Canada's Venture Capital and Private Equity Association (CVCA) and Thompson Financial recently announced that venture capital investment in Canada increased 21% to $2.1 billion in 2007. However, more than 80% of the growth resulted from a significant increase in investment by U.S. venture capital firms in Canadian companies. U.S. firms represented more than 40% of total Canadian venture capital investment in 2007 and more than 50% of investment in Ontario.
Biopharmaceutical and other life science investments increased 23% in 2007 to $633 million, compared to $514 million in 2006. Investments were made in 70 life sciences companies over the course of the year.
The CVCA also reported that Canadian venture capital firms saw a significant decline in fundraising in 2007. Canadian venture capital firms raised only $1.19 billion, a drop from the $1.64 billion raised in 2006 and the 5th year out of the past 6 that fundraising has declined.
In contrast to the Canadian situation, according to The MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thompson Financial, venture capitalists invested U.S.$29.4 billion in U.S. companies in 2007, an 11% increase over 2006 and the highest investment total since 2001. The life sciences sector set an all time record for venture capital investing with U.S.$9.1 billion in 862 deals, compared to U.S $7.6 billion in 786 deals in 2006.
More significantly, U.S. venture capital funds raised U.S.$34.7 billion in 2007. While this is only slightly more than the amount raised in 2006, it represents the highest level of fundraising seen since 2001.
In summary, the 2007 results reveal that the Canadian venture capital industry continues to struggle to overcome the sluggishness exhibited since the technology bubble burst in 2001. Instead, venture capital investment growth in Canada is being driven primarily by U.S. funds extending into, and taking advantage of the available opportunities in, Canada.
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