The Canadian venture capital world is suffering from a terrible hangover in the wake of the collapse of many labour-sponsored funds in Canada. Many of the funds, which offered federal and provincial tax credits to investors, have posted dismal returns. The worst was VenGrowth, which registered negative returns on all of its 18 series. Unitholders of these funds haven't made a dime even though the managers stand to earn a ridiculous termination fee of $13-million (for just five of the funds) if the failing funds are absorbed by Covington Capital.
It's bad enough that investors lost hundreds of millions, but adding insult to injury is the fact VenGrowth Investment Management Inc. and other LSFs, have given the VC industry a black eye that will take years to heal. For venture capital players fundraising now, VenGrowth's bad returns and fee grab are a publicity nightmare. Many institutional investors have told general partners such as Peter van der Velden, president and chief executive of Lumira Capital, they won't invest another dime into the VC space until all the money that's been locked in the LSF funds, has been flushed out of the market. And that could be five years or more.
To read the full, original article click on this link: How to get past its 'black eye'
Author: Karen Mazurkewich
