Comparative Venture Capital Governance. Private Versus Labour Sponsored Venture Capital Funds

41 Pages Posted: 3 Mar 2003

See all articles by Jeffrey G. MacIntosh

Jeffrey G. MacIntosh

University of Toronto - Faculty of Law

Douglas J. Cumming

Florida Atlantic University

Multiple version iconThere are 2 versions of this paper

Date Written: February 2003

Abstract

Private independent limited partnership venture capital funds receive capital from institutional investors, without tax incentives. Limited partnership investment activities are governed by restrictive covenants that are determined by negotiated contract between the fund managers (general partners) and the institutional investors (limited partners). By contrast, Canadian Labour Sponsored Venture Capital Corporations (LSVCCs) receive capital only from individual investors who receive tax breaks on capital contributions of up to CAN$5,000. LSVCC investment activities are governed by statutory restrictions. This chapter contrasts the governance of LSVCCs to limited partnerships. We also summarize Canadian evidence on the impact of LSVCC governance and tax incentives: (1) on the distribution of venture capital funding between private and LSVCC funds; (2) on the unusually large overhang of uninvested capital in the Canadian venture capital industry; (3) the portfolio size (i.e. number of investee firms per fund) of private funds versus LSVCCs; and (4) the performance of LSVCCs relative to other types of venture capital organiziations and other comparable investments for individual investors.

Keywords: Venture Capital, Canada, Tax, Government, Crowding Out, Portfolio Size, Governance

JEL Classification: G24, G28, G32, G38, K22

Suggested Citation

Macintosh, Jeffrey G. and Cumming, Douglas J., Comparative Venture Capital Governance. Private Versus Labour Sponsored Venture Capital Funds (February 2003). CESifo Working Paper Series No. 853, Available at SSRN: https://ssrn.com/abstract=382933

Jeffrey G. Macintosh

University of Toronto - Faculty of Law ( email )

78 and 84 Queen's Park
Toronto, Ontario M5S 2C5
Canada
416-978-5795 (Phone)
416-978-2648 (Fax)

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

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