MONTRÉAL, Feb. 14, 2012 /CNW Telbec/ - Québec's venture capital (VC) market is showing substantial growth, with investments in Québec totalling $549 million in 2011, up 48% from the $370 million invested in 2010. This brings Québec back to the annual investment levels last seen before the financial crisis, notes the annual report on activity in the investment capital industry compiled by Thomson Reuters and published today by Réseau Capital.
Strong growth in investments in Québec and across Canada
Activity in Québec by value of transactions show the fastest growth in North America. VC investments in Canada stood at $1.5 billion, up 34% from 2010 and the highest level since 2008, whereas our neighbours to the south saw an increase of only 23%, with a total of US$28.5 billion in 2011.
In 2011, Québec accounted for 36% of the dollars invested in Canada. Québec's share rose slightly from the 33% obtained in 2010, putting Québec neck-and-neck with Ontario. Québec remains in the lead in the number of VC-backed companies, with a share reaching 58% of total companies financed in Canada. Altogether, 256 Québec companies benefited from VC financing in 2011, up from 176 in 2010, a 45% rise. The average amount invested per company stood at $2.1 million, unchanged from 2010.
"Québec has reason to be proud of this excellent performance in 2011, especially since every type of investor contributed to this growth in investment and every economic sector benefited," said Geneviève Morin, Co-President of Réseau Capital.
A higher contribution from foreign investors
Local and foreign investors each contributed significantly to the annual growth in Québec's VC activity in 2011.
Labour funds and other tax-advantaged funds remain the most active among Québec investors, with $164 million spread among 156 companies in 2011, a 21% increase compared to the previous year.
The amounts invested by independent private VC funds also rose considerably last year, with $114 million invested in 64 companies. This is $48 million more than in 2010, a 74% increase. Dollars invested in Québec by private funds thus rose from the 12% historical average to 21% in 2011.
American VC funds and other foreign investors also increased their presence in the Québec market, injecting $126 million in transactions in 2011, up 45% from the $87 million invested the previous year. Transborder activity ranks second in amounts invested as VC, with 23% of the total.
Funds raised across Canada up just 2%
Compared to transactional activity, VC funds raised across Canada saw a less vigorous increase. New capital intended for Canadian funds rose only 2% between 2010 and 2011. It is worth noting, however, that Québec-based VC fund managers accounted for the highest percentage of new commitments in Canada in 2011. Québec funds drew $552 million, or 53% of the total of $1.0 billion raised.
"The low level of funds raised in Canada continues to be a matter of concern," Ms. Morin added. "Even though Québec performed better, the fact remains that the amounts that came in are barely sufficient to maintain the level of activity, considering that companies' requirements are growing."
Activity by sector in Québec
The information technologies sector again topped the list, for the fourth year in a row. A total of 65 companies obtained $181 million in 2011, up 48% from 2010, a significant rise representing one-third of the total invested. This trend benefited most areas of IT, with activities focusing on the Internet, electronics and software standing out most sharply.
The biopharmaceutical and life sciences sector did not experience as strong an increase, with a 19% rise. The $104 million invested in 2011 now represent only one-fifth of all outlays.
VC activity in "cleantech" (clean technologies) sectors shot up to the highest level ever recorded in this field in the Québec market. The $97 million that went into 13 cleantech companies last year represents 18% of the total and more than double the $39 million invested in 2010. It is also worth noting that the amounts invested, which went into 13 cleantech companies including Enerkem Inc., the recipient of Canada's largest VC financing in 2011, were the highest ever recorded in the Québec market.
Companies in non-technology sectors were not left out, with $148 invested in 155 companies, up 27%.
Late-stage development deals drive growth in Québec
Québec VC activity attributable to late-stage development deals accounted for 79% of all amounts invested, a two-thirds rise compared to 2010. Despite growth in start-up financings, overall early-stage activity fell by 9% in the same period, with 69 companies obtaining $113 million, down from $125 million the previous year.
"It is hardly a surprise that the amounts invested are concentrated in late-stage development deals, since many independent private funds have reached the point in their life cycles where they have to focus their efforts on companies in their portfolios and bring them toward an exit," Ms. Morin noted. "The fact that financings at the start-up stage have increased and that 60% of the companies financed were receiving venture capital financing for the first time shows a certain capacity for renewal nevertheless."
About Réseau Capital
Réseau Capital, founded in 1989, is the only private-equity association that brings together all stakeholders involved in the Québec investment chain. The mission of Réseau Capital is to contribute to the development and efficient operation of the private-equity industry, which plays a major role in the development and financing of businesses in Québec. Réseau Capital has more than 425 members representing private-equity, tax-advantaged and public investment companies, as well as banks and insurance companies, accounting and law firms, angel investors, and many professionals working in the field.
For further information:
Co-President, Réseau Capital
Head of Investment
Co-President, Réseau Capital
Osler, Hoskin & Harcourt LLP