Firms that invest in technology startups say they are distributing funds more cautiously due to worries about a worldwide economic slowdown, making it tough for new firms to launch.

"There's no question, it's pretty dire right now," said Bernard Zeisig of Great Northern Capital, one of the investment firms attending Ottawa's annual Venture Capital Summit Wednesday. "For the entrepreneur trying to raise money, it's tough, it's very, very tough."

Barry Monette, chief financial officer of Magenn Power, was among representatives of local tech firms pitching their ideas to firms like Great Northern Capital.

Magenn has developed a wind turbine that is suspended in the sky by a helium-filled envelope.

Monette said he has only been able to lure one U.S. investor to fund the company.

Venture capital firms traditionally gather money from giant pension funds and other investors, then redistribute it among up-and-coming businesses in the hope that some will make it big. But with the market as it is right now, it's difficult for venture capital firms to do that gathering, said Sharon Lewis, who was at the summit representing Vertex Venture Capital.

Many venture capitalists have also adjusted their strategy to reduce their risk in current market conditions.

Fewer firms funded

David Adderley, a partner in Celtic House Venture Partners, said his firm ensures that it is not the sole investor in any one startup. Neal Hill, who works with Zeisig at Great Northern Capital, said other firms may concentrate on fewer companies.

"Rather than sprinkling a little bit of money in 15 or 20 companies, most VCs now would prefer to put more money in eight or 10 companies and make sure those companies have a better chance to succeed."

Bernie Li, a principal at Inovia Capital, suggested that startups may need to adjust to the conditions by stretching the dollars they already have.

"Maybe you do have to slow things down a bit to preserve a little more cash, but to create more steady business."

Zeisig suggested that local entrepreneurs look beyond the North American market.

Monette is heeding that advice, looking to Switzerland and Great Britain to fund his invention, but he cautioned that Canada might wind up losing some of the new technology.

"There's the risk there that we might become an American or a European company."