Québec's venture capital results for 2007 - Investments up in Québec but early-stage capital continues to fall



    MONTREAL, Feb. 12 /CNW Telbec/ - Réseau Capital today announced the
results for Québec's venture capital industry for 2007, as compiled by Thomson
Financial Canada. Deal activity in Québec's venture capital (VC) market grew
for the third year in a row in 2007, reaching its highest level since 2002.
Dollars invested totalled $648 million, up 8% from the $600 million of 2006.
More Québec-based companies were financed with VC as well, with these
numbering 189 in 2007, up 6% from the year before. Québec's share of all
disbursements in Canada was 31% in 2007, a level well above its historical
average. Québec also accounted for the lion's share of companies financed in
the country, or 46%.

    ACTIVITY BY STAGE

    Québec-based companies in expansion, or at a late stage of development,
were at the centre of VC activity in 2007. Late-stage activity as a whole saw
a total of $426 million invested in 134 companies, or two-thirds of all
disbursements in Québec, and 27% more than the $336 million of 2006. As in
previous years, by far the largest proportion of late-stage activity was
assumed by expanding firms, 121 of which garnered $398 million in 2007, up 28%
from the $312 million taken by 81 firms the year before. As a result,
expansion activity alone accounted for 62% of total capital invested in Québec
this time, as compared with its 52% share in 2006.
    Early-stage VC involving seed and startup activity fell to its lowest
level since the mid-1990s, in both real and relative terms. Seed deals
captured $10 million, or less than half of the $23 million invested in 2006,
and startup deals, $64 million, down 42% from the $111 million invested in
2006. Together, seed and startup activity accounted for only 11% of all
disbursements in Québec in 2007.
    According to Charles Cazabon, President of Réseau Capital and
Vice-President, Venture Capital, of BDC, "Despite Québec's fine performance in
terms of dollars invested, the decrease in seed and startup venture capital
activity is worrisome, since these investments allow the development of the
industry leaders of tomorrow."

    Breakdown by investor type

    Building on steady growth in Québec since 2003, U.S. venture capital
funds and other foreign investors once again increased their market presence
in 2007. Foreign investors brought a total of $210 million to Québec deals, or
19% more than the $177 million they contributed in 2006. This is the
second-highest level of foreign activity in Québec on record, surpassed only
by the $420 million invested in the peak year of 2000.
    As a proportion of total VC activity in Québec, foreign investors last
year broke all records, assuming almost one-third of all disbursements. By
comparison, the share obtained by these investors was 29% in 2006, and 27% in
2000.
    The activity of LSVCC and other retail funds in Québec also rose on a
year-over-year basis, with $163 million invested in 127 firms in 2007, up 7%
from $152 million invested in 114 firms in 2006.
    For the third consecutive year, the Québec activity of
private-independent funds increased in 2007. Private funds invested $96
million in 46 firms, or 15% more than the $84 million they invested in 42
firms in 2006. While taking third spot after foreign and retail activity,
private funds continued to account for an above-average share of total capital
invested in Québec in 2007, or 15%.

    Investment by sector

    Québec's life sciences sectors remained in the forefront of VC activity
in 2007 despite a small drop in activity in real terms; a total of
$262 million was invested in 26 companies, or 3% less than the $271 million
invested in 36 companies in 2006. Life sciences once again attracted the
leading share of all disbursements in Québec in 2007, or 40%. As in prior
years, biopharmaceutical activity received by far the most dollars invested in
life sciences sectors last year, with 21 firms absorbing $222 million, or 85%
of the total.
    IT-related activity in Québec was also stable in 2007 with $210 million
going to 63 firms, in comparison with the $212 million invested in
57 companies in 2006. VC activity in Québec's IT and life sciences sectors
drove trends in 2007. Telecom activity led in Québec's IT sectors in 2007, as
15 firms captured $67 million, up 16% from $58 million the year before.
    Québec's energy and environmental technology sectors saw a major surge in
VC activity in 2007. A total of $59 million was invested in 13 companies,
which is better than triple the $17 million invested in 10 companies in 2006.
Indeed, 2007 clean-tech activity was the highest recorded to date in Québec.

    Fund raising

    In contrast with deal activity, new capital committed to Canadian VC fund
managers once again declined in 2007. Funds raised across the country reached
$1.2 billion at the end of December, down 27% from the $1.6 billion raised in
2006. In fact, the results of fund-raising activity on a Canada-wide basis
last year were among the lowest on record.
    The Québec market once again accounted for a major proportion of the new
capital committed across Canada in 2007, with local VC funds obtaining a 69%
share, or $816 million. This trend notwithstanding, Québec fund-raising
activity also reflected a year-over-year decline, as last year's total was 25%
shy of the $1.1 billion of new supply secured in 2006.
    New commitments to LSVCC and other retail funds totalled $604 million in
2007, or close to three-quarters of the Québec aggregate. Still, this level of
retail fund raising in Québec was off 21% from the $766 million of the year
before. Québec-based and Québec-focused private funds saw $211 million
committed in 2007, which was 31% below the $304 million committed in 2006.
    According to Charles Cazabon, President of Réseau Capital and
Vice-President, Venture Capital, of BDC, "To build a company, you have to
ensure it has access to funds during its entire development phase. This stage
can last from five to 10 years, or even longer. Since it's usually venture
capitalists who supply the required funds, it's important that they themselves
be well capitalized. That's why the weak statistics concerning fund raising by
Canadian venture capital fund managers are of concern."

    For more information, we invite you to consult the document "2007 annual
overview" in the press room section of our website at www.reseaucapital.com

    About Réseau Capital

    Réseau Capital - the Québec Venture Capital and Private Equity
Association - was founded In 1989 and has more than 525 members who represent
public and private venture capital companies, as well as firms of
professionals serving the industry. Its mission is to foster the growth of the
industry and the professional development of its members.




For further information:

For further information: Robert Pierre Venne, Media Relations, Réseau
Capital, (514) 993-6260, robert-pierre@reseaucapital.com; Source: Charles
Cazabon, President, Réseau Capital, Vice-President, Venture Capital, BDC

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