Companies Invested In
LSVCC funds invest primarily in small and medium-sized private companies who require funding to sustain and increase growth. The emergence of the LSVCC industry stems from the idea that the growth of these firms will stimulate the Canadian economy and create jobs.
The money investors put into these firms is a form of venture capital. These firms are just starting out and generally aren't listed on a stock exchange such as the Toronto Stock Exchange. LSVCCs offer an asset class that is normally not accessible through conventional investment vehicles. These companies have potential for substantial growth and high returns down the line if they succeed and are generally chosen precisely for that growth potential.
In an LSVCC, as in any mutual fund, investors' money is distributed among a number of businesses. However, because the companies invested in by LSVCCs may be new and are likely small, many don't have much of a track record and can be risky investments by themselves. Ideally, an LSVCC can reduce that risk by diversifying their portfolio of assets.
These small to mid-sized companies are interested in receiving financing from LSVCC fund companies because they are in a high growth cycle and are looking to further support the expansion of their business. These companies are often too small or too young to secure conventional bank financing. The LSVCC fund companies are also able to provide sought-after strategic guidance and operational support.
Read more about this topic: Labour-sponsored Venture Capital Corporation
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