Although the venture capital industry is only one element of the innovation ecosystem, examples from countries such as the United states and Israel show the potential impact this industry can have in creating technology champions. Unfortunately, Canada is “hitting below its weight” in this respect. In fact, long-term returns in the Canadian venture capital industry are such that capital has fled the market. Recovery will be a lengthy process.
The Business Development Bank of Canada’s venture capital group (BDC VC) has invested over $1.2 billion to support 465 different Canadian technology companies over the past 25 years. Its aim has been, per the BDC Act, to play a complementary role by helping to fill gaps in the industry, while demonstrating the potential of Canada’s technology entrepreneurs.
BDC has delivered on public policy objectives and Canadian technology entrepreneurs recognize the key role BDC plays in venture capital investing. however, BDC VC experiences many of the same pressures and performance issues as other market participants, and BDC VC’s financial results are largely comparable.
Given this, a strategic review of BDC VC’s activities was launched in the spring of 2010 to:
- understand the state of the venture capital industry in Canada;
- assess BDC VC’s impact; and
- develop a strategy for BDC VC to increase its effectiveness as an industry catalyst.
To build an appropriate fact base for this review, 68 interviews were completed with market participants and internal stakeholders, including Canadian and foreign Limited partners (Lps), Canadian and foreign General partners (Gps), portfolio companies, venture capital professionals, BDC management and investment professionals, advisors and experts. A detailed survey of all BDC VC investment professionals was also conducted (Appendix 1).
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