Crowding out private equity: Canadian evidence

Assessing the impact of public venture capital programmes in the United Kingdom: Do regional characteristics matter?

“…As shown by the graph, the UK venture capital industry shares the wave-trend characterizing also other VC markets, like the US (Lerner, 2002a(Lerner, , 2002b, Canada (Cumming and MacIntosh, 2006), Europe (Armour and Cumming, 2006) and Australia (Cumming, 2007). In all these cases, and in particular for the UK, VC investments showed a drastic increase in the years 1999 and 2000 leading up the beginning of the end of the bubble in April 2000. of equity investments in regions with high technological intensity (Figure 3).…”

“…A first approach adopts a macro-level of analysis, focusing on the relationship between public and private sources of venture capital at the regional or country level, in order to assess the existence of complementarity vs. substitution between the two forms. At the region level, for instance, the study by Cumming and Macintosh (2006) analyzes the effects of a Canadian tax-driven venture capital vehicle (LSVCC) on the supply of private venture capital funds in different Candian geographic regions. At the country level, the work of Leleux and Surlemont (2003) investigates the effects of publicly sponsored or managed venture capital funds in the development of national venture capital markets in 15 European countries.…”

“…Stimulated by the implementation of such initiatives, in recent years several works in the field of entrepreneurial finance have tried to assess the effectiveness of different public policy instruments for the creation of active venture capital markets (Cumming, 2007;Cumming and MacIntosh, 2006;Lerner, 2002b). Such literature has contributed to identify successful experiences, critical aspects to design effective public venturing initiatives and potential distortions deriving from the public involvement in the VC market.…”

The Canadian Public Venture Capital Market

“…In Canada, the public VC market outperformed the private one. One explanation for this is that the reported VC return is abnormally low, because it includes the very poor return of Labour-Sponsored VC Funds, which receive large tax subsidies but suffer from poor governance (Cumming and MacIntosh 2006). According to this explanation, during the studied period the larger players in the VC market have not demonstrated the capacity and skill usually attributed to private VCs.…”

“…However, the Canadian situation can also be attributed to the inefficiency of the conventional VC market, largely influenced by public policies promoting poorly designed Labour-Sponsored VC funds (Cumming and MacIntosh 2006;Cumming and MacIntosh 2007). In consequence, the stock market has been largely used as a substitute for the VC market.…”