Opportunities, Caution at the 24th Angel Forum

The 24th Angel Forum, held at the SFU Harbour Centre, is a chance for investors and start-ups to meet, pitch and network. But it’s also a chance for a look at the venture capital space as a whole.

2008 is (not surprisingly) being termed an “interesting time”, given the continued credit crisis and the skittish nature of the American investment landscape. But the upside for new businesses is that inputs cost less, there’s a wider choice of labour at a cheaper price, and companies can develop their product with less pressure from competitors.

Randy Garg, the Managing Director of Corporate Finance at Price Waterhouse Coopers, gave his traditional address to the Angel Forum at the opening ceremony with a summary of the current venture funding climate.

VC funding is down 33 percent YTD in Canada from the same time in 2008, thanks to the ongoing financial crisis affecting world markets. US investment has flattened, and foreign VC investment is down to 27 percent, down from 41 percent in 2007.

Investment in internet ventures is down, but cleantech investments are on the rise. Life sciences investments are also up, but are more capital intensive and take longer to get off the ground. Technology investment is down primarily due to the continued financial uncertainty in the United States.

THe US IPO market is at its lowest point in 30 years, with only 5 IPOS in the United States, and only one in Canada. Garg said consolidation would be the model for smaller companies in the immediate future, due to the weakness in the M and A market after the debt that financed it dried up in the credit crisis.

But not every company has stopped buying, though surprisingly Google and Cisco have pulled back from their usual pace of acquisition. Microsoft and Oracle are still buying companies, though they are picking and choosing smaller firms.

In terms of BC business, the province is up slightly at $79 million invested in 17 companies, and Yaletown Ventures recently closed a 65 million round focused on cleantech and IT. But while BC is the 3rd highest area of investment in Canada, it’s only 16th in North America, trailing behind Maryland.