In mid-February of this year, the Canadian Venture Capital Association (CVCA) reported on the state of the venture capital markets in Canada.

Although still dwarfed by venture capital monies going to IT, clean tech companies took a total of $187 million or 17% of the invested venture capital monies in Canada in 2010, the largest amount yet. Beyond that optimistic picture, however, there are serious concerns about funding to early-stage clean tech companies. The CVCA notes that venture capital dollars invested in Canada as a percentage of Gross Domestic Product are half what they are as a percentage of GDP in the US. What is more, the average venture capital transaction in Canada was $3.2 million. For clean tech companies, with significant costs to proof-of-concept, that is insufficient to advance to commercialization. And it is getting worse. According to the CVCA’s February press release, new commitments to VC funds totaled $819 million in 2010, down 24% from 2009, and the lowest per-annum level in the Canadian market in 16 years.

Compare the Canadian investments in clean tech in 2010 to those in the US. According to the National Venture Capital Association (NVCA), a total of $3.7 billion was invested in 2010 in clean tech companies. Even if you use the general yardstick of “Canada is 10% of the US” in size – our extrapolated clean tech investment in 2010 should have been more than twice the size that it was.

There is no question that returns in the venture capital industry have been a challenge over the past decade. At the same time innovation, including in clean tech, needs capital.