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Venture Capital Investment level is lowest in 14 years

Canada’s Venture Capital & Private Equity Association (CVCA) released a report today along with research partner Thomson Reuters that states activity in Canada’s VC market continued to fall in the third quarter of 2009.

Deal activity in Canada’s venture capital market continued to lag in the third quarter of 2009, as a total of $191 million was invested nationwide, down 51% from $388 million invested during the same period in 2008.  The trend was felt in most regions, though Ontario-based disbursements experienced an especially steep year-over-year drop of 87%.

Domestic VC activity in Q3 2009 was the weakest recorded in 14 years.  Furthermore, dollars invested at the end of the first nine months of the year, totaling $682 million, was 36% shy of the $1.1 billion invested at the same time in 2008.  This suggests that final 2009 outcomes might well slip below the $1.0 billion-dollar mark for the first time since 1995.

“Canada’s venture capital industry is facing severe challenges,” said Gregory Smith, President of the CVCA. “we must work to improve the ecosystem and funding levels for entrepreneurs and small businesses.”

In the report, the CVCA once again calls for the development of a comprehensive innovation strategy for Canada and the provincial governments to address the growing technology deficit.  Here’s what they what the government(s) to do:

  • establish and grow fund of funds structures
  • make improvements to the SR&ED tax credit program
  • improve the incentives for corporations to invest in venture capital funds
  • actively promote investment in Canadian venture capital funds as part of the offset agreements that are negotiated with major government contractors
  • improve measures be taken to  improve the attractiveness of venture capital to retail investors. 

The CVCA was founded in 1974 and is the association that represents Canada’s venture capital and private equity industry. Its over 1800 members are firms and organizations which manage the majority of Canada’s pools of capital designated to be committed to venture capital and private equity investments.

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