The NDP wants to lend $500 million to entrepreneurs in hopes they will come up with the next big thing, employ thousands of people in B.C. and make everyone lots of money.
What’s not to like?
It turns out the Opposition B.C. Liberals have a number of reservations, strong enough that they look ready to vote against the idea of InBC Investment Corp. It won’t make any difference, but it would be a novelty to see a free-enterprise party opposing a business-friendly measure.
The bill creating B.C.’s latest Crown corporation is up for debate and the government’s enthusiastic pitch at the launch hasn’t moved a number of skeptical critics.
The striking degree of independence for the chief investment officer, who is explicitly given permission to ignore the politicians, was noted here earlier. It was enshrined in law because the investment world is skeptical of most government-run investment funds. So the NDP wanted to signal that, this time, things are going to be different.
The premise is that too many B.C. start-ups show promise but then stall out, or get bought out and moved. A new funding source in the risky early going (that would be us taxpayers) will create more long-term success stories that stayed home.
InBC will provide “patient capital” with lower expectations of returns on investment. That’s a clear signal it won’t make much money. The returns may or may not come in other forms – job growth, low-carbon wins and assorted social and economic goals.
The previous B.C. Liberal government tried exactly the same thing to nurse the fledglings along, but in a different way. It put $100 million up for grabs, but handed it over to a private investment firm to manage.
That’s a more obvious solution to the worries about independence and political meddling. Liberal critic Todd Stone, who founded a successful IT firm before politics, said it has only disbursed about $40 million in the past five years, but has leveraged ten times that.
It also saves the millions it will take to set up a Crown corporation full of finance wizards who command huge salaries.
The independence issue arose again when the board of directors was appointed this month. It includes two deputy ministers, who will obviously represent the government’s interests, former finance minister Carole James, someone from a leftish think tank and a former adviser to the NDP government.
That lineup had the Opposition asking: “How can the NDP seriously expect British Columbians to believe that … investment decisions will be shielded from NDP influence?”
Apart from InBC’s relationship with government, another aspect of independence is the expectations InBC can impose on recipients. The goals outlined above are all worthy but the market will consider them loans with strings attached, said Stone.
“Talking with lots of venture capital folks … even the slightest hint of strings attached is a no-fly zone in most of these folks’ mind.”
That could limit the follow-on investments that often go into growing companies.
Stone said investors feel lending with various strings attached means the easiest way to sever them is for someone to buy out the government in later stages.
Stone said a lender’s position would be: “Part of our investment is we’re going to buy out the position of InBC and we’re packing up and leaving.”
The timing also raises questions. InBC is coming to life when there are huge amounts of capital “sloshing around, looking for a place to invest,” said Stone. It’s an odd side-effect of the pandemic.
That might be temporary, but regardless, the new outfit’s service plan anticipates some lead time before it starts writing cheques.
The game plan states: “InBC is not anticipated to be in a position to place investments until the end of fiscal 2021-22 (almost a year from now.)”
It makes for a lot of dire predictions from the critics. “Trust me; this will be an absolute boondoggle, of taxpayer proportions. … It’s going to end in utter disaster. … This will come back to haunt the NDP like the fast cat ferries did.” – Liberal MLA Bruce Banman.
Or it could play less dramatically – dribbling out money cautiously to protect its batting average, while hoping against hope it picks more winners than losers.
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This article has been updated to include this correction: InBC Investment Corp.’s board includes a former adviser to the NDP government, not a current one.