No VC $ For You

A recent story by The Alternative Assets Network highlighted just how bad it is for both VC’s and their potential investments. Canadian venture investment in companies is falling to very low levels. With a 26% year over year drop in Q3 as measured against 2007 (a very low investment year also) it has to be concerning to fund managers and start ups in general. With about $1B raised to date this year it is off last year by 33%.

Bert Hill over at the Ottawa Citizen reiterated the bleakness of the situation in an article he wrote.

What to do?

Even Bob Rae, a politician I don’t credit with a great economic past, in his address to the Canadian Club of Toronto last week, made reference to the situation when he said;

Canada needs to encourage venture-capital investment and to cut corporate taxes. We have to have a competitive tax system as it relates to corporations and as it relates to small businesses…

This was reported by James Cowan of the Ottawa Citizen, you can read his article here.

Over at the Venture Capital & Private Equity Association their blog has been hot on the topic for some time.

How some companies deal with it

As a company who works primarily with small business we can tell you that they are struggling with the basic financial operations of a company and attempting to stretch every research and development dollar as far as they can. Canada needs to develop a more creative approach to encourage technical innovation and ensure that the market start up funding is available. Good ideas do not come with a steady supply of cash but can generate it if we encourage strong positive growth.

Most of the companies we work with have tightened up expense controls, cut capital spending and are attempting to sell what they have available rather than reaching out to new opportunities. This is especially challenging in companies who have already been funded and are looking to expand again. Most have been cut off from needed capital infusion and are on drip feeding. For many companies this is not sustainable and will be inimical to the industry in general as we move forward into next year.

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One Comment

  1. Mike Harmon:

    Thanks for posting the article, was certainly a great read!

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