News

Investment from the Canadian venture capital industry climbed to $627-million in the second quarter of 2005, the largest sum in a second quarter in four years, Canada's Venture Capital and Private Equity Industry (CVCA) reported Tuesday.

Investment rose 53 per cent from $409-million during the same period last year and climbed 87 per cent from $326-million in the first quarter of 2005.

The gain reflects “the growth which has been under way for two years,” said Robin Louis, president of CVCA, in a release.

During the quarter, investment in from foreign firms in Canadian companies reached $219-million, its highest in two years. Funds from venture investment firms abroad — most of them U.S.-based — corresponded to 35 per cent of the total investment in Canadian companies.

“Canadian firms and their Canadian venture investors are actively pursuing funding from abroad,” said Mr. Louis, attributing the success to “the high quality of the Canadian companies and also because the U.S. industry has a large amount of capital available, and this is causing deal prices to increase there.”

Despite the increase in investments during the second quarter, the CVCA expressed concern about a $155-million decline of new capital commitments to the industry. The industry has raised $1,2-billion year so far this year, down 29 per cent from the $1.7-billion in the same period last year.

This is a “worrisome trend,” noted Mr. Louis, saying that “the industry's ability to provide the funding will necessarily decline unless the industry is able to increase the amount of capital that it raises.”