Venture caps encouraged by equity markets

(January 29, 2004) The strong performance of Canada’s equity markets in 2003 has sparked renewed optimism in the venture capital field, according to a survey released by Deloitte and the Canadian Venture Capital Association (CVCA).

The survey found 60% of Canada’s venture capitalists (VCs) expect an improved overall economic climate over the next six months, marking the highest level of optimism in two years.

“The increased optimism among investors is closely reflected by the growth in capital available for investments, following impressive fund-raising rounds this quarter of nearly $1 billion as well as the increased flow of capital from abroad,” said Michael Badham, a partner at Deloitte.

The improved confidence of retail investors has stoked hopes of a resurgence of initial public offerings (IPOs) to the market, reducing reliance on mergers and acquisitions (M&A) as an exit strategy. The survey found 9% of respondents expect an equal number of exits through IPOs and M&A activity, up from 1% in the previous quarter.

“I am cautiously optimistic,” said Dr. Robin Louis, president of the CVCA. “A more positive sentiment in the industry is being driven by an improvement in the underlying fundamentals for portfolio companies in many technology markets and this is leading to more deal activity, although the flow of investment opportunities is still not at the level that we would like to see.”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com