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VANCOUVER, BC (December 8, 2015) – British Columbia is taking a leaf out of the federal government’s playbook with its announcement Tuesday of a $100-million technology innovation fund to fuel the venture capital market in the province.

“We have to find ways to ensure there are more success stories in tech, in this city and across the province,” Premier Christy Clark said in announcing the fund at an event at mobile ecommerce company Mobify’s Vancouver headquarters. “But it’s difficult to get a tech company started.

“Tech companies need four things: They need talent, they need markets, they need ideas and they need money. All of those things are areas where the government can’t do it all but government can support making sure that it happens.”

Government-sponsored venture capital is a widely used model, both in Canada and in other countries. James Brander, a professor at the University of British Columbia’s Sauder School of Business, co-authored a study earlier this year on the international record of government support for venture capital.

“As it happens government support of venture capital finance in the high-tech area is very common around the world,” he said. “Governments all over the place are in this business, including the government of Canada.”

Brander said his study’s findings may come as a surprise to people who expect such government spending isn’t productive.

“What surprised me and surprised a lot of people who normally study this stuff is that the record of governments in this area is not bad,” he said. “A lot of people expected it would be a waste of money.

“But this kind of investment has often worked out to be pretty good.”

Brander said the design and implementation of such programs is very important to their success.

“It’s quite possible this . . . might be a good investment,” he said. “A lot of government investments, you could say it’s a political deal, it doesn’t make economic sense — this is not one of those.”

Bill Tam, president and chief executive of the British Columbia Technology Industry Association, was among tech leaders who welcomed the announcement.

“It is such a super exciting day for us . . . . I think this announcement is very much about job creation and investing in the economic growth we see for the tech sector going forward,” he said in a speech at the event.

“This is probably the most sizable single venture capital investment in the history of British Columbia in this area,” said in a later interview. “There are many other jurisdictions that have done similar things. The B.C. government has consulted far and wide and they have taken the best of practices in other jurisdictions into account.”

In the most recent example, the federal government committed $400 million in its Venture Capital Action Plan, aimed at revitalizing the venture capital sector.

Among the initiatives that have come from that is the NorthLeaf Venture Catalyst Fund, a $300-million fund with private and public investment, including funds from the Canadian and Ontario governments along with institutional investors.

Tam spoke of the growing funding gaps, with dwindling amounts of venture capital available for companies that are ready to take that next step after their initial start-up and seed funding.

“We’ve observed over the last several years that the infrastructure and support for companies at early stages has really come of age,” he said. “As these companies have grown over time, what we’ve identified as a key funding gap is that first series of institutional funding, the Series A round.

“It can be in the range of $3 million to $10 million in size and it effectively allows a company that’s already in the market . . . to really escalate the rate of growth.”

Tam said in the mid 2000s, there would have been more than a dozen VC firms in this area, but with the downturn in 2008, that number has dropped to a handful.

Where there used to be about $250 million annually available in what Tam describes as “the Series A bucket,” now that amount has dropped to $40 million. That level of funding can make or break a company.

“We often find that first stage of capital is a pivotal point in determining the success or failure of a company,” said Tam.

Paris Gaudet is the executive director of Innovation Island, a Vancouver Island industry association and tech accelerator.

“It closes the funding gap,” said Gaudet. “Access to capital is the lifeblood of any tech company . . . this funding demonstrates a strong commitment to the tech sector.”

Igor Faletski, co-founder and chief executive of Mobify, a mobile commerce company in Vancouver, said he never imagined “the company we started in my mom’s basement would grow into a global ecommerce leader.”

What made the difference, he said, was support from government and business in B.C. He said if B.C. companies are to compete with well-funded global competitors, “venture capital is a crucial step.”

Faletski said if such funding had been more broadly available five years ago, there would be more tech companies in B.C. today.

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