Investment is investment, more or less

According to a government press release:

The New Brunswick Securities Commission (NBSC) will embark on a series of roundtable dialogues throughout New Brunswick on Jan. 18 to understand issues and impediments to developing an effective capital market in the province. Entitled The New Brunswick Securities Commission’s Roundtable on Fostering Capital Markets, the initiative will bring together knowledgeable stakeholders who share a similar desire and passion to build New Brunswick’s capital market.

I had a long conversation with someone on this issue a couple of months ago (don’t know where they got my name – maybe from the blog).

Anyway, my central theme is that New Brunswick doesn’t get anywhere near its share of the global investment flow. That, I believe, is at the core of our economic problems.

But that investment can come in many ways. It can come in the form of greenfields (companies not here today moving in) and it can come in the form of investment into existing companies providing them with the capital to grow. It can also come in the form of venture capital for early stage companies. It can also come in the form of external investors buying up local infrastructure (i.e. malls, real estate, roads – yikes – etc.). The point is that external investment is expended here. That’s not to say there isn’t leakage. When John Manship out at Spielo got $250 million for his company from a US firm, I am relatively sure that he didn’t turn around and invest that money entirely in New Brunswick (just as the NB Investment Corporation about this). But he has built a multimillion dollar house and I hear he is investing in a few small companies here.

So if the NBSC is successful in stimulating ‘investment’ into our local firms, that will be wonderful – in fact in some cases better than greenfields because of the company’s deep ties to the province.

But they will run up against an age old problem in New Brunswick. Most of our traditional entrepreneurs don’t like to give up control. I could name you a dozen successful SMEs in Moncton right now that wouldn’t take on external equity if you begged them.

It’s not just about lack of access to capital. It’s also about a lack of willingness to access capital.

During the dot.com boom, companies were setting up with the sole purpose of ‘flipping’ their companies – many times before they even generated revenue let alone profit. But we can’t afford to go the opposite way. Our successful entrepreneurs need to take on external equity. Banks will never fill that void – it’s not what they are structured to do. They need to leverage that external equity into increased business and more spending in the local economies.

Good luck to the NBSC on what could be a very interesting initiative.

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0 Responses to Investment is investment, more or less

  1. Anonymous says:

    Here’s a scary thought, and perhaps the CORE problem as far as economic development is concerned:

    The New Brunswick Securities Commission doesn’t ALREADY understand the ‘issues and impediments to developing effective capital markets’ in the province.

    I mean, if THEY don’t, who the heck in the province DOES! I would suspect that goes a long way toward explaining WHY there is so little global investment in NB:

    Global investor: “Yes, hello, I’m thinking of investing there..”

    NB: “Yes, can you hold please, we’re just trying to figure out how to build a capital market”

    Global investor: “Ok, can you call me back?”

    NB: “Certainly, they should be done by 2008”