educate, inform, or entertain.
Continue to Build a Strong Research Environment in B.C.
The Province recognizes the importance of government investment in a healthy research environment and the opportunities that can arise, and the broad benefits that can accrue, from cutting-edge research.
B.C. has a high-calibre health research environment. This infrastructure leads to breakthroughs in areas like cancer treatment. Through organizations like Genome BC and the Michael Smith Foundation for Health Research, we will continue to attract and keep top research talent, train human capital, build new knowledge and then translate the results of this work into leading health practices.
We also want our entrepreneurs to continue to use federal financial assistance programs, such as the National Research Council’s Industrial Research Assistance Program. This program is open to small- and medium-sized companies that plan to grow through the development and commercialization of innovative technology products, services, or processes.
Federal tax credits applicable to B.C. tech companies are also valuable. Meant to encourage scientific and technological innovation, the Scientific Research and Experimental Development Tax Incentive Program (SR&ED) gives Canadian-controlled private corporations an investment tax credit of 35% up to $3 million on qualified expenditures for basic research, applied research, and experimental development.
Read the #BCTECH Strategy for more information including a full list of #BCTECH Strategy actions and BC Tech success stories.