Published 24 September 2015

Public funding measures

– a comparison of experiences from Denmark's and Canada's publicly supported venture capital and credit guarantee schemes

Growth Analysis has been appointed by the government to compile international experiences of public funding measures for small and medium-sized enterprises. The aim of this report is to complement the government’s inquiry concerning the supply of and demand for capital for small and medium-sized enterprises in Sweden by presenting lessons learned from measures taken in Denmark and Canada.

Many small and medium-sized businesses often face difficulties in accessing funding. At the same time they are viewed as being important from a growth perspective. The aim of public funding measures is to solve this problem by assisting small and medium-sized enterprises through funding which may potentially create growth and jobs in the economy. This report covers two public funding measures: credit guarantee schemes and venture capital.

Although Canada and Denmark have different credit guarantee schemes with regard to credit guarantee levels and premium levels, evaluations show that government credit guarantees are needed and that they have been of significance for small and medium-sized enterprises’ possibilities of access to finance. Both Canada’s and Denmark’s programmes are financed through government funds. However, cost-benefit analyses in both countries indicate that these programmes generate a clear profit for the economy as a whole.

In Denmark, Canada and Sweden, public venture capital consists of both direct and indirect (fund of funds) investments. The difference between the countries is the prioritisation of these forms. Canada has a main focus on fund of funds investments but Denmark is also heading in that direction. Evaluations of all three countries show there is a risk of crowding out private venture capital, especially when public agents invest directly in businesses. Therefore it could be better for public funds to be invested through funds of funds. In all three countries, the prioritised sectors for government venture capital investment are ICT, Clean Tech and Life Science.