There seems to be a lot of venture capital (VC) being invested in 2013, but the question is whether it may dry up.
According to a Reseau Capital report issued this morning, the second quarter of 2013 was a busy time for the VC market in Québec, with investments totalling $246 million, more than double what was invested in the second quarter of 2012.
But Canadian VC fundraising activity continued to slow in the second quarter of 2013 compared to the year earlier.
Nevertheless, the first half of 2013 was one to celebrate for la belle province, as $433 million in total was invested, topping the $415 million for all of 2012. Canada-wide, Québec dominated with 49% of all funds invested in Canada for the first six months of 2013, while Montréal accounted for 41% of all funds invested countrywide.
“The record in the first two quarters of the year speaks for itself: VC investments are booming, and Québec is favourably positioned to take advantage of these market conditions,” said Reseau Capital CEO Jack Chadirdjian. “In terms of fundraising, things are moving more slowly than in 2012…but we are confident of a positive shift in the situation by the end of this year.”
The United States didn’t fare as well as Quebec or Canada from April to June in 2013, witnessing a seven percent decline. Investments totalled $12.6 billion (which, in context, is still way above Canadian numbers). Meanwhile, the Canadian market rose by 17 percent with $886 million invested.
In Quebec, some of the major deals included a $50 million financing round completed in June by Enerkem, on top of the $37 million obtained in the first quarter of 2013. “The scope of this deal shows clearly why the clean-tech sectors continue to drive VC market growth in Québec, bringing in $109 million in investments in Q2 2013,” read the report.
Next in line were the non-technology sectors, where $105 million was invested. This was largely to deals involving Propair Inc. of Rouyn-Noranda and Revision Military Ltd. of Montréal. Early- and late-stage deals are gaining ground in Québec, though expansion and related late-stage deals continue to set the trend, absorbing 71% of total investment.
Fundraising remains a challenge for Canadian investors, and numbers continued to slow in the second quarter of 2013. New capital committed in the latest quarter totalled $297 million, 62 percent less than in the previous year.
In total for 2013, $678 million has been raised, with Québec VC fund managers getting the largest share at 43 percent.
Jacques Bernier has long been outspoken about the difficulties in fundraising that Canadian funds typically experience, particularly in venture capital. Bernier is head of Teralys Capital, the largest Canadian fund-of-funds. In several conversations with the Montreal-based partner, he has expressed the continued need for Canada to attract more corporate or private investment, and distancing itself from a government funds-heavy investment community.
“In every fund that we’ve done we’re always the largest investor, always the lead to make the fund happen,” said Bernier. “We do believe in having more investors with us to make things much easier.”
In the buyout and private equity (PE) market, things didn’t quite catch up to the mammoth year of 2012, when $2.7 billion was reported after the first half of the year. 2013 saw just $1.5 billion, representing 50 deals, 22 percent less than the year before. “We all recognize that 2012 was one of the busiest years for the buyout and private equity market,” said Chadirdjian. “But the results recorded in the first half of 2013 are highly promising when compared to the last four years overall, exceeding the full year’s activity in Québec for 2011, 2010 and 2009.
