Venture Capital Activity In Canada At Its Lowest Level In Twelve Years

Canadian venture capital deal flow slowed down significantly in 2008 and reached its lowest level since 1996, according to a recently published report (pdf) by the Canadian Venture Capital Association (CVCA). Key findings include:

  • Only $1.3 billion was invested across the country in ’08, compared to $2.1 billion invested in ’07 – a drop of 36%. Compare that to VC activity in the United States, where $28.3 billion got invested in 3182 companies in ’08, a drop of 8% from ’07.
  • Key reason for the slowdown attributed to greatly reduced cross-border activity, with American and international VCs reducing their investment in Canada by 56% – reaching the lowest level in five years.
  • Company financings in Canada averaged $3.6 million, with 371 firms securing VC financing in ’08.
  • Ontario VC activity dropped 40%, from $950 million in ’07 to $570 million in ’08 invested in 119 companies.
  • Quebec VC activity dropped 46%, from $642 million in ’07 to $349 million in ’08 invested in 141 companies .
  • British Columbia VC activity dropped 18%, from $316 million to $259 million in ’08 invested in 51 companies.
  • Across Canada, Internet-related startups took the biggest hit, with funding dropping from $413 million in ’07 to $118 million in ’08. Cleantech fared better than other sectors, where 31 companies were financed with $187 million in ’08.

Quote from Gregory Smith, President of the CVCA and President of Macquarie Capital Funds Canada Ltd:

These statistics demonstrate the declining availability of capital in the venture capital industry, which has real repercussions for Canada’s ability to drive innovation and to develop the knowledge-based economy we need to compete effectively on the global stage…We are failing to capitalize on the potential of our entrepreneurs and small growth companies, which have traditionally been vital drivers of jobs and prosperity for Canadians.

Check out the full report here:CVCA Q4 2008 VC Press Release Final