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Despite the economic uncertainty south of the border, it is fascinating to see the flurry of venture capital deals being announced.

In Canada, meanwhile, it's pretty much the same landscape, with a modest number of VC deals happening.

Even then, most of them are small investments aimed to support the growth of an idea or early-stage startup, rather than the aggressive expansion of a company looking to exploit a major growth opportunity.

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The difficult venture capital landscape exists amid what I see as one of the most exciting times for Canadian startups.

In the 15 years I have been involved with startups as a former reporter, employee/founder and consultant, I see more entrepreneurs doing more interesting things than ever before.

That said, it was disappointing to see the Canadian Venture Capital Association report recently that investments in the second quarter dropped to $328-million from $355-million in the same period a year earlier due, in part, to "stalled fund-raising activity."

The silver lining is that 134 companies were financed, up 11 per cent from 2010.

In a press release, CVCA president Gregory Smith described the decline in investment activity as "very concerning."

"Clearly, there is demand coming from young, entrepreneurial businesses – a fact that is borne out by year-over-year growth in company financings – but this demand is not being met by an adequate supply of value-added risk capital," he said.

So why isn't there more money flowing into the venture capital ecosystem to support the entrepreneurial renaissance happening?

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Is there an aversion to risk or, perhaps, a lack of confidence in the entrepreneurs leading the charge?

Or are investors simply putting their money into other opportunities with better returns?

There are a few reasons why there is a lack of financing.

For one, there has never been a healthy appetite for risk among Canadian investors, particularly when it comes to high-risk startups that may not have revenue, let alone a product or service to sell. Canadian

VCs have also been stung by a shortage of acquisitions, although there have been a steady number over the past 18 months.

If more companies were purchased, it would, in theory, provide investors with more confidence.

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Finally, I think investors are still playing catch-up to the entrepreneurial activity now happening and the growing number of attractive investment opportunities out there.

The bottom line is that there needs to be more venture capital and more investors willing to embrace risk.

However you want to slice and dice it, it is a problem that has to be solved; otherwise the entrepreneurial spirit and innovation will start to disappear.

There are no easy solutions but it would help if our startup success stories were thrust into the spotlight more often to demonstrate to investors that it's safe to come into the water.

There might also be ways for the federal and provincial governments to bolster investments in startups through the use of vehicles such as tax credits or preferred treatment of capital gains if a start-up was acquired.

Of course, we have been talking about the troubled VC landscape for years, but little has changed.

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Sure, there are a several new funds focused on startups but the financing ecosystem needs to be more robust, aggressive and larger to support the development of all kinds of companies.

Special to The Globe and Mail

Mark Evans is the principal with ME Consulting, a communications and marketing strategic consultancy that works with startups and fast-growing companies to create compelling and effective messaging to drive their sales and marketing activities. Mark has worked with four startups – Blanketware, b5Media, PlanetEye and Sysomos. He was a technology reporter for more than a decade with The Globe and Mail, Bloomberg News and the Financial Post. Mark is also one of the co-organizers of the mesh, meshmarketing and meshwest conferences.

Join The Globe's Small Business LinkedIn group to network with other entrepreneurs and to discuss topical issues: http://linkd.in/jWWdzT

Editor's note: An earlier online version of this story had an incorrect reference to calorie content. This online version has been corrected.

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