Venture capital investments grew to $627 million in the second quarter of 2005, up 53% from the $409 million invested by the industry in the second quarter of 2004, according to new data from Canada’s Venture Capital and Private Equity Association.

The CVCA reported that the $627 million invested is the largest quarterly investment in a second quarter in four years, and is also up sharply from the $326 million invested in the first quarter of 2005. It is also the single largest quarterly industry disbursement since the fourth quarter of 2003.

“This quarter’s investments continue the growth which has been underway for two years,” said Dr. Robin Louis, president of the CVCA and president of Ventures West, “they reflect a good level of high quality Canadian firms seeking venture capital.”

While investments rose considerably in the second quarter of 2005, new commitments to venture capital declined to $155 million. Year to date in 2005, the industry has raised $1. 2 billion which is 29% less than the $1.7 billion raised in the same period in 2004 and 39% less than the $1.96 billion raised in the first half of 2003.

“Having disbursements greater than capital raised continues a worrisome trend,” said Louis, “The demand for capital from high quality firms appears to be strong but the industry’s ability to provide the funding will necessarily decline unless the industry is able to increase the amount of capital that it raises.”

The CVCA also notes that relatively large funding rounds were completed in the quarter — the 10 largest deals captured 41% of the total capital invested, as compared to the 19% share of the 10 largest deals in all of 2004.

During the quarter, Canadian firms were quite successful in obtaining capital for their growth and expansion from abroad, it adds. Funding from venture capital companies outside of Canada (mostly from the U.S.) accounted for $219 million, or 35 %, of all the investments in Canadian companies in the second quarter of 2005. This investment from foreign sources was at its highest level in two years.

“Canadian firms and their Canadian venture investors are actively pursuing funding from abroad. Their success during the quarter results from the high quality of the Canadian companies and also because the U.S. industry has a large amount of capital available, and this is causing deal prices to increase there,” Louis added.