What are Labor-Sponsored Venture Capital Corporations (LSVCC)?
Labor-sponsored venture capital corporations (LSVCCs) are Canadian venture capital companies established by labor unions.
How Do Labor-Sponsored Venture Capital Corporations (LSVCC) Work?
Labor-sponsored venture capital corporations (LSVCCs) issue labor-sponsored investment funds (LSIFs). Investors purchase shares of an LSIF, and the LSVCCs subsequently invest the proceeds in a range of high-growth, high-risk venture capital projects. LSVCCs are strictly regulated by the Canadian government, and all venture capital activities must meet specific requirements.
For example, suppose Venture ABC is an LSVCC. ABC issues 1,000 shares of LSIFs at $2,000 each. It invests the $2 million ($2,000 x 1000 shares) with its entrepreneurial clients as venture capital. Venture ABC's LSIF shares fluctuate in value based on net gains or losses that its venture capital projects experience over time.
Why Do Labor-Sponsored Venture Capital Corporations (LSVCC) Matter?
It is estimated that LSVCCs provide nearly half of all venture capital in Canada. The Canadian government encourages investors to purchase LSIF shares by offering reduced income and capital gains taxes at both regional and federal levels.
