Financing activity in Canada’s venture capital market dropped to its lowest level in 12 years, as the economic downturn choked the flow of funds to small startups.
In 2008, $1 billion was invested in Canada, down from $1.7 billion in 2007, according to a report last week by Canada’s Venture Capital and Private Equity Association (CVCA) and Thomson Reuters (publisher of PE Week).
Aside from the drop in value of financings, the number of companies that received capital was also lower, falling to 371 in 2008, compared to 412 in 2007.
“These statistics demonstrate the declining availability of capital in the venture capital industry, which has real repercussions for Canada’s ability to drive innovation and to develop the knowledge-based economy we need to compete effectively on the global stage,” CVCA President Gregory Smith said in a statement.
“The availability of (venture capital) dollars has been eroding for years, a trend that has been exacerbated by the sharp economic downturn,” he said.
The report notes there was also a pronounced drop in cross-border activity in 2008, with U.S. venture funds and other foreign investors providing just about $300 million, down from $675 million in 2007. —Wojtek Dabrowski, Reuters