You might have notice the news about the
public pension budget hole.
Our Canadian government has to face this issue. Dumping it on the new generation or increasing even more taxes will just fuel more the generation clash problem and I don't think we can afford a social crisis. The students strikes might just be the beginning of something much bigger.
As discussed in my previous post on sred, our federal wants to make R&D subsidies more accountable of creating wealth. In order to do so, our government wants to make better investments and has chosen to leverage NRC through its IRAP programs and slowly get rid of the sred program has we know it now. Innovation and commercialization lead to more wealth creation in short term then sred.
Now, according to my initial analysis, only companies that are backed by BDC can leverage this vehicule now (IRAP $100K+). It seems to be the same strategy for DEC who is providing generous loans to finance commercialization but you have to be BDC founded again.
Its a smart move, you finance public pension hole by leveraging better allocation of public subsidies.
Let's phase is differently. More taxpayer is redirected to finance missing founds of public pension plans.
Even if you flip the problem, canadian taxpayer will pay for the missing pension money so the solution might be the least worst of both solutions.
But now, if you think about it, this will have global bad effect.
Why would a non BDC founded tech company stay in Canada anymore?
In this highly competitive market, high salary, high tax level and lower access to subsidies will make Canada and Quebec less competitive and increase the entrepreneur barrier of entry. This will destroy the throughput of value creation by removing fuel to the early stage companies that are the basis of the entire system. In theory it will create more competition but it will attract way less people.
But there is an in-between solution. Renegotiate pensions plans to reduce gv weigh and keep all innovation been fueled. Hopefully this process is already taking place.
If this is the reality, it is a bad news for the canadian techno community in the long run and even for pensions because the choice of truly innovative companies will decrease which should have a direct correlation with pension results.
On the surface it seems a good idea but I think this will destroy a big part of the basis of innovation and will make it a loose-loose situation.
SRED program initial review started on the right track I think.
It the same as the education debate, if less people can access university, its a loose-loose for the society. The root cause is the same, financing the heathcare system of the previous generation take precedence.
Don't take me wrong, the basis are right. sred program has to be revised but it should be for better no the opposite. Leveraging NRC is good but it shouldn't exclude alternative founding. I do hope I am wrong.
But even if pension budget hole is an issue, knowing that the process will create unequal chances to companies to get subsidies and worst, it will only finance mostly public pensions, it is unequal solution for all taxpayers which should lead our gv to renegotiate public pensions plans.
The strong argument of risk control is in favor of this strategy but VC have tendency of selling too early and loosing huge value due to constraints of porfolio expiration policies.
But I might be all wrong, I hope there is a arms-length principle in place. The arm's length principle (ALP) is the condition or the fact that the parties to a transaction are independent and on an equal footing.
We might be shitting in our plate,
A bias guy.
