Canadian venture-capital (VC) funds raised $1.8 billion in 2012 and invested $1.5 billion in new VC investments – the best results in a decade and an indication that 2013 will be another strong year for the sector, according to an annual report issued jointly by the Toronto-based Canada’s Venture Capital & Private Equity Association (CVCA) and Thomson Reuters Corp.
In fact, stronger than expected fundraising by VC firms and increasing levels of government support point to an even better year ahead, says Richard Rémillard, the CVCA’s executive director: “On the fundraising side, there will be capital coming in that hadn’t been available in previous years, so the chances are that we will be building on the numbers of 2012. And on the investing side, investing follows fundraising; and coming off a stronger fundraising year than had been anticipated, that should drive investing volumes.”
The report found that $1.5 billion was invested through 395 rounds into companies in Canada’s innovation and emerging growth sectors last year. That activity “was virtually identical to the accelerated pace” of 2011, says the report, a five-year high.
VC activity in Canada also compared favourably with the U.S., where VC investment activity fell by 10% in 2012. Of the $1.5 billion invested during the year, Canadian VC funds contributed $1.1 billion, an increase of 7% vs 2011. This growth in domestic activity was important in helping to offset a 22% decline in investments by foreign VC funds, which still brought $380 million to Canada.
VC investment flowed to the information technology (IT) sector ($719 million, up by 6%); the biotechnology, life sciences and medical technology sectors (even, at $368 million); and the clean technology sector ($144 million, down from 2011).
Ontario firms captured the greatest share, accounting for $603 million of invested capital (41%), followed by Québec (28%).
Peter van der Velden, the CVCA’s president, notes that six Canadian VC deals (Desire2Learn Inc., Engineered Power LP, Thrasos Therapeutics Inc., D-Wave Systems Inc., Lightspeed Retail Inc. and Securekey Technologies Inc.) “were among the top 30 largest venture-capital deals done in North America.”
In terms of investor fundraising, 33 domestic VC funds received $1.8 billion in new commitments, the highest level since 2002, when $2.5 billion was raised. Twenty-three private/independent VC funds accounted for 70% of the total funds raised ($1.2 billion), more than triple the $368 million raised in 2011.
Retail VC funds also obtained more new commitments in 2012, raising $414 million, 3% higher than in 2011. Most of the retail fundraising activity (77%) occurred in Quebec.
The surge in VC activity can be credited to the steady growth in the economy and the federal and provincial governments “pushing a very heavy research and development/commercialization agenda,” Rémillard says. “You see that in the numbers around the pickup of [federal scientific research and experimental development] tax credits, the growth of incubators and accelerators across the country like the MaRS centre in Toronto. That’s creating, in itself, a large demand for venture capital.”
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