Quebec Budget augments NRIP spending with new funds for angels, gazelles

Targeted support for fast-growing businesses, recapitalization of a successful angel venture capital fund and a boost in the budget of the Ministry of Higher Education, Research highlight Quebec's Budget plans for 2014-15, although its implementation will almost certainly be short circuited with the imminent call for a provincial election.

Delivered February 20 by Finance minister Nicolas Marceau, the middle-class and business-friendly Budget forecasts another two years of deficit — $2.5 billion in FY13-14 and $1.75 billion in FY15-17 —before the province's books are balanced.

Marceau's Budget speech emphasized the importance of research and innovation, referencing last year's release of the National Research and Innovation Policy (NRIP), which aims to boost R&D expenditures to 3% of GDP from 2.4% in 2010.

The NRIP is one of four strategic initiatives released last fall, the others being Québec's Industrial Policy, the External Trade Development Plan, and the Transportation Electrification Strategy. NRIP is backed with spending commitments of $3.7 billion over five years (R$, October 28/13).

Since its release, the government has launched proposals to certify three new college centres for technology transfer, called for proposals for the provincial valorization and transfer support program and, last week, announced $62.5 million for seven research projects in the life sciences sector (see Briefs on page 7).

To stimulate Quebec's venture capital sector, the Budget provides an additional $25 million, in collaboration with Investissement Québec, to recapitalize the Anges Quebec Capital fund. The money — drawn from an advance from the Fonds du developpement économique — will be augmented by $35 million from additional partners who in turn will invest a minimum of $30 million, raising the recapitalization of the co-investment fund to $90 million.

Launched in 2012, Anges Capital Québec received $20 million from the government which leveraged an additional $40 million. That capital has been completely invested in 14 Quebec businesses, five of which have secured a second round of financing.

Support for gazelles

The Quebec Industrial Policy is the basis for a Budget initiative to accelerate fast-growing firms — known as gazelles — to stimulate jobs and economic growth in the province. The plan is to select 300 high-growth gazelles over the next three years (100 per year) through a national selection committee from the manufacturing and "high-value tertiary sector".

Successful candidate firms must have at least 20% annual sales growth and provide information on their international outreach, productivity and management team. Selected businesses will receive individualized support and multidisciplinary support cells will be established in each region where experts will help to guide their growth.

While further details of the program will be announced in the coming weeks, the Budget also announced $50 million for the creation of a new venture capital fund of funds to help recapitalize existing successful funds whose investment period is coming to an end. The fund of funds is expected to lever $2 in private capital for every $1 in public investment.

The Budget signalled the province's intention to tap into $350-million envelope within the federal government's Venture Capital Action Plan intended for large fund of funds financing. It notes that VCAP already provided $36 million to Ontario-based Northleaf Capital Partners and says negotiations are underway to determine whether the Quebec's fund of funds is eligible.

The Budget also announced that Fonds de solidarité will be overseen by three new committees for governance and ethics, human resources and risk management. As well, it stated that it does not intend to follow the federal government's lead of phasing out support for labour-sponsored funds.

The Ministry of Higher Education, Research, Science and Technology (MHERST) also received a boost to its budget, one of just a few ministries to see program spending increase. Budget documents lump MHERST in with the Ministry of Education for an additional $493 million — an increase of 3%. The Budget did not provide budgetary breakdowns for any ministry.

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