Québec's venture capital results for 2009 - Québec dominates the venture
capital industry

MONTREAL, Feb. 17 /CNW Telbec/ - Réseau Capital today announced the results for Québec's venture capital industry for 2009, as compiled by Thomson Reuters.

Contrary to prevailing global venture capital (VC) trends, deal activity in the Québec market increased last year, with a total of $431 million invested, or 10% more than the $392 million invested in 2008. This outcome was reinforced in Q4 2009, when disbursements totalled $112 million, up 24% from the $91 million invested in Q4 2008.

In 2009, Québec-based trends contrasted sharply with VC activity elsewhere in the North American market. Across Canada, a total of $1.0 billion was invested, down 27% from $1.4 billion in 2008. The year-over-year decline was even steeper in the United States, where US$17.7 billion was invested in 2009, down 37% from the previous year's figure of US$28.0 billion.

Québec consequently took a larger and leading share of all disbursements made in the Canadian market in 2009, with 43%. As a result, the amount invested per company rose to an average of $2.7 million last year. Montréal continued to dominate Québec deal-making last year, with 56% of all disbursements. However, the Québec City region stood out with 31% of investments versus 6% the previous year.

Investor type

After significantly reducing their presence in the Québec market in 2008, U.S. venture capital funds and other foreign investors returned in force in 2009, bringing a total of $125 million to deals. This level of foreign activity is up 52% from the $82 million invested the previous year. Consequently, foreign investors accounted for 29% of all disbursements in 2009, which surpasses their more typical 25% market share of recent years.

Québec labour-sponsored and other retail funds were involved more in local deal-making, investing $138 million in 114 companies, or 11% more than the $124 million they had invested the year before. As a result, retail funds accounted for slightly less than one-third of total VC activity in 2009.

According to François Chaurette, Co-President of Réseau Capital and General Partner at Novacap, "Once again, Québec dominated Canada's investment capital scene. Our industry's ability to add value to investments shows why foreign funds invest in Québec's entrepreneurs and companies."

INVESTMENT BY SECTOR

For the second year in a row, the information technology (IT) sector captured most of the VC deals in Québec. Higher levels of IT-related activity helped power overall growth in 2009, with $199 million invested in 34 companies, up 24% from the $161 million invested the year before, and accounting for 47% of the total.

In Québec's life sciences sectors, activity nonetheless fell 25% on the year, with $88 million going to 22 companies, compared with $118 million in 2008. This result gave life sciences activity an especially sub-par 20% of all disbursements.

In contrast, Québec's non-technology sectors made big gains last year, with a total of $129 million invested in 95 companies, up 65% from the $78 million invested in 2008. Consequently, traditional activity accounted for an above-par 30% market share.

FUND RAISING

Canada's VC fund-raising environment was almost unchanged in 2009, as a total of $995 million in new commitments went to fund managers, or just shy of the $1.0 billion committed the year before. As a result, fund-raising levels continued to approximate those of the mid-1990s. Domestic fund-raising showed some improvement in the final three months of 2009, when $388 million was committed. Private funds accounted for 53% of new resources last year, or $527 million, although this amount was 27% shy of the $719 million raised by them in 2008.

Labour-sponsored and other retail funds brought new commitments totalling $331 million into the Canadian market in 2009. Fund managers focused on deal opportunities in Québec absorbed 38% of new supply inflows last year.

Activity involving Québec and Canadian funds in Q4 2009 was attributable in part to the recent emergence of VC-oriented funds-of-funds, including Montréal-based Teralys Capital, which completed its $700-million first closing in 2009.

According to François Chaurette, Co-President of Réseau Capital and General Partner at Novacap, "The success of Québec companies that have attracted equity investment reflects the expertise developed by the members of our association. That's why we succeed in Québec."

About Réseau Capital

Réseau Capital - the Québec Venture Capital and Private Equity Association - was founded in 1989. Its members represent public and private venture capital companies as well as firms of professionals serving the industry. Réseau Capital's mission is to contribute to the development and smooth functioning of the investment chain. Its preferred approaches are training, information, networking, advocacy and representation.

For further information: Robert Pierre Venne, Media Relations for Réseau Capital, Direct line: [phone], [email protected]; Source: François Chaurette, Co-President of Réseau Capital, Novacap - Senior Partner; Janie C. Béïque, Co-President of Réseau Capital, Solidarity Fund QFL - Senior Vice-President, New Economy