The future of Canada’s Venture Capital industry was in the public eye last week after the release of a report highlighting the impact financing for small businesses will continue to have on the Canadian economy.
The Canadian Venture Capital and Private Equity Association’s (CVCA) report, Why Venture Capital is Essential to the Canadian Economy, Impact of Venture Capital on the Canadian Economy, outlines the contribution in revenues, job creation, and technological advances of organizations that receive venture capital.
According to Gregory Smith, president of the CVCA, venture capital is not only a key driver of job creation and economic growth, but the introduction of new technology and innovation in Canada can only stimulate these investments, as they have continued to decline relative to foreign markets in recent years.
“This is a trend that will only worsen the downturn in the economy and credit markets,” says Smith. “The federal budget provides an important opportunity to support venture capital investment, which can help to bolster the economy and create value-added, high-tech jobs for the future.”
According to the report, 1,755 venture capital-backed companies in Canada generate sales of $18.3 billion, employ 63,955 Canadians (17,760 abroad) and generate another 83,549 indirect jobs in Canada.
“This is a groundbreaking study and the first of its kind for the venture capital industry in Canada,” Smith says. “The study was authored by Dr. Gilles Dereflé, who has been a consultant in the industry for a number of years.” Dereflé was recently appointed to the board of the directors at the CVCA, and conducted the study based on data from his previous consulting firm, Thompson Reuters.
While Dr. Dereflé has authored a number of other studies over the last few years, Smith says this is probably the first comprehensive report on the economic impact of venture capital. It follows a May 2008 report in which the CVCA looked at the economic impact of the buyout industry on Canada.
“Venture capital managers bring a unique approach to financing and management that is critical to start-ups in the technology sectors,” says Dr. Dereflé. “This study also shows the ‘snowball’ effect of venture capital has been extremely valuable to the economy, as successful ventures reinvest and apply their knowledge, research discoveries and entrepreneurial experience.”
Smith says that it is essential that governments, investors, venture capital funds and entrepreneurs work together to build a strong Canadian venture capital industry. “The CVCA will continue to work with all the partners to advance solutions with the potential to boost the Canadian economy.”
The full CVCA report can be found here.
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