February 17, 2010 / 10:38 AM / 8 years ago

Canadian venture capital levels tumble in 2009

TORONTO (Reuters) - Canadian venture capital turned in its weakest performance in 13 years in 2009 as investment levels tumbled and fewer entrepreneurs received funding, industry figures revealed on Wednesday.

“Deal activity in the Canadian venture capital market continued to slow in 2009, to reach its lowest level since the mid 1990s,” the Canadian Venture Capital and Private Equity Association (CVCA) said in a statement, releasing data for the fourth quarter and full year of 2009.

The umbrella association said the number of entrepreneurs backed by venture capital fell by 15 percent in 2009, with dollars invested per deal also on the decline.

Amounts invested per company averaged C$3.1 million ($3 million) in 2009, compared with C$3.5 million in 2008 and C$5.1 million the year before that.

“The nationwide statistics demonstrate the lack of capital in the venture capital industry,” said CVCA President Gregory Smith. “The availability of VC dollars has been eroding for years. We are failing to capitalize on the potential of our entrepreneurs and small growth companies, which have traditionally been vital drivers of jobs and prosperity in Canada.”

The CVCA said fund-raising in venture capital was roughly flat at C$995 million in new commitments, compared with C$1 billion committed in 2008.

That comes in stark contrast to private equity buyout activity, which slipped in 2009 from 2008, but was viewed as more resilient than the venture capital sector.

Deal activity in the buyout market was down 25 percent in 2009 in terms of number of transactions, compared with 2008, and there were fewer larger deals.

The top deal of the year was the $900 million sale of Nortel Networks Corp’s enterprise unit to Avaya Inc, which drove private equity buyout figures to the best quarter of the year.

The CVCA said eight Canadian buyout funds raised some $2.1 billion in 2009, including about $1 billion raised by Onex Partners III.

“Despite reduced buyout investment in Canada in 2009, fund-raising was still robust, especially considering the three very strong years of buyout fund-raising from 2006 through 2008,” the CVCA said.

($1=$1.04 Canadian)

Reporting by Pav Jordan; editing by Rob Wilson

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