Canada’s

Canada s Venture Capital Market in 2010
Venture Capital Market in 2010

Prepared
p by
y Thomson Reuters for the Canadian Venture Capital
p
& Private Equity Association
 Canada’s VC Market in 2010
C d ’ VC M k i 2010 3‐5
3 5
$ Invested and # Companies Financed 6‐7
North American Context                              8‐12
Domestic vs. Foreign Investment 13‐16
Deal Sizes & Types of Companies Funded 17‐21
Investment Stages 22‐23
Top (Disclosed) Deals 24
Geographical Distribution of Investment 25‐27
VC Funds Raised 28‐31
IPO and M&A Exits 32

Table of Contents

Thomson Reuters
 Canadian VC market trends
Despite a slow final quarter, Canadian venture capital (VC) market activity in Canada grew moderately in 2010, with
$1.1 billion invested in total, or 10% more than the $1.0 billion invested the year before. Consequently, the domestic
market experienced its first per-annum increase in disbursement levels since 2007.
This being said, VC invested in Canada in 2010 remained shy of the $1.4 billion invested in 2008.
The number of Canadian innovative firms securing VC financing last year increased by a similarly moderate 5%.
5%
Companies financed totaled 354, compared to 337 companies financed in 2009.
Most of the heft behind Canadian market activity in 2010 came in the first six months, which accounted for 57% of all
disbursements. In contrast, VC activity in Q4 2010 was the slowest of the year in terms of dollar flows, with $241
million invested, down 27% from $329 million invested in Q4 2009.
Despite
p a number of majorj Canadian VC deals done last y year,, including
g financings
g of Encelium Technologies,
g ,
Greengate Power and Peraso Technologies in Q4 2010, amounts invested per firm did not move up appreciably.
Company financing sizes averaged $3.2 million in 2010, or not far above the $3.1 million average of the year before.
As a result, the competitive gap in VC financing sizes between Canada and the United States was no less wide last
year, with Canadian innovative firms garnering only 39% of the dollars going to their American counterparts.
The international deal-making of Canadian VC funds rose considerably in 2010, with $313 million invested, up 64%
from $191 million the year before.
before Like domestic activity,
activity this is the first year-over-year
year over year growth shown by this market
indicator in three years.
Trends in the US VC market
Higher levels of VC market activity were also evidenced in the United States in 2010, and also for the first time since
2007. A total of US$21.8 billion was invested south-of-the-border, or 19% more than the US$18.3 billion invested in
2009.
009

Canada’s Venture Capital Market in 2010

Thomson Reuters
 Canadian VC trends by region
Growth in Canadian market activity last year was, in dollar terms, located chiefly in Ontario, British Columbia and
Alberta. In particular, Ontario bounced back from a disappointing 2009, with $424 million invested in 2010, or 37%
of the national total, and 43% more than the $296 million invested previously.
VC invested in British Columbia totaled $216 million in 2010, up a sharp 35% compared to the $160 million of the
year before. Disbursement levels in Alberta climbed 8% year-over-year, with $67 million put to work this time
around.
Relative to its $429 million invested in 2009, Québec-based VC activity decreased 9% last year, with $391 million
invested. However, with 34% of all disbursements, the Québec share of the domestic market remained above
historical levels.
Canadian VC trends by investor type
Both domestic and foreign investors were more active in the Canadian market in 2010. In total, Canadian VC funds
deployed $811 million to deals, which represents an 11% improvement over the $728 million they accounted for in
2009.
Locally-based private-independent funds led this trend, increasing their dollars invested to $262 million in 2010, up
25% year-over-year. Not far behind were LSVCC and other retail funds, which invested $236 million last year, though
this lagged
gg their activity
y in 2009 by
y 6%.
American VC funds and other foreign investors brought $331 million to Canadian deals in 2010, or 6% more than the
$311 million they contributed the year before. As a result, cross-border activity accounted for 29% of total dollars
invested, which approximates the traditional market share.
Canadian VC trends by sector
While
e communications
co u cat o s a
and
d ot
other
e IT secto
sectors
soonce
ce aga
again att
attracted
acted the
t e largest
a gest percentage
pe ce tage of
o Canadian
Ca ad a VCC activity
act ty last
ast
year, it was deal-making in clean technology and life sciences sectors that spurred overall market growth.

Canada’s Venture Capital Market in 2010

Thomson Reuters
 A total of $484 million was invested in 126 IT companies last year,
year or 42% of all disbursements
disbursements, though actual levels
were down 3% from the $497 million invested in 2009. Software, telecom and internet-focused firms accounted for
most of the dollar flows, obtaining $141 million, $135 million and $130 million, respectively.
In contrast, 56 biopharmaceuticals and other life sciences companies captured more VC in 2010, with $299 million
invested, or 38% more than the $216 million invested the year before. Consequently, life sciences activity lifted its
share of total VC activity in Canada to 26% last year.
Clean-tech activity rose even more sharply year-over-year, with $192 million going to 28 companies in 2010, up 58%
from the previous $122 million. Taking 17% of all disbursements as a consequence, clean technology racked up its
largest per-annum share on record in the Canadian VC market.
Trends in Canadian VC-Backed Exits
Like deal-making, exits from VC fund portfolio investments underwent a moderate rebound in 2010, due largely to
greater stability in the overall economic environment
environment. Exit activity involving Canadian
Canadian-based
based companies totaled 31
last year, up 24% from the 25 exit events of 2009.
Acquisitions of VC-backed firms, undertaken primarily by strategic technology investors, drove trends, with these
totaling 30. As in 2009, there was only one exit via initial public offering reported this time around.
Trends in Canadian VC Fund-Raising
In contrast with deal and exit trends
trends, Canadian VC fund-raising
fund raising activity was especially weak in 2010
2010. New capital
commitments to VC funds totaled $819 million last year, down 24% from $1.1 billion committed the year before, and
the lowest per-annum level reached in the Canadian market in 16 years.
A key factor in the year-over-year drop in funds raised was a comparative shortage of major VC partnership closings.
Private funds brought $350 million of new supply into the market last year, or 41% below their activity in 2009. Retail
funds were not able to compensate for this trend, despite having secured 10% more new commitments in 2010, or
$369 million.
illi

Canada’s Venture Capital Market in 2010

Thomson Reuters
 $700 180

160
$600
Values: Millions of $CAD

131 140
$500 122
115
110 108 120

# of Deals
$400 100

$300 80

60
$200
Deal V

40
$100
20

$0 0
Q1'07

Q2'07

Q3'07

Q4'07

Q1'08

Q2'08

Q3'08

Q4'08

Q1'09

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Q3'10

Q4'10
Total Deal Values # of Deals

$241 Million of Venture Capital Invested in Q4 2010
DOLLARS INVESTED AND COMPANIES FINANCED

Thomson Reuters
 $1,000 180

$900 160
Values: Millions of $CAD

$800 140
$700
120
$600

# of Deals
100
$500
80
$400
60
$300
$
Deal V

$200 40

$100 20

$0 0
Q1'07

Q2'07

Q3'07

Q4'07

Q1'08

Q2'08

Q3'08

Q4'08

Q1'09

Q2'09

Q3'09

Q4'09

Q1'10

Q2'10

Q3'10

Q4'10
Total Deal Values # of Deals

$241 Million of Venture Capital Invested in Q4 2010
DOLLARS INVESTED AND COMPANIES FINANCED
FOUR QUARTER ROLLING AVERAGES

Thomson Reuters
 California $10,398 California $11,313
Massachusetts $2,446 Massachusetts $2,337
New York $1,349 New York $1,067
Texas $927 Texas $780
Washington $635 Washington $686
Illinois $591 New jersey $605
Pennsylvania $524 Colorado $524
Colorado $478 Pennsylvania $475
North Carolina $471 Québec $429
New Jersey $466 Georgia $345
Ontario $424 Florida $332
Québec $391 Maryland $329
Virginia $386 Minnsota $300
Maryland $371 Ontario $296
Georgia $342 Virginia $283
British Columbia $216 North Carolina $279
Connecticut $207 Illinois $264
Florida $198 Connecticut $183
Oregon $179 Utah $181
Ohio $162 Indiana $178

2010 2009

North American Rankings
VENTURE CAPITAL DISBURSEMENTS BY PROVINCE AND STATE
ONTARIO, QUÉBEC, BRITISH COLUMBIA FINISH 2010 IN 11th, 12th, and 16th Place

Thomson Reuters
 D $ Billions) $35

$30

$25
nvested (CAD

$20

$15
Amount In

$10

$5

$0
2005 2006 2007 2008 2009 2010

USA Canada X 10

Canada and U.S. Investment Levels Increasing Over 2009 Lows
VENTURE CAPITAL DISBURSEMENTS: CANADA & THE UNITED STATES

Thomson Reuters
 6,000

5,000
nanced

4,000
Companies Fin

3,000

2 000
2,000
# of C

1,000

0
2005 2006 2007 2008 2009 2010

USA Canada X 10

Canada Continues To Fund Comparatively More Companies
NUMBER OF COMPANIES FUNDED: CANADA & UNITED STATES

Thomson Reuters
 ns)
verage Amount Invested (CAD $ Million $12.0

$10.0

$8.0

$6.0

$4 0
$4.0

$2.0
Av

$0.0
2005 2006 2007 2008 2009 2010

USA Canada

Average Canadian Company Secures Less Than Its U.S. Counterpart
AMOUNTS INVESTED PER COMPANY, CANADA & UNITED STATES

Thomson Reuters
 ns)
verage Amount Invested (CAD $ Million $6.0

$5.0

$4.0

$3.0

$2 0
$2.0

$1.0
Av

$0.0
2005 2006 2007 2008 2009 2010

Foreign Investors Domestic Investors

U.S. Funds Still Making Larger Investments Than Domestic Funds
AVERAGE INVESTMENT SIZES IN CANADIAN COMPANIES
DOMESTIC INVESTORS VS. FOREIGN INVESTORS

Thomson Reuters
 100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2005 2006 2007 2008 2009 2010

Private Independent Retail Government Foreign Other

Angel Investors, Management Teams, Contributing More To Deals 
SHARE OF DOLLARS INVESTED BY INVESTOR TYPE

Thomson Reuters
 $900 90

$800 80
s of $CAD

$700 70

$600
$ 60
Deal Values: Millions

# of Deals
$500 50

$400 40

$
$300 30

$200 20

$100 10

$0 0
2005 2006 2007 2008 2009 2010

Total Deal Values # of Deals

Foreign Investors Increase Canadian Investment By 6% Over 2009
FOREIGN INVESTORS, CANADIAN PORTFOLIO COMPANIES
DOLLARS INVESTED AND NUMBER OF FINANCINGS 

Thomson Reuters
 $400 90

$350 80
Deal Values: Millions of $CAD

70
$300
60
$250

# of Deals
50
$200
40
$150
30
$100
20

$50 10

$0 0
2005 2006 2007 2008 2009 2010

Total
o a Deal
a Values
au s #o
of Deals
as

Canadians Participate in 43% More Foreign Deals in 2010 Over 2009
CANADIAN INVESTORS, FOREIGN PORTFOLIO COMPANIES
DOLLARS INVESTED AND NUMBER OF FINANCINGS

Thomson Reuters
 D $ Millions) $1,400

$1,200

$1,000
nvested (CAD

$800

$600
Amount In

$400

$200

$0
2005 2006 2007 2008 2009 2010

Investment Abroad Domestic Investment

Canadian Funds Investing More in 2010, Domestically and Abroad
CANADIAN INVESTMENT WITHIN CANADA VS. CANADIAN INVESTMENT OUTSIDE CANADA
DOLLARS INVESTED

Thomson Reuters
 $1,200 300

$1,000 250
alues: Millions of $CAD

$800 200

# of Deals
$600 150

$400 100
Deal Va

$200 50

$0 0
2005 2006 2007 2008 2009 2010

Total Deal Values # of Deals

Information Technology Investment Holds Steady in 2010 
INFORMATION TECHNOLOGY SECTOR
DOLLARS INVESTED AND NUMBER OF FINANCINGS

Thomson Reuters
 $700 120

$600
100
alues: Millions of $CAD

$500
80

# of Deals
$400
60
$300

40
Deal Va

$200

20
$100

$0 0
2005 2006 2007 2008 2009 2010

Total Deal Values # of Deals

Life Sciences Attract 38% More Dollars in 2010, Year‐
Life Sciences Attract 38% More Dollars in 2010, Year‐Over
Over‐‐Year 
LIFE SCIENCES SECTOR
DOLLARS INVESTED AND NUMBER OF FINANCINGS 

Thomson Reuters
 $250 50

45
alues: Millions of $CAD

$200 40

35

$
$150 30

# of Deals
25

$100 20
Deal Va

15

$50 10

$0 0
2005 2006 2007 2008 2009 2010

Total Deal Values # of Deals

2010 Investment  In Cleantech Sector Increases 58% Over 2009
CLEAN TECHNOLOGIES SECTOR
DOLLARS INVESTED AND NUMBER OF FINANCINGS 

Thomson Reuters
 $300 250

$250
alues: Millions of $CAD

200

$200
150

# of Deals
$150

100
$100
Deal Va

50
$50

$0 0
2005 2006 2007 2008 2009 2010

Total Deal Values # of Deals

More Traditional Sector Companies Financed Than Any Other Sector
TRADITIONAL SECTOR
DOLLARS INVESTED AND NUMBER OF FINANCINGS 

Thomson Reuters
 unt Invested (CAD $ Millions) $10
$9
$8
$7
$6
$5
$4
Average Amou

$3
$2
$1
$0
2005 2006 2007 2008 2009 2010

Information Technology Life Sciences Cleantech Traditional

Life Sciences, Cleantech Deal Sizes Growing
AVERAGE AMOUNT INVESTED PER COMPANY, BY SECTOR

Thomson Reuters
 1,200

1,000
ments

800
# off Fund Investm

600

400

200

0
2005 2006 2007 2008 2009 2010

New Follow-On

Number of Follow
Number of Follow‐‐On Investments Reaches 5‐
On Investments Reaches 5‐Year Low
# OF FUND INVESTMENTS, NEW VS. FOLLOW
# OF FUND INVESTMENTS, NEW VS. FOLLOW‐‐ON

Thomson Reuters
 1,000
900
800
ments

700
# off Fund Investm

600
500
400
300
200
100
0
2005 2006 2007 2008 2009 2010

Early Stage Late Stage

Late Stage Investments Outpace Early‐‐Stage in 2010
Late Stage Investments Outpace Early
# OF FUND INVESTMENTS, EARLY VS. LATE STAGES

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 Company Prov. Value Disclosed Investors

Enerkem Technologies, Inc. QC $53.8 Rho Ventures, Braemar Energy Ventures,

BDR Capital, Cycle Capital Management

CellFor, Inc. BC $36.4 Capricorn Investment Group, CSFB Equity

Partners, GrowthWorks Capital

Protox Therapeutics, Inc. BC $35.0 Warburg Pincus

Adenyo ON $27.7 Genuity Capital Markets

Aquinox Pharmaceuticals, BC $25.7 Ventures West, Pfizer Venture

Investments, Johnson & Johnson
Inc. Development Corporation, Baker Brothers
Investments, BC Advantage Funds

INVIDI Technology AB $23.6 EnerTech Capital, InterWest Partners,

Google, Motorola Ventures, Menlo
C
Corporation
ti Ventures, Westbury Partners

Sprott Power Corporation ON $23.0 VentureLink

NexJ Systems, Inc. ON $22.5 None Disclosed

Top Canadian VC Deals (Disclosed) in 2010
DEAL VALUES IN MILLIONS OF CANADIAN DOLLARS

Thomson Reuters
 2010: $1,142 Million 2009: $1,039 Million

British Columbia Alberta

Manitoba-Saskatchewan Ontario
Québec Atlantic Canada

Québec, Ontario Continue to Attract Bulk Of VC Dollars
VC DOLLARS INVESTED BY REGION, 2009 & 2010

Thomson Reuters
 2010: $1,142 Million 2009: $1,039 Million

Toronto Montreal Vancouver Ottawa

Quebec City Calgary Other

Toronto & Vancouver See Biggest Gains Year‐
Toronto & Vancouver See Biggest Gains Year‐Over
Over‐‐Year 
VC DOLLARS INVESTED BY MAJOR URBAN CENTRE, 2009 & 2010

Thomson Reuters
 1,000
900
Deal Vallues: Millions of $ CAD

800
700
600
500
400
300
200
100
0
2005 2006 2007 2008 2009 2010

Ontario Quebec Rest of Canada

Investment In Ontario Edges Out Québec in 2010
DOLLARS INVESTED IN ONTARIO, 
DOLLARS INVESTED IN ONTARIO, QUÉBEC
QUÉBEC

Thomson Reuters
 Q4 2010

Q3 2010

Q2 2010

Q1 2010

Q4 2009

$0 $100 $200 $300 $400 $500

Individuals Corporations Foreign

Fund of Funds Government Other

2010 Fundraising Led by Individuals, Governments, Foreign Groups
FUNDRAISING BY QUARTER, BY SOURCE 

Thomson Reuters
 $4,000

$3,500
ns of $ CAD

$3,000

$2 500
$2,500
aised: Million

$2,000

$1,500
Funds Ra

$1,000

$500

$0
2005 2006 2007 2008 2009 2010

Canada USA X 0.10

U.S. Fundraising  Still Outpaces Canadian Fundraising, Despite Decline
NEW CAPITAL COMMITMENTS BY NATION
NEW CAPITAL COMMITMENTS BY NATION
CANADIAN FUNDRAISING HITS NEW 16
CANADIAN FUNDRAISING HITS NEW 16‐‐YEAR 
YEAR LOW
LOW

Thomson Reuters
 $900
$800
ns of $ CAD

$700
$600
aised: Million

$500
$400
$300
Funds Ra

$200
$100
$0
2005 2006 2007 2008 2009 2010

Private Independent Funds Retail Funds

Retail Funds Outpace Private Funds For First Time in 5 Years
NEW CAPITAL COMMITMENTS BY FUND TYPE

Thomson Reuters
 $900
$800
s of $ CAD

$700
$600
aised: Millions

$500
$400
$300
Funds Ra

$200
$100
$0
2005 2006 2007 2008 2009 2010

Ontario Quebec Rest of Canada

Québec Leads Canadian Fundraising In 2010
NEW CAPITAL COMMITMENTS BY PROVINCE

Thomson Reuters
 40 $695
$160
35 $140
30 $120
25 $100
20 $80
15 $60
10 $40
$
5 $20
0 $0
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010

# of IPO Exits Average IPO Offering Size

# of M&A Exits Average M&A Transaction Size

Strategic Sales Increasing in Quantity and Value
EXITS OF CANADIAN VC
EXITS OF CANADIAN VC‐‐BACKED PORTFOLIO COMPANIES

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Thomson Reuters