Until recently, a Canadian who wanted to back a startup in the U.S. could write a cheque, take a board seat, and help build the company. For angel investors in Vancouver, corporates in Toronto, and venture funds in Montreal, accessing the U.S. venture ecosystem has been almost as easy as doing deals north of the border. But that may be about to change.
The new regulations provide for a small number of “excepted foreign states” to be exempted from these additional reviews. The list of countries has not yet been finalized, however, and it is expected to be quite small. Proposals have been made to exclude NATO allies, but the recently released U.S. Treasury Department rules provide no simple delineation. For the future of North American economic development, it is critical that Canada be an “excepted foreign state” under these new rules.
If Canada doesn’t get an exemption, there may be a tit-for-tat reply. A decade ago, fewer than 50 venture and private equity minority investments in Canada included a U.S. investor, accounting for less than US$1 billion of inbound investment. Each of the past two years, however, has seen more than 400 such deals, while more than US$2 billion has been invested every year since 2013, again according to data from PitchBook.
Source: News Formal (newsformal.com)
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