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Canadian venture capital activity up 20 per cent in third quarter

Canadian venture capital activity increased 20 per cent in the third quarter, according to data Thomson Reuters compiled for the Canadian Venture Capital and Private Equity Association.

The total investment for the latest third quarter totalled CAD261m (USD258m).

“With two consecutive quarters of growth, Canadian VC activity in 2010 continues to track ahead of activity in 2009,” the association said in a quarterly report.

Venture capital investments for the nine months to 30 September were at CAD905m, or 28 per cent higher than the same period in 2009, when investments were CAD709m.

Disbursement levels also rose in the third quarter on a per firm basis, with the amount invested per Canadian company averaging CAD2.4m, compared with CAD2m on average in the third quarter of 2009.

Dealmaking by Canadian venture capital funds in other countries jumped to CAD78m in the quarter, more than double what it was in the year-ago period.

At the same time, less money was being committed in the third quarter to new venture capital funds, which pool investment dollars to be disbursed among promising new firms.

“Investing levels are ultimately driven by fundraising,” says Gregory Smith, the CVCA’s president and a managing partner at Brookfield Financial. “Unless venture capital industry fundraising picks up, then an increasing number of entrepreneurs and start-up companies will find it exceedingly difficult to get the money they need to grow.”

Canadian buyout activity has gained momentum over the course of the year, with USD2.45bn of disclosed deal values for the January to September period. In the nine months to 30 September, 88 deals were completed or pending and value was disclosed for 35 of those.

In the year-ago period there were 74 deals and 31 of those had disclosed value of USD1.93bn.

For the third quarter, 34 completed and pending buyout transactions were noted, with 12 of those having disclosed values of USD736m, or less than the USD1.034bn of five deals where transaction sizes were disclosed in the third quarter of last year.

“These figures indicate that the Canadian buyout market continues to pick up speed largely as a result of increased investments by Canadian funds both here and abroad,” Smith says. “The healthy fundraising of the past three years is now being actively put to work to take advantage of accelerating business opportunities.”

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