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Canadian venture capital activity slows in Q2 2003

Canadian venture capital investment levels have fallen in the second quarter of 2003, according to the latest industry statistics released by Macdonald & Associates and the Canadian Venture Capital Association (CVCA).

The aggregate value of venture capital investments fell by 33 per cent in the second quarter, to $212m from $314m in Q1 2003. A total of 179 Canadian companies were financed this time around, which is 18 per cent less than the 218 firms in the first quarter.

In addition the level of disbursements was less than half of the $458m recorded for the same second quarter period in 2002.

Although the Canadian industry has fared better than its US counterpart for most of the current downturn, Macdonald & Associates and the CVCA believe that increasingly stable activity in the US could indicate that the Northern American market is finally beginning a slow recovery. For the first time in three years, dollars invested by the US industry grew in the second quarter, to $4.3bn from $4bn.

‘The Canadian VC industry resisted the downdraft for several quarters after activity started to decline in the US,' said Mary Macdonald, president of Macdonald & Associates. ‘However, Canadian investors couldn't avoid it forever, particularly given the extent to which the telecom sector has been hit over the past two years. With activity in the US turning up in Q2 for the first time in three years, we will hopefully quickly follow suit.'

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