BC fund manager cries foul over government action

Enthusiastic response to British Columbia’s improved Small Business Venture Capital Act (SBVCA) has resulted in at least one disgruntled small fund manager. Mike Volker, founder of the Western Universities Technology Innovation Fund (WUTIF), says the government arbitrarily suspended his fundraising well before the deadline, forcing him to turn away investors ready to sign contracts.

“Without warning, they called me up one morning in early February and said ‘You’ve got to stop selling.’ There was never ever warning from them that they could do this,” says Volker, whose fund had raised less than $1 million of its $5-million allocation when the new deadline was imposed. “I read the Act and so did a lot of other people and they don’t have the right to do that. What they have the right to do is hold back future allocations but they can’t renege on agreements they’ve already made.”

Enhancement to the SBVCA — which provides a 30% cash-back tax credit to investors — created demand that caused the $20-million cap to be exceeded. Volker says his fund and possibly one other were caught by the early deadline, while most reached their limits early and were not effected.

An official with the Ministry of Small Business and Economic Development (MSBED) says the popularity of the tax credit prompted the deadline to be moved up but he denies the government acted improperly.

“If (Volker) didn’t know or acknowledge there was a limited tax credit budget then he’s not getting very good advice,” says Todd Tessier, portfolio manager of the ministry’s investment capital branch.

Tessier says the improvements to the SBVCA has resulted in $7 being raised for every $1 going into the program. It’s so successful, BC is trying to convince the federal government to establish a national program on the same principles.

Volker says that the cap on the tax credit doesn’t make sense.

“If you’ve got people ready to write cheques and you say to them ‘We can’t take your money’, that’s pretty bad,” he says. “You’ve got all this money coming into the economy so it’s a payback. It’s not really an expenditure.”

R$