More patience is needed with venture capital (VC) in Canada. Investments have grown steadily in the last few years; however, the rewards for investors are fleeting while more work is required to support the nation’s entrepreneurs and keep them from setting up shop abroad.
VC is critical financing for startups and small businesses thought to have long-term growth potential. Venture capitalists not only supply funding but also advise small enterprises. VC can be needed at several stages of a company’s development until “exit,” when the firm goes public or is acquired by a larger company and the venture capitalist realizes the return on investment.
In the United States, companies are choosing to stay private longer. The average time for a company to exit hit over six years in the first half of 2017, according to data platform PitchBook.
More and more, firms are able to get VC funding as they scale up. Thus, the need to exit earlier is declining. Especially in the United States, there’s plenty of VC money to go around.
“There’s almost a record amount of ‘dry powder’ in the industry,” says Mike Woollatt, CEO of the Canadian Venture Capital and Private Equity Association (CVCA), in a phone interview.
As companies stay private longer, it leads to bigger exits (measured by average dollar size). However, Canada is falling behind the United States and Great Britain, as its average deal size increased only 16 percent since 2013, whereas deal sizes have gone up by 77 percent and 123 percent respectively in those other two jurisdictions, according to analysis from BDC Capital, the investment arm of the government agency Business Development Bank of Canada.
Canada’s Improving Venture Capital Scene Still Playing Catch-Up
NEWS ANALYSIS
More patience is needed with venture capital (VC) in Canada. Investments have grown steadily in the last few years, however, the rewards are fleeting.
Finance minister Bill Morneau speaks with John Ruffolo, CEO of OMERS Ventures at the Munk School of Global Affairs in Toronto in 2016. Through supporting venture capital, the government aims to support innovative small companies in Canada.
The Canadian Press/Peter Power
Rahul Vaidyanath
Journalist
|Updated:
We want local Canadian VCs to write more and bigger checks.
, CEO, Canadian Venture Capital and Private Equity Association
Rahul Vaidyanath
Journalist
Rahul Vaidyanath is a journalist with The Epoch Times in Ottawa. His areas of expertise include the economy, financial markets, China, and national defence and security. He has worked for the Bank of Canada, Canada Mortgage and Housing Corp., and investment banks in Toronto, New York, and Los Angeles.
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