We on the margin have been following the first real engagement of the upcoming silly season with a passing interest. We’re sure that the other blogs will dissect the particulars of the Mascoll/Murrell/Hardwood/EGF situation ad nauseum. We would like to take a slightly broader view of this, consider the following:
- Government has set up the Venture capital funds like the Enterprise Growth Fund and the Innovation Fund etc. to help develop small businesses who have great ideas but limited access to capital. These funds deal specifically with entrepeneurs who would by their very nature scare a commercial bank’s risk management department.
- The means of functioning of these funds is to take equity positions in (invest in ownership of) these relatively high risk ventures. In doing this the funds will typically take a controlling interest and award the entrepreneur “sweat equity” if he has no funds of his own to put into the operation.
- The EGF and its like, ARE government funds, (Taxpayers money) and should be subject to the PAC etc.
- There is considerable discretion in how these funds invest, obviously if the funds are invested badly the fund will go bankrupt so there is an economic reality that the fund managers have to deal with but they do have considerable leeway in making investment decision.
- It is THEORETICALLY possible for abuse to happen, for example for a politician’s friends to get preferred access to the funds (We are NOT saying that is what happened with Hardwood) and there does need to be some oversight to avoid this.
- It is also THEORETICALLY possible for someone with a political axe to grind to pick on a random EGF company and drag it through the mud in an effort to get some of the mud to stick to a particular politician. (Once again, we are NOT saying that is what happened with Hardwood)
Now here’s the rub…
How many entrepeneurs are looking at the Hardwood housing political theatre show, and deciding that they will not approach the EGF because of the risk of becoming collateral damage in a political crossfire?
And just to be even handed…
What level of confidence can the EGF give to the public and politicians on their investments as they are playing with taxpayers dollars?
Let us hope that we can find an answer to this, otherwise we may be compromising one of the most promising ways to advance economic enfranchisement of our working class.