Investors Poured 7x More Capital into Canadian VC Funds in Q3: Report

(Reuters) – Canadian venture capital funds raised C$365 million ($356.8 million) in the third quarter, more than seven times the C$47 million they raised in Q3 2010, according to a new report from the Canadian Venture Capital and Private Equity Association (CVCA).

Fundraising for the first nine months of this year totaled C$739 million, just below the C$741 million raised in the first nine months of last year, says the CVCA report, which was produced in conjunction with Thomson Reuters (publisher of peHUB). To date, 38% of the capital has come from individual investors, 24% from pension funds, and 15% from government sources, the report states.

“The uptick in fundraising [by VC funds] is welcome news, however, it must be recalled that levels of activity in both 2011 and 2010 remain low by historical standards,” CVCA President Gregory Smith said in a prepared statement. “In particular, new supply going to venture capital  partnerships has shown little improvement to date, a situation that undermines the ability of seasoned Canadian investors to bring value-added risk financing to technology startups.”

At the same time that Canadian VC funds are pulling in more money, so are Canadian startups. Investment in Canadian companies rose 51% to C$388 million in the third quarter, the CVCA reports.

Venture capital investment rose in most Canadian technology sectors, led by IT-related activity with C$177 million invested, or 31% more than a year earlier.

Life sciences companies secured C$106 million in investments, or 83% more than in the third quarter last year.

But Canadian venture capital still lagged the United States.

“Even with the growth in disbursements in the most recent quarter, Canadian innovative firms receive only 40% of the dollars going to their competitors in the United States,” Smith said in a statement.

In Canada, deal-making was most robust in the provinces of British Columbia, Alberta, Quebec and Nova Scotia.

Quebec led the pack with an 81% rise in deal-making activity, with C$145 million invested in venture capital.

The top venture capital deal of the quarter was a C$39.1 million investment by six funds in Enobia Pharma Inc., a Quebec-based developer of therapies to treat serious genetic bone disorders for which there are no approved treatments.

Second place went to Unique Solutions Design, a Dartmouth, Nova Scotia-based company that develops advanced body measurement technologies for the health and fitness, sports and fashion industries.

Unique Solutions Design received C$30 million in funding from Northwater Capital Management, a privately held investment management company with offices in Toronto, New York and Chicago. It focuses on investments in intellectual property and intellectual property rich companies.

The CVCA press release is here.

By Pav Jordan, Reuters

(Editing by Lawrence Aragon, peHUB)