A new investment opportunity:
Northleaf Venture Catalyst Fund will invest primarily in Canada–focused early–stage and mid–stage venture capital funds, and directly in companies across Canada. Northleaf Capital Partners has been selected by lead investors to act as the general partner for the Fund, following a fair and competitive selection process led by the Venture Capital Expert Panel appointed by Minister Flaherty. Investment decisions will be made by Northleaf Capital Partners on market–based principles in order to maximize returns.
So a series of government departments has, after following the appropriate bureaucratic procedures, decided to play venture capitalist. But don't worry, everything is going to work on "market based principles." Now here's the kicker:
The Governments of Canada and Ontario have agreed to make a combined capital commitment of $1 for every $2 committed by private sector investors to the new Fund, up to a maximum of $50 million each. The Fund will seek additional investors to reach its target size and anticipates holding a second closing later in 2014.
The thing about the market is that, ahem, it doesn't involve the government providing matching funds. This isn't a market based economics, it's crony capitalism. Even when it follows the appropriate bureaucratic procedures. Do keep in mind that while the Wynnesters in Queen's Park are abetting this nonsense, the Feds are taking the lead. So Jim Flaherty, ex-hatchet man for Mike Harris, has decided he'll play Gordon Gekko, albeit without the brick-cell phone and Daryl Hannah.
But this isn't really about venture capital, or innovation, or market based principles, however poorly understood. It's about power. This fund, likely through a series of tax credits, has attracted a clutch of private investors that reads like a Who's Who of Bay Street. They'll make an easy buck, so long as the fund doesn't under perform the market by too much. Perhaps they'll also get some brownie points with the Tories the next time the Bank Act comes up from renewal.
What does the government get out of it? The usual photo up. A line item in a prepared speech. And, of course, good old power and influence. While the above fund is chump change for everyone involved, it is only one drop in the wide sea of private-public sector partnerships. Why bother nationalizing an industry, or even regulating it, when so much of a financial institution's capital is tied up in these partnerships. An agreement terminated at just the right time can force one of the Big Banks to miss their quarterly numbers, and everything that entails. Now that's real power, discreet and devastating.
Gordon Gekko was, let's be honest, a bit old fashioned. He was obsessed with money. Power is the new sexy. In that spirit let's re-write his famous speech:
Power, for lack of a better word, is good. Power is right. Power works. Power clarifies, cuts through, and captures, the essence of the evolutionary spirit. Power, in all of its forms; power for life, for money, for love, knowledge, has marked the upward surge of mankind and more power, you mark my words, will not only save Jim Flaherty, but that other malfunctioning corporation called the Conservative Party of Canada.
They dropped the qualifier from the name, but the progressive still lives on in the Conservative Party.
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