Montreal investing trends

Given the interest of our readers in the series about Waterloo Investing Trends, it seems apropos to look at what has been going on in the rest of the country over the coming weeks. Having just closed two new transactions in Montreal (Bluestreak and Airborne), it is natural to look at the state of that VC market next.

From my vantagepoint, it feels as though the tech market in Montreal has come to life over the past 18 months. Several Montreal-based VC funds have had good success in raising new funds (MSBi, Propulsion, Trio, Garage, etc.) from limited partners of late, which is an excellent barometer of what is going on in the tech space in this part of the country. Let’s see what the numbers bear out, appreciating that a fund that raised LP $ in 2006, for example, will have had a hard time closing too many deals in the past few months.

As you might recall, the analysis is meant to compare information technology venture capital financings (ie, not debt) that have been tracked (ie, names/deal sizes disclosed) by public and industry sources. This should cover almost every venture-backed company. The idea is to compare the three year period prior to January 2003 and the three year period that followed.

Here is what the results show:

2003-2006
$399.4 million disbursed
$50 million of those had some type of CDP involvement
142 transactions (remarkably 69 transactions didn’t disclose the amount funded)
94 different companies

1999-2002
$1.4 billion disbursed
$229.7 million with CDP involvement
435 transactions (yet only 25 deals didn’t disclose the size of the round)
181 different companies

The takeaways are quite clear:

1. Post bubble, Montreal still saw plenty of tech financings, unlike other regions of the country. But the drop off in $ funded was quite pronounced, even with so many undisclosed.
2. VCs aren’t really putting more money into fewer deals, which is probably a welcome relief to the entrepreneurial community on the one hand..but troubling on the other.
3. The incredbile hole left by the CDP has been, surprisingly, filled in by other players. But it wasn’t really as large as people might have expected.
4. There appears to have been fewer follow-ons, which suggests that either i) the firms didn’t warrant it, or ii) funders were largely tapped out and needed to focus on what they thought were the winners.

MRM