No one will dispute the fact that in Canada, “small companies die due to lack of funding”. In the article, “Canada needs a stronger venture capital foundation to build on” in yesterday’s edition of The Montreal Gazette, David Crane raises our attention on weaknesses identified in a recent study on venture capital conducted by The Impact Group. The study is based on a sample size of 18-high tech firms and it does raise a good question, “Do venture capital investors do enough to mentor the companies? Do they do enough to help build the companies?”
It’s certainly a question that should be examined in the near future. Innovation is nothing that you can stop and it can take place when times are difficult. It’s common wisdom that, when times are tough, innovative companies can continue to invest in new products or services, explore new market opportunities to break new ground and differentiate themselves from the competition when the good times return.
Nothing is always as bad as it looks :-). I would like to share with you some interesting information on the impact of the venture capital on the Canadian economy. Last year, E&B DATA conducted an impact study for Canada’s Venture Capital & Private Equity Association. To bring an optimistic outlook to your day on this issue, please note the following :
- In 2007, venture capital-backed technology companies generate close to 150,000 jobs in Canada (1.3% of all private sector employees) and 1% of Canadian GDP.
- Between 1996 and 2007, venture capital investors financed 2,175 technology companies in Canada. 1,740 of those were operating in Canada in 2008. In addition, prior to 1996, venture capital investors financed 15 companies that are still operating and have sales larger than $50 million in 2008.
- On average, these 1,740 companies had sales of $10.5 million and employment of 47 direct jobs each. They are a mix of small, medium and large companies.
In aggregate, they generated sales of $18.3 billion.
- $15.4 billion in ICT
- $1.9 billion in Life Sciences
- $1.0 billion in Other Technologies
It is good and it is a sample of performance indicators that the venture capital community (VC) can continue to improve on.
The lesson to be learned is that when times are difficult, it’s even more important for the VC community the be responsive to the needs of innovative companies (start-up and maturing companies).
Are Canadian venture capitalists proactively seeking new deals? In this unperfect world, well some actually do. Just last week, Celtic House Venture Partners and Ventures West led a financing round of $10 M for Fresco Microchip. Established in 2004 and active in Canada and in the US, Fresco’s manufactures mixed-signal and digital signal processing integrated circuits (ICs).
We certainly do need more good news to convey us that Canadian venture capitalists can secure sustainable development in the high tech sector and I hope to read more and more press releases in the near future. Can Canadian venture capitalists take on this challenge? Are you confident that they will ?
