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Five year plunge in Canadian venture capital investment
Jan 15,2009 00:00
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Venture capital investment in Canada plunged 35% between 2003 and the third quarter of last year, threatening economic growth in the country, the Canadian Venture Capital & Private Equity Association (CVCA) said Thursday. Meanwhile, venture capital investment in the United States grew at 17% during the same period, creating an economically dangerous gap, the CVC said in a report. "Venture capital is a key driver of job creation, economic growth, new technologies and innovation in Canada," said Gregory Smith, president of the CVCA. "Yet Canada's venture capital investment has declined relative to foreign markets in recent years." He added that the trend "will only worsen with the downturn in the economy and credit markets." The report suggests the drop in venture capital in Canada will cause it to lag behind other countries in research and development. Without the economic benefits of innovation, Canada is threatened with economic stagnation. "It is essential that governments, investors, venture capital funds and entrepreneurs work together to build a strong Canadian venture capital industry," said Mr. Smith. Canada's 1,755 venture capital-backed companies generate sales of $18.3-billion annually, the CVCA said. The companies employ 63,955 Canadians and generate another 83,549 jobs indirectly. They also export 70% of their sales, four times the average export ratio of the Canadian private sector. The sector accounts for 1.3% of all private sector jobs and nearly 1% of Canada's GDP. The study's author, Gilles Duruflé, said venture capital investment was critical for start-ups in the technology sector. "This study also shows the 'snowball' effect of venture capital has been extremely valuable to the economy, as successful ventures reinvest and apply their knowledge, research discoveries, capital and entrepreneurial experience," Mr. Duruflé said. The report was sponsored by the CVCA, the Business Development Bank of Canada, Industry Canada and provincial government partners. http://www.financialpost.com/news/story.html?id=1180844 |