Is Canada’s venture capital investment landscape softening, even though there seems to be more startup activity than ever?
According to a new report from the Canadian Venture Capital Association, the amount of deals done in the first-quarter fell 34% to $263-million compared with a year earlier, while the number of companies attracting VC dropped 10% and the size of deals fell to $2.3-million from $3.1-million.
So, what’s the word from CVCA president Gregory Smith: “Perhaps the biggest single obstacle facing high-growth Canadian technology firms is difficulty accessing adequate value-added risk financing, in general and relative to competitors in the global economy. Even in 2011, when disbursements in the domestic market grew 37%, we did not see the needle move appreciably with respect to deal capitalization levels. The disappointing results of the first quarter of 2012 underscore the importance of taking steps to address this formidable challenge.”
Translation: There isn’t enough investment capital to support Canadian startups, and the size of the deals being done either suggest investors aren’t being aggressive enough or there isn’t enough deals being done beyond the seed stage.
As the CVCA holds its annual meeting in Montreal next week, the latest data provides even more food for thought about how the venture capital ecosystem can become more robust and healthier.