Québec's venture capital results for Q2 2007 - IT returns to the fore

    MONTREAL, Aug. 14 /CNW Telbec/ - Réseau Capital today announced the
results for Québec's venture capital industry for the second quarter (Q2) of
2007, as compiled by Thomson Financial. In the first six months of 2007,
venture capital (VC) activity in Québec was up, with a total of $321 million
disbursed to 113 companies at the end of June, or 28% more than the
$251 million invested at the same time last year. The venture capital market
in Québec was very active in the second quarter, with $149 million disbursed,
or 10% more than the $135 million invested during the same period of 2006. The
number of Québec-based firms receiving VC also increased, rising from
50 companies one year ago to 71 companies in Q2 2007.
    Increased activity in Québec did not rely on above-average deal sizes
this time. The average amount invested per firm in Québec was $2.1 million in
Q2 2007, compared with $2.7 million in Q2 2006 and $3.2 million in Q1 2007.

    Investment by sector

    After yielding to the life sciences sectors during the whole of 2006 and
again in Q1 2007, the IT sectors resumed their prominence in the second
quarter. IT-related activity reflected a total of $79 million disbursed to
30 companies, up 45% from the $54 million disbursed to 21 companies at the
same time last year. As a consequence, IT sectors attracted 53% of total
capital invested in Québec. This improves on the 36% share they recorded for
2006 as a whole, as well as the 40% share for 2005, when activity in these
sectors also led trends in the Québec market.
    Life sciences activity in Québec declined from April to June. A total of
$28 million was invested in 11 life sciences companies, down 51% from the
$58 million invested in 10 companies in Q2 2006.
    Activity in consumer, manufacturing and other traditional sectors also
rose on a year-over-year basis, with $26 million disbursed to 24 companies, or
more than double the $9 million disbursed to 12 companies in Q2 2006.
Non-technology activity received 18% of the capital invested, up from 14% in
2006 over all.
    In real terms, early-stage activity in Québec held its own in Q2 2007,
with $51 million invested in 25 companies, an amount that nearly matches the
$52 million recorded the year before. Startups were key to this sustained
trend, with 10 securing $32 million, up 89% from the $17 million secured
during the same period of last year.
    In relative terms, however, early-stage deals accounted for a
comparatively small 34% of total capital invested in Québec this time. For
2006 as a whole, this activity obtained a 44% share and, in the first
three months of 2007, 60%.
    According to Charles Cazabon, President of Réseau Capital and
Vice-President, Venture Capital, of BDC, "Q2 brought good news for Québec,
which posted growth for the second straight quarter. Québec-based companies
received $149 million, or 35% of the venture capital invested in Canada,
accounting for the largest proportion of all Canadian investment. This is due
mainly to the activity of retail funds, foreign funds and private funds. It is
important to note that Québec-based funds accounted for 84% of the funds
raised in Canada in the second quarter. I'd also like to point out that the
vitality of the Québec's venture capital industry is due partially to CDP and
the QFL, which have adopted the strategy of attracting foreign managers to the
province and supporting local managers so that they can invest in promising

    Breakdown by investor type

    LSVCC and other retail funds were out in front in Q2 2007, investing
$48 million, up 55% from the same period in 2006. U.S. venture capital funds
and other foreign investors took second spot, bringing $29 million to Québec
deals from April through June, or 19% of the total. Private-independent funds
in Québec contributed $21 million.
    On a year-over-year basis, the activity of private-independent funds
dropped somewhat, with $21 million invested in 19 companies in the second
quarter, or 25% less than the previous $28 million. Still, with 14% of capital
invested, private funds continued to account for a historically greater share
of Québec activity.
    Fund-raising activity in the VC market in Canada continued at a sluggish
pace from April to June, as $272 million of new capital was committed to fund
managers' coffers, down 42% from the year before. Of that amount, 84% flowed
to VC funds based in Québec, much of which was accounted for by new private
fund commitments. Québec-based fund-raising activity was therefore
particularly consequential to Canadian trends.

    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, Director, Public
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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