Is the Canadian venture capital roaring back to health? Are the waters getting warmer for Canadian startups seeking capital?
If you’re a glass half-full person, there’s reason to be optimistic about venture capital activity in Canada. According to the Canadian Venture Capital & Private Equity Association there was $388 million invested in Q3, a 51% jump from the same period a year go. The number of companies that attracted venture capital climbed 27% to 137. So far this year, $1.1 billion of venture capital has been invested, a 30% jump from 2010.
“It is encouraging to see healthier levels of venture capital investment in Canada at this point”, said CVCA president Gregory Smith. “And it is gratifying that the year-over-year growth in dollars invested has been spread across entrepreneurial firms in key innovative sectors – communications and information technology, life sciences, and clean technology.
So let’s pop the champagne because the good times are back again within the Canadian venture capital community. If you’re a startup, get that business plan ready ’cause the VCs have some money for you.
That would be a panacea but no one should get carried away. Sure, there was a flurry of VC deals in Q3, particularly by high-tech startups such as WattPad, Paymentus, Achievers.com, ScribbleLive, Keek and Wave Account, but there are still major gaps in the VC landscape.
The biggest is the glaring absence of institutional investors and pension funds, which can provide Canadian start-ups with money beyond seed rounds. While OMERS recently launched a $180-million fund, they’re an exception to the rule.
Without multiple sources of post-seed capital, many companies will have to go to the U.S. or not be able to get the capital they need to grow and expand. As much as the start-up financing ecosystem is getting healthier, no one should consider it vibrant and sustainable until the gaps are filled in.
Don’t get me wrong, I think the Q3 numbers are encouraging and positive. It is just important for people not to get carried away.