Venture capital investment surged back to pre-crisis levels in 2011, according to the latest data from Industry Canada.
The department reports that Canadian VC investment rose to $1.51 billion in 2011, up 34% from the previous year, marking the industry’s strongest annual performance since 2007. In the fourth quarter, investments reached $342 million, which is consistent with quarterly levels throughout the year, but represents a 40% increase from the same period in 2010.
Notwithstanding this recovery, VC investment remains well below the $2.05 billion invested in 2007. And, Industry Canada also reports that VC fundraising activity remained relatively unchanged in 2011, with just over $1.0 billion raised, up just 2% from 2010. And that was only achieved thanks to a strong second half, as nearly $600 million in new capital was raised then. Retail VC funds raised $402 million during the year, accounting for the largest share of total new commitments, it says. Whereas, private funds attracted $368 million, down 36%.
The number of companies receiving VC funding was also up during the year to 504, a 23% increase from 2010. Which, Industry Canada reports, is the highest level of total deals completed since 2005, when 595 firms received VC financing. Average deal size increased by 7% to $3 million.
Additionally, Industry Canada reports that VC investments in 2011 were increasingly concentrated in later-stage deals, with these sorts of firms attracting approximately 71% of all investment dollars. This is up 60% from the previous year. And, it notes that the increase in total investment levels last year can be entirely attributed to increased later-stage activity, as year-over-year investment levels at all other stages dropped compared to 2010.
Quebec led Canada in the amount of deals completed (284), but Ontario attracted the greatest value of VC ($550 million), it says. The largest increase in investments occurred in Quebec, where companies received 48% more investment in 2011 than in 2010. British Columbia also continued its recent strong performance, it notes.
By sector, investments in information and communication technology firms led the way, accounting for almost half of the activity, largely driven by investments into internet and software companies. Industry Canada also notes that the $245 million attracted by the energy and environmental technologies sector was the strongest year for that sector on record, primarily driven by financings into alternative energy companies in Quebec, Ontario and B.C. And, capital invested in life sciences firms increased by about 15% over 2010.
Finally, it also reports that almost all investor types were more active in the market in 2011, with foreign funds leading the way for the eighth straight year, investing $431 million in 89 deals, compared to $311 million in 74 deals over 2010. Private independent funds also experienced a notable increase in activity, while labour-sponsored venture capital corporations and retail fund activity remained virtually the same.