Canadian venture capital deals increased in value for the first time in three years in 2010, rising 10 per cent as investment in Ontario, home to a large high-tech sector, set the pace.
According to data compiled by the Canadian Venture Capital and Private Equity Association (CVCA) and research partner Thomson Reuters, $1.1 billion of venture capital was invested in 354 companies, or 5 per cent more than the previous year.
The total amount invested was still far from the $1.4 billion in 2008, showing the industry is still struggling to emerge from the recent global economic downturn.
“While high-growth, entrepreneurial firms in Canada raised a modestly greater amount of risk capital in 2010 than in 2009, demand continues to outstrip supply,” said CVCA president Gregory Smith, also a managing partner at Brookfield Financial.
While disbursements rose, funds had more difficulty raising capital in Canada last year, potentially a negative sign for the future. New commitments in 2010 fell 24 per cent to $819 million, the lowest in 16 years.
“Fundraising continues to be the major challenge facing the venture capital industry,” Mr. Smith said.
The CVCA said in a statement that Canadian activity was strongest in traditional venture capital strongholds of Ontario, British Columbia and Alberta.
In Ontario, $424 million was invested last year, 43 per cent more than in 2009. About 42 per cent of all venture capital investments flowed to Canadian information technology sectors during the year, while clean tech and life sciences also helped attract capital.
The data also showed both domestic and foreign venture capital funds were more active in Canada last year, with Canadian funds investing $811 million, or 11 perc ent more than in 2009, and foreign funds investing $331 million, a 6-per-cent rise.
Deal sizes averaged $3.2 million last year, almost unchanged from 2009.