Brutal venture capital stats for H1 2007

It’s that time again to ask the question: which regions in Canada are raising venture capital?

The sample set is January-June 2006 2007, all venture capital (equity) invested in information technology firms. I backed out any identifiable venture debt deals.

National figures

– 50 transactions
– $355.3 million disbursed (17 deals didn’t disclose the size)
– 3 transactions involved sums in excess of $20 million; Geosign ($160MM, of which $50MM was a secondary), SiGe ($21.95MM), Teradici ($20.5MM). Average deal size of those that announced amounts raised was $6MM (excluding Geosign from the group).

British Columbia
$54.2MM raised on 14 deals (6 didn’t disclose the deal size)

Ontario
$243.8MM raised on 18 deals (5 didn’t disclose the deal size, and one was massive at $160MM)

Quebec
$50.3MM raised on 15 transactions (5 didn’t disclose size)

New Brunswick
$4MM raised on 1 deal

Nova Scotia
$3MM raised on 2 deals (1 didn’t disclose deal size)

Scanning the list of deals is a bit despressing, actually. The impact of the shrinking venture market is quite stark when you think that less than $200 million of investments were disclosed (ex Geosign) across our nation during a six month period.

Software Innovation Inc. of the Waterloo region, was the only firm in that area to receive VC funding during the first half of the year ($3 million), although there was a 2nd tranche with an undisclosed investor/size in May.

That compares to $47MM put to work in the Montreal area. Or even $5MM in Gatineau (and a second deal wasn’t disclosed).

The real shame has to be Ontario, however, with a modest $83.8MM invested in the absence of Geosign. For all of the time and effort that has gone into the MARS project, the technology industry is starving for capital in this province. MARS may well be an important leg to Ontario Premier McGunity’s innovation + economic growth stool, but a one-legged stool can’t support the weight of the entire industry.

Which is not to turn a blind eye to the fact that Alberta didn’t have a single reported VC deal during the period. But at least their provincial government doesn’t pretend that they are making headway on this front.

But let’s not ignore the national figures. Less than $200MM was reported as disbursed across the country for an entire six month period (ex Geosign). That’s down more than 15% from $236MM during the same period in 2006 (the relevant comparison as there were no mega deals during that period). $460MM of venture capital funding was disclosed in the first half of 2005 on 101 companies, with the largest deal being Mertion at $64MM invested. 2004 enjoyed $292MM, and the tech meltdown was still fresh in everyone’s mind that year.

And, in case you’ve forgotten, there was more than $1.2 billion invested in Canada during the first half of 2001 across 224 companies.

Something is happening, and the roots are taking hold.

At our firm, by comparison, we are having the most active time in our seven year history. During the first six months of 2007 we led $43.3MM of transactions. That represents more than half the VC sum that was put out across Ontario (ex Geosign), and over 20% of all of the VC funding invested across Canada.

We aren’t lacking for opportunities, and I can only assume that goes for every provider of capital for tech firms.

But in the VC market, we are looking at another weak start to the year, and at levels not seen this decade.

Is the issue a lack of good companies? Is it a lack of capital? Lack of forseen exit opportunities? Tax policy? Strong dollar? Unreasonable valuation expectations?

You tell me.

MRM