 |
There are encouraging signs that things are finally looking up for Canada's venture-capital industry after a three-year downturn that has been hard on both investors and young companies.
Venture capital investments still remain far below levels hit during the technology bubble, but the situation appears to have stabilized thanks to a stronger economy and healthier stock markets.
The biotechnology sector has attracted the most new investment over the last year, but prospects also appear to be brightening in the telecommunications and information-technology sectors.
"There are some positive signs," said Charles Cazabon, Vice President, Venture Capital, at the Business Development Bank of Canada (BDC), which manages $500 million in venture-capital investments. "Sales at companies are ramping up and that's typically a good leading indicator of things to come.
"As things progress there will be more investment and eventually things will come back to a more normal situation."
This year got off to a good start for venture-capital investments, which usually take the form of equity participations in fast-growing, private companies. Investments increased 23 per cent to $401 million in the first-quarter of 2004 compared with $325 million in the same period last year, according to research by Macdonald & Associates Ltd.
Richard Rémillard, Executive Director Canada's Venture Capital and Private Equity Association, said investment numbers are encouraging.
"There's a sense that things are more stable after a few years that have been very difficult," he said. "Exit activity, either via IPOs or the M&A route, seems to have picked up and confidence indicators developed through surveys are also up."
Venture capitalists have been looking for a turnaround since the tech bubble burst in 2000.
From a peak of $5.8 billion in 2000, the amount of venture investments fell to a five-year low of $1.5 billion last year. That downturn left entrepreneurs going hungry for capital, while sub-par returns from venture investments pushed both institutional and retail investors to other asset classes.
But things appear to be improving not only in Canada but also in the U.S. venture-capital industry. U.S. venture investments reached $5.1 billion in the first quarter of 2004 up 5 per cent over the previous quarter, continuing an encouraging trend of growth in each quarter since the beginning of 2003, according to a Ernst &Young/VentureOne report.
On both sides of the border, investments in biotechnology have led the way in the last year. In Canada, biotech companies raised $176 million in the first quarter or 44 per cent of total venture-capital investment.
Montreal biotech entrepreneur Elias Georges said it took a lot of perseverance for his company to raise venture capital in the down years of 2001 and 2003.
"It was a difficult time to raise funds and it took a long time," said Georges, co-founder and chief executive officer of Aurelium BioPharma Inc., which has raised almost $15 million from BDC and other venture capital investors in three financing rounds.
But Georges, whose company develops drugs and diagnostic tools for the treatment of chemotherapy-resistant cancers, said he is now seeing clear signs that venture capital is on the rebound.
"If we had wanted to raise money this year, it would have been a lot easier and a lot faster."
For more information, call 1 877 BDC-BANX (232-2269).
Articles of interest
 Canadian entrepreneurs working to close productivity gap
Financing available to help entrepreneurs boost productivity
Lean manufacturing payoff can be dramatic
Women entrepreneurs get on track for success
Seed investing creates champions of tomorrow
|
|
