Venture capital investment nears 14-year low
Last Updated: Tuesday, November 10, 2009 | 6:23 PM ET
CBC News
Investment in Canadian emerging high technology companies is headed for its lowest level in 14 years, an industry association said Tuesday.
Canada's Venture Capital & Private Equity Association said a total of $191 million was invested in the industry in the third quarter, down 51 per cent from the $388 million raised in the same period in 2008.
Investment in emerging Canadian technology is headed toward its worst levels in 14 years. (CBC) The study looked at industries ranging from clean technology — such as renewable energy — to biotech.
Ontario was worst hit, it said, with $24 million invested, a drop from a year ago of 87 per cent. The province took in only 13 per cent of all Canadian venture capital.
Dollars invested over the first nine months of this year totalled $682 million, a 36 per cent drop from the $1.1 billion raised in the same period a year ago. At this rate, capital raising for the year could come in below the $1-billion mark for the first time since 1995.
The association said despite a "handful" of larger deals done during the summer — such as the $50 million US financing of Montreal's Enobia Pharma — the average amount per firm was $2 million. Last year's average was $3.2 million.
The association has called for the federal and provincial governments to introduce investment incentives, including improved tax credits and requirements for major government contractors to invest in new and emerging technology companies.
Wants better tax credits for venture investment
It also wants Ottawa to set up a panel of company executives, university presidents, entrepreneurs and venture capitalists to come up with a plan for supporting Canada's technology industries.
Greg Smith, the association's president, said underinvestment in emerging companies is a problem because those companies tend to "grow at five times the rate of traditional companies, so when we talk about repositioning Canada to be successful in the new economy, and being able to compete on the global stage, investment in innovation is tremendously important."
Smith said there is capital available. While investment has dropped globally about 30 per cent, it has fallen 50 per cent in Canada compared with last year.
"In Canada over the past five years, our investment in technology as a percentage of our Gross Domestic Product has decreased by 35 per cent, whereas in the U.S., its investment in venture-backed companies has actually increased 18 per cent."
The CVCA has proposed a commercialization support program to help address these venture industry trends and to increase the availability of venture capital for high-growth small businesses.
