Venture capital funds raised $1.8 billion in 2012, and invested $1.5 billion in new venture investments, according to Canada’s Venture Capital & Private Equity Association (CVCA) and Thomson Reuters.
The CVCA says that 2012 was “a truly outstanding year” with 33 domestic VC funds receiving $1.8 billion in new commitments, which was the highest level of new capital formation in a decade (back in 2002, the industry raised $2.5 billion), and was up 73% from 2011. This comes amid a recently announced federal plan to invest $400 million in the venture industry over the next several years.
The CVCA reports that 23 private-independent funds accounted for 70% of total funds raised ($1.2 billion worth), which was more than triple the $368 million raised in 2011. Retail VC funds also obtained more new commitments in 2012, it said, raising $414 million, which is up 3% from the year before (although it notes that 77% of the retail fund-raising activity was in Quebec).
“After 10 years of weak capital supply, it is rewarding to see Canada’s venture capital industry being given a significant boost in 2012. This boost is an extremely important first step in providing the providing the sustainable investment capital required to fund the world class entrepreneurs who are driving the next generation of high-growth Canadian companies,” said Peter van der Velden, president of the CVCA and managing general partner of Lumira Capital Corp.
“While this was a year of strong positives across virtually all facets of the VC sector, long term sustainable capital still remains a concern and it is hoped that the speedy implementation of all facets of the recently-announced federal Venture Capital Action Plan will allow the sector to continue to build on the positive momentum and help leverage more corporate and institutional investor commitments to top-tier Canadian venture capital partnerships,” he added.
On the investment side, the CVCA reports that $1.5 billion was invested via 395 rounds into emerging companies. It says this level essentially matched the pace of investment in 2011, which was a five-year high for investment activity. Conversely, VC investment activity in the U.S. declined by about 10% in 2012, it noted.
Of the $1.5 billion invested, Canadian VC funds contributed $1.1 billion, the CVCA said; which represented an increase of 7% compared to 2011. “This growth in domestic activity was important in helping to offset a 22% decline in investments by foreign VC funds, which nonetheless brought $380 million of investment to Canada,” it said.
The information technology (IT) sector garnered the most new capital, with $719 million invested via 214 rounds, a 6% increase year over year. Investments in the biotech, life sciences and medtech sectors was steady at $368 million invested via 76 rounds, the CVCA said. However, it notes that the clean technology sector saw investments decline, with $144 million invested in 33 rounds.
By geography, Ontario led Canadian VC market activity in 2012, the CVCA reports, with $603 million of invested capital representing 41% of all disbursements. Quebec held on to second spot with a 28% market share and $409 million invested.
“The investment results for 2012 are really encouraging and one of the things that isn’t immediately obvious from the data is that six Canadian deals [were] among the top thirty largest venture capital deals done in North America,” said van der Velden. “These companies highlight this country’s phenomenal potential as an innovation leader in the global economy and these investments illustrate the both the importance and rationale for a strong domestic Canadian venture capital ecosystem.”