CVCA releases Q3 VC investment flow figures
The results from the Canadian Venture Capital and Private Equity Assoc. this am are encouraging in spots, despite the drop in actual dollars invested. As a CVCA board member, the good news is that dollars investmented per company are increasing. The distressing news clearly is that 85% of venture capital deployed in the most recent quarter went to existing portfolio companies. This fact, when twinned with the overall decline in money invested, is a double whammy for tech and biotech firms. Here’s an excerpt from the CVCA’s release:
“Venture capital investment in emerging Canadian technology companies continued to decline in Q3 2006 to $331 million a drop of 32% from the $489 million invested in Q2 2006, according to the CVCA and research partner Thomson Financial (formerly Thomson Macdonald). Year to date, venture capital investment in Canada totaled $1.19 billion, a decline of 8% from the $1.3 billion invested during the first nine months of 2005. In spite of this overall declining trend, quarterly investment activity did represent 13% more capital deployed in the most recent quarter than during a low water mark of $292 million invested during Q3 2005.
Investment patterns through 2006 continue to show a move away from new companies, as more than 85% of all capital deployed in Q3 2006 went to follow on investment in existing portfolios, and two thirds of all investment was classified as later stage. While the average size of Canadian venture investments is growing, it remains far below comparable levels in the United States venture market. During the first nine months of 2006, the average Canadian venture financing amounted to $3.8 million ($2.7 million during Q3), an increase of 31% over the average of $2.9 million during the same 2005 period.”
In 2005, for example, our average investment per transaction was about $4.9MM, about 1.3x larger than the average VC equity investment in Q3. This year, we are trying to do our part again: our dollars invested per firm figure may exceed $6MM.
For IP heavy firms and/or VCs that are finding the equity raise (or follow-on) unnecessarily challenging, give us a call…if we haven’t called you first.