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Canadian Venture Capital Activity: An Analysis of Trends and Gaps (1996–2002)

Part IV: Analysis of Gaps/Outstanding Issues and Policy Questions

Part IV shifts focus from a description and analysis of the Canadian venture capital (VC) market over the past seven years to a more subjective assessment of the state and performance of the Canadian VC industry and a consideration of key outstanding issues facing the industry.

In particular, recognizing that the fundamental role of public policy is to reduce or eliminate gaps in the markets, Part IV reviews the weaknesses/challenges and policy issues discussed in parts II and III in response to the following questions:

• Where are the gaps or outstanding issues related to the VC market (e.g. structure and operation, supply and demand)?
• How do these gaps and outstanding issues in the VC industry dampen the development, innovation and growth of Canadian small and medium-sized enterprises (SMEs)?

For this purpose, this section presents:

1. A discussion of what a "gap" in the VC market is, and how the different perspectives involved (e.g. economist, supplier of capital and venture capitalist, business, government) and the definitional challenges related to identifying gaps in the SME-financing market hinder a balanced understanding of issues and policy actions.
2. An assessment of key outstanding issues related to the Canadian VC market that may require further action by private sector stakeholders and/or government.
3. A review of government's fundamental role in addressing gaps or outstanding issues in the VC market, as well as basic principles that should be reviewed in the development of government policy (if appropriate).
4. Key questions that private sector stakeholders and governments should consider in the development of potential actions to promote an effective and competitive environment that supports business growth and encourages a viable and sustainable private VC industry.

This analysis and these policy questions are aimed at stimulating discussions between private sector stakeholders and government regarding the development of a coordinated and collaborative approach to addressing the outstanding issues faced by the Canadian VC industry and Canadian SMEs.

Part IV

• 1. What is a "Gap" in the Venture Capital Market?
• 2. Outstanding Issues Related to the Canadian Venture Capital Market
• 3. Principles for Developing a Government Approach to Venture Capital
• 4. Key Questions for Further Consideration

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