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Pre ared b Thomson Reuters for the Canadian Venture Ca ital& Private Equity Association
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ana as
ar et
n
$Investedand#CompaniesFinanced 67NorthAmericanContext 812Domesticvs.ForeignInvestment 1316
DealSizes
&
Types
of
Companies
Funded 17
21
InvestmentStages 2223Top(Disclosed)Deals 24GeographicalDistributionofInvestment 2527
VCFunds
Raised 28
31
IPOandM&AExits 32
TableofContentsTableofContents
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Despite a slow final quarter, Canadian venture capital (VC) market activity in Canada grew moderately in 2010, with$1.1 billion invested in total, or 10% more than the $1.0 billion invested the year before. Consequently, the domesticmarket experienced its first per-annum increase in disbursement levels since 2007.
This being said, VC invested in Canada in 2010 remained shy of the $1.4 billion invested in 2008.
.Companies financed totaled 354, compared to 337 companies financed in 2009.
Most of the heft behind Canadian market activity in 2010 came in the first six months, which accounted for 57% of alldisbursements. In contrast, VC activity in Q4 2010 was the slowest of the year in terms of dollar flows, with $241million invested, down 27% from $329 million invested in Q4 2009.
Despite a number of major Canadian VC deals done last year, including financings of Encelium Technologies,
Greengate Power and Peraso Technologies in Q4 2010, amounts invested per firm did not move up appreciably.Company financing sizes averaged $3.2 million in 2010, or not far above the $3.1 million average of the year before.
As a result, the competitive gap in VC financing sizes between Canada and the United States was no less wide lastyear, with Canadian innovative firms garnering only 39% of the dollars going to their American counterparts.
The international deal-making of Canadian VC funds rose considerably in 2010, with $313 million invested, up 64%rom m on e year e ore. e omes c ac v y, s s e rs year-over-year grow s own y s mar eindicator in three years.
Tr en ds in t he US VC m a rk et
Higher levels of VC market activity were also evidenced in the United States in 2010, and also for the first time since2007. A total of US$21.8 billion was invested south-of-the-border, or 19% more than the US$18.3 billion invested in2009.
CanadasVentureCapitalMarketin2010CanadasVentureCapitalMarketin2010
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Growth in Canadian market activity last year was, in dollar terms, located chiefly in Ontario, British Columbia andAlberta. In particular, Ontario bounced back from a disappointing 2009, with $424 million invested in 2010, or 37%of the national total, and 43% more than the $296 million invested previously.
VC invested in British Columbia totaled $216 million in 2010, up a sharp 35% compared to the $160 million of theyear before. Disbursement levels in Alberta climbed 8% year-over-year, with $67 million put to work this timearound.
Relative to its $429 million invested in 2009, Qubec-based VC activity decreased 9% last year, with $391 millioninvested. However, with 34% of all disbursements, the Qubec share of the domestic market remained abovehistorical levels.
Canadian VC t r ends by inv estor t ype
Both domestic and foreign investors were more active in the Canadian market in 2010. In total, Canadian VC fundsdeployed $811 million to deals, which represents an 11% improvement over the $728 million they accounted for in2009.
Locally-based private-independent funds led this trend, increasing their dollars invested to $262 million in 2010, up25% year-over-year. Not far behind were LSVCC and other retail funds, which invested $236 million last year, thoughthis la ed their activity in 2009 by 6%.
American VC funds and other foreign investors brought $331 million to Canadian deals in 2010, or 6% more than the$311 million they contributed the year before. As a result, cross-border activity accounted for 29% of total dollarsinvested, which approximates the traditional market share.
Canadian VC t r ends by sector
While communications and other IT sectors once a ain attracted the lar est ercenta e of Canadian VC activit last
CanadasVentureCapitalMarketin2010CanadasVentureCapitalMarketin2010
year, it was deal-making in clean technology and life sciences sectors that spurred overall market growth.
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180$700
131
110
122
108115
120
140
160
$500
$600
nso
f$CAD
snso
f$CAD
s
60
80
100
$300
$400
alues:M
illio
#
ofD
ea
l
alues:M
illio
#
ofD
ea
l
0
20
40
$0
$100Dea
l
Dea
l
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
Q2'10
Q3'10
Q4'10
Total Deal Values # of Deals
$241MillionofVentureCapitalInvestedinQ42010$241MillionofVentureCapitalInvestedinQ42010DOLLARSINVESTEDANDCOMPANIESFINANCEDDOLLARSINVESTEDANDCOMPANIESFINANCED
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180$1,000
120
140
160
$700
$800
nso
f$CAD
snso
f$CAD
s
60
80
100
300
$400
$500
alues:M
illio
#
ofD
ea
l
alues:M
illio
#
ofD
ea
l
0
20
40
$0
$100
$200Dea
l
Dea
l
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
Q2'10
Q3'10
Q4'10
Total Deal Values # of Deals
$241MillionofVentureCapitalInvestedinQ42010$241MillionofVentureCapitalInvestedinQ42010DOLLARSINVESTEDANDCOMPANIESFINANCEDDOLLARSINVESTEDANDCOMPANIESFINANCEDFOURQUARTERROLLINGFOURQUARTERROLLING AVERAGESAVERAGES
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$635
$927
$1,349
$2,446
$10,398
Washington
Texas
New York
Massachusetts
California
$686
$780
$1,067
$2,337
$11,313
Washington
Texas
New York
Massachusetts
California
$424
$466
$471$478
$524
Ontario
New Jersey
North CarolinaColorado
Pennsylvania
$332
$345
$429$475
$524
Florida
Georgia
QubecPennsylvania
Colorado
$216
$342
$371
$386
$391
British Columbia
Georgia
Maryland
Virginia
Qubec
$279
$283
$296
$300
$329
North Carolina
Virginia
Ontario
Minnsota
Maryland
$162
$179
$198
Ohio
Oregon
Florida
$178
$181
$183
Indiana
Utah
Connecticut
2010 2009
NorthAmericanRankingsNorthAmericanRankingsVENTURECAPITALDISBURSEMENTSBYPROVINCEVENTURECAPITALDISBURSEMENTSBYPROVINCE ANDSTATEANDSTATEONTARIO,QUBEC,BRITISHCOLUMBIAONTARIO,QUBEC,BRITISHCOLUMBIA FINISH2010INFINISH2010IN 1111thth,12,12thth,and16,and16thth PlacePlace
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$35
$25
$30
$Billions
)
$15
$20
ves
ted(
CA
$5
$10
A
moun
tI
$0
2005 2006 2007 2008 2009 2010
USA Canada X 10
CanadaandU.S.InvestmentLevelsIncreasingOver2009LowsCanadaandU.S.InvestmentLevelsIncreasingOver2009LowsVENTURECAPITALDISBURSEMENTS:VENTURECAPITALDISBURSEMENTS: CANADA&THEUNITEDSTATESCANADA&THEUNITEDSTATES
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6,000
4,000
5,000
nance
d
3,000
ompanie
sFi
1,000
,
#
of
0
2005 2006 2007 2008 2009 2010
USA Canada X 10
CanadaContinuesToFundComparativelyMoreCompaniesCanadaContinuesToFundComparativelyMoreCompaniesNUMBEROFCOMPANIESFUNDED:CANADA&UNITEDSTATESNUMBEROFCOMPANIESFUNDED:CANADA&UNITEDSTATES
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$12.0s)
8.0
$10.0
CAD
$Millio
$6.0
ntInvest
ed(
$2.0
.
era
ge
Amou
$0.0
2005 2006 2007 2008 2009 2010
USA Canada
A
AverageCanadianCompanySecuresLessThanItsU.S.CounterpartAverageCanadianCompanySecuresLessThanItsU.S.CounterpartAMOUNTSINVESTEDPERCOMPANY,AMOUNTSINVESTEDPERCOMPANY, CANADA&UNITEDSTATESCANADA&UNITEDSTATES
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$6.0s)
4.0
$5.0
CAD
$Millio
$3.0
ntInvest
ed(
$1.0
.
era
ge
Amou
$0.0
2005 2006 2007 2008 2009 2010
Foreign Investors Domestic Investors
A
U.S.FundsStillMakingLargerInvestmentsThanDomesticFundsU.S.FundsStillMakingLargerInvestmentsThanDomesticFundsAVERAGEINVESTMENTSIZESINCANADIANCOMPANIESAVERAGEINVESTMENTSIZESINCANADIANCOMPANIESDOMESTICINVESTORSVS.FOREIGNINVESTORSDOMESTICINVESTORSVS.FOREIGNINVESTORS
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100%
70%
80%
90%
40%50%
0%
10%
20%
2005 2006 2007 2008 2009 2010
Private Independent Retail Government Foreign Other
AngelInvestors,ManagementTeams,ContributingMoreToDealsAngelInvestors,ManagementTeams,ContributingMoreToDealsSHAREOFDOLLARSINVESTEDBYINVESTORTYPESHAREOFDOLLARSINVESTEDBYINVESTORTYPE
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90$900
60
70
80
$600
$700
$800
of$CAD
40
50
$400
$500
lues:
Million
#
ofDe
als
10
20
30
$100
$200
$300
Dea
lVa
0$0
2005 2006 2007 2008 2009 2010
Total Deal Values # of Deals
ForeignInvestorsIncreaseCanadianInvestmentBy6%Over2009ForeignInvestorsIncreaseCanadianInvestmentBy6%Over2009FOREIGNINVESTORS,CANADIANPORTFOLIOCOMPANIESFOREIGNINVESTORS,CANADIANPORTFOLIOCOMPANIESDOLLARSINVESTEDANDNUMBEROFFINANCINGSDOLLARSINVESTEDANDNUMBEROFFINANCINGS
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90$400
60
70
80
$300
$350
of$CAD
40
50
$150
$200
lues:
Millions
#
ofDe
als
10
20
$50
$100
Dea
lVa
0$0
2005 2006 2007 2008 2009 2010
Total Deal Values # of Deals
CanadiansParticipatein43%MoreForeignDealsin2010Over2009CanadiansParticipatein43%MoreForeignDealsin2010Over2009CANADIANINVESTORS,FOREIGNPORTFOLIOCOMPANIESCANADIANINVESTORS,FOREIGNPORTFOLIOCOMPANIESDOLLARSINVESTEDANDNUMBEROFFINANCINGSDOLLARSINVESTEDANDNUMBEROFFINANCINGS
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$1,400
$1,000
$1,200
$Millions
)
$600
$800
ves
ted(
CA
$200
$400
A
moun
tI
$0
2005 2006 2007 2008 2009 2010
Investment Abroad Domestic Investment
CanadianFundsInvestingMorein2010,DomesticallyandAbroadCanadianFundsInvestingMorein2010,DomesticallyandAbroadCANADIANINVESTMENTWITHINCANADAVS.CANADIANINVESTMENTOUTSIDECANADACANADIANINVESTMENTWITHINCANADAVS.CANADIANINVESTMENTOUTSIDECANADADOLLARSINVESTEDDOLLARSINVESTED
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300$1,200
200
250
$800
$1,000
so
f$CAD
150$600
lues:
Million
#
ofDea
ls
50$200Dea
lV
0$0
2005 2006 2007 2008 2009 2010
Total Deal Values # of Deals
InformationTechnologyInvestmentHoldsSteadyin2010InformationTechnologyInvestmentHoldsSteadyin2010INFORMATIONTECHNOLOGYSECTORINFORMATIONTECHNOLOGYSECTORDOLLARSINVESTEDANDNUMBEROFFINANCINGSDOLLARSINVESTEDANDNUMBEROFFINANCINGS
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120$700
80
100
$500
$600
so
f$CAD
60$300
$400
lues:
Million
#
ofDea
ls
20$100
$200
Dea
lV
0$0
2005 2006 2007 2008 2009 2010
Total Deal Values # of Deals
LifeSciencesAttract38%MoreDollarsin2010,YearLifeSciencesAttract38%MoreDollarsin2010,YearOverOverYearYearLIFESCIENCESSECTORLIFESCIENCESSECTORDOLLARSINVESTEDANDNUMBEROFFINANCINGSDOLLARSINVESTEDANDNUMBEROFFINANCINGS
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50$250
35
40
45
$200
so
f$CAD
20
25
30
$100
$150
lues:
Million
#
ofD
ea
ls
5
10
15
$50Dea
lV
0$0
2005 2006 2007 2008 2009 2010
Total Deal Values # of Deals
2010Investment InCleantechSectorIncreases58%Over20092010Investment InCleantechSectorIncreases58%Over2009CLEANTECHNOLOGIESSECTORCLEANTECHNOLOGIESSECTORDOLLARSINVESTEDANDNUMBEROFFINANCINGSDOLLARSINVESTEDANDNUMBEROFFINANCINGS
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250$300
200
$200
$250
so
f$CAD
100
150
$150
lues:
Million
#
ofD
ea
ls
50$50D
ea
lV
0$0
2005 2006 2007 2008 2009 2010
Total Deal Values # of Deals
MoreTraditionalSectorCompaniesFinancedThanAnyOtherSectorMoreTraditionalSectorCompaniesFinancedThanAnyOtherSectorTRADITIONALSECTORTRADITIONALSECTORDOLLARSINVESTEDANDNUMBEROFFINANCINGSDOLLARSINVESTEDANDNUMBEROFFINANCINGS
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$10ns
)
$7
$8
$9
(CAD
$Millio
$4
$5
$6
ntInves
ted
$1
$2
$3
ver
age
Amo
$0
2005 2006 2007 2008 2009 2010
Information Technology Life Sciences Cleantech Traditional
A
LifeSciences,CleantechDealSizesGrowingLifeSciences,CleantechDealSizesGrowingAVERAGEAMOUNTINVESTEDPERCOMPANY,BYSECTORAVERAGEAMOUNTINVESTEDPERCOMPANY,BYSECTOR
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1,200
800
1,000
men
ts
600
Fun
dIn
ves
t
200
#
of
0
2005 2006 2007 2008 2009 2010
New Follow-On
NumberofFollowNumberofFollowOnInvestmentsReaches5OnInvestmentsReaches5YearLowYearLow#OFFUNDINVESTMENTS,NEWVS.FOLLOW#OFFUNDINVESTMENTS,NEWVS.FOLLOWONON
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1,000
700
800
900
men
ts
400
500
600
Fun
dIn
ves
t
100
200
300#
of
0
2005 2006 2007 2008 2009 2010
Early Stage Late Stage
LateStageInvestmentsOutpaceEarlyLateStageInvestmentsOutpaceEarlyStagein2010Stagein2010#OFFUNDINVESTMENTS,EARLYVS.LATESTAGES#OFFUNDINVESTMENTS,EARLYVS.LATESTAGES
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Company P rov. Value Disclosed Investors
Enerkem Technologies, Inc. QC $53.8 Rho Ventures, Braemar Energy Ventures,BDR Capital, Cycle Capital Management
CellFor, Inc. BC $36.4 Capricorn Investment Group, CSFB EquityPartners, GrowthWorks Capital
Protox Therapeutics, Inc. BC $35.0 Warburg Pincus
Adenyo ON $27.7 Genuity Capital Markets
Aquinox Pharmaceuticals,Inc.
BC $25.7 Ventures West, Pfizer VentureInvestments, Johnson & JohnsonDevelopment Corporation, Baker BrothersInvestments, BC Advantage Funds
INVIDI Technology AB $23.6 EnerTech Capital, InterWest Partners,Goo le Motorola Ventures Menloorpora on
Ventures, Westbury Partners
Sprott Power Corporation ON $23.0 VentureLink
NexJ Systems, Inc. ON $22.5 None Disclosed
TopCanadianVCDeals(Disclosed)in2010TopCanadianVCDeals(Disclosed)in2010DEALVALUESINMILLIONSOFCANADIANDOLLARSDEALVALUESINMILLIONSOFCANADIANDOLLARS
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2009: 1 039 Million2010: 1 142 Million
British Columbia AlbertaManitoba-Saskatchewan OntarioQubec Atlantic Canada
Qubec,OntarioContinuetoAttractBulkOfVCDollarsQubec,OntarioContinuetoAttractBulkOfVCDollarsVCDOLLARSINVESTEDBYREGION,2009&2010VCDOLLARSINVESTEDBYREGION,2009&2010
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2009: 1 039 Million2010: 1 142 Million
Toronto Montreal Vancouver Ottawa
Quebec City Calgary Other
Toronto&VancouverSeeBiggestGainsYearToronto&VancouverSeeBiggestGainsYearOverOverYearYearVCDOLLARSINVESTEDBYMAJORURBANCENTRE,2009&2010VCDOLLARSINVESTEDBYMAJORURBANCENTRE,2009&2010
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1,000
700
800
900
of$CAD
400
500
600
ues:
Millions
100
200
300
Dea
lVa
l
0
2005 2006 2007 2008 2009 2010
Ontario Quebec Rest of Canada
InvestmentInOntarioEdgesOutQubecin2010InvestmentInOntarioEdgesOutQubecin2010DOLLARSINVESTEDINONTARIO,DOLLARSINVESTEDINONTARIO,QUBECQUBEC
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Q3 2010
Q1 2010
Q2 2010
$0 $100 $200 $300 $400 $500
Q4 2009
Individuals Corporations Foreign
Fund of Funds Government Other
2010FundraisingLedbyIndividuals,Governments,ForeignGroups2010FundraisingLedbyIndividuals,Governments,ForeignGroupsFUNDRAISINGBYQUARTER,BYSOURCEFUNDRAISINGBYQUARTER,BYSOURCE
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$4,000
$3,000
$3,500
so
f$CAD
$1,500
$2,000
,
ise
d:M
illion
$500
$1,000
Fun
ds
R
2005 2006 2007 2008 2009 2010
Canada USA X 0.10
U.S.Fundraising StillOutpacesCanadianFundraising,DespiteDeclineU.S.Fundraising StillOutpacesCanadianFundraising,DespiteDeclineNEWCAPITALCOMMITMENTSBYNEWCAPITALCOMMITMENTSBYNATIONNATIONCANADIANFUNDRAISINGHITSNEW16CANADIANFUNDRAISINGHITSNEW16YEARYEARLOWLOW
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$900
$600
$700
$800
so
f$CAD
$400
$500
ise
d:M
illion
$100
$200
Fun
ds
R
2005 2006 2007 2008 2009 2010
Private Independent Funds Retail Funds
RetailFundsOutpacePrivateFundsForFirstTimein5YearsRetailFundsOutpacePrivateFundsForFirstTimein5YearsNEWCAPITALCOMMITMENTSBYFUNDTYPENEWCAPITALCOMMITMENTSBYFUNDTYPE
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$900
$600
$700
$800
of$CAD
$400
$500
ise
d:
M
illion
$100
$200
Fun
ds
R
2005 2006 2007 2008 2009 2010
Ontario Quebec Rest of Canada
QubecLeadsCanadianFundraisingIn2010QubecLeadsCanadianFundraisingIn2010NEWCAPITALCOMMITMENTSBYPROVINCENEWCAPITALCOMMITMENTSBYPROVINCE
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40 $695$160
25
30
35
$100
$120
$140
10
15
20
$40
$60
$80
0
5
2006 2007 2008 2009 2010
$0
$20
2006 2007 2008 2009 2010
# of IPO Exits
# of M&A Exits
Average IPO Offering Size
Average M&A Transaction Size
StrategicSalesIncreasinginQuantityandValueStrategicSalesIncreasinginQuantityandValueEXITSOFCANADIANVCEXITSOFCANADIANVCBACKEDPORTFOLIOCOMPANIESBACKEDPORTFOLIOCOMPANIES
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