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With small and medium-sized businesses turning more and more
to equity financing, particularly as a source of growth capital,
the Small Business Quarterly is launching a new Equity
Financing section. This new section will cover issues such as
trends in venture capital, characteristics of informal investors
(“angels”), the role of “love money” for start-ups,
and the strengths and weaknesses of the Canadian market for initial
public offerings. This issue’s feature story presents an
overview of venture capital activity in Canada from 1996 to 2000.
The new equity financing section
provides a breakdown of venture capital activity by industry.
 Over
the past five years, Canada’s venture capital industry has
expanded to record levels of activity. The year 2000 saw 1441
rounds of financing, which is 46 percent above the level in 1999
and 128 percent more than in 1996 (see Chart 1).
Each transaction with an investee company represents one round
of financing, in which multiple investors may have participated.
The 1441 rounds in 2000 came about as a result of 2566 investments.
Other key results from 2000 include:
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The amount of capital disbursed grew to a record level of
$6.3 billion, reflecting increases of 133 percent
and 472 percent over the $2.7 billion and $1.1 billion
of 1999 and 1996 respectively.
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The average amount of financing was $4.4 million, up
from $2.7 million in 1999.
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The high rate of growth in the venture capital industry is
powered by large transactions ($5 million and above),
which represent 79 percent of the total dollars invested,
compared with 64 percent in 1999 and 50 percent
in 1996.
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Small transactions (less than $1 million) and mid-sized
transactions ($1–5 million) continue to represent
a small proportion of the total value of industry investment,
accounting for only 4 percent and 17 percent respectively,
down from 7 percent and 28 percent in 1999 and from
11 percent and 40 percent in 1996. However, small
transactions also continued to make up about half of the total
number of rounds.
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The dollar value of small transactions more than doubled
from 1996 to 2000. In that same period, the value of large
transactions increased almost tenfold.
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Small Business Research and Policy
