Growing the Businesses of Tomorrow: Challenges and Prospects of Early-Stage Venture Capital Investment in Canada

Description of figures

Figure 1: Typical SME Growth Profiles

This is a line graph that describes the typical growth profile of an SME, illustrating the growth of a low-growth firm, a moderate-growth firm, and a high-growth firm. The x-axis details the number of sales of SMEs (in millions of dollars) and the y-axis details the number of years (from one to ten). The low-growth firm profile illustrates steady sales over a ten-year period, with approximately $2.5 million in sales at the ten-year mark. The medium-growth firm profile illustrates sales that begin increasing at the four to five year mark, with approximately $14 million in sales at the ten-year mark. The high-growth firm profile illustrates sales that begin increasing at the four to five year mark, increasing at a high rate, with approximately $50 million in sales at the ten-year mark.
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Figure 2: Early-Stage Dollars Invested and Companies Financed in Canada

This vertical bar and line graph illustrates the amount of dollars (in millions) invested in early-stage financings, and the number of companies financed during early-stages from 1996-2004. In 1996, $295 million was invested in early-stage financings for 181 companies. In 1997, $557 million was invested in 275 companies. In 1998, $563 million was invested in 343 companies. In 1999, $912 million was invested in 347 companies. In 2000, $2.57 billion was invested in 502 companies. In 2001, $2.28 billion was invested in 413 companies. In 2002, $1.11 billion was invested in 366 companies. In 2003, $836 million was invested in 339 companies. In 2004, $871 million was invested in early stage financings for 312 companies.
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Figure 3: Early-Stage Dollars Invested and Companies Financed in Ontario

This vertical bar and line graph illustrates the amount of dollars (in millions) invested in early-stage financings, and the number of companies financed during early-stages from 1996 to 2004. In 1996, $111 million was invested in 48 companies. In 1997, $167 million was invested in 75 companies. In 1998, $188 million was invested in 95 companies. In 1999, $424 million was invested in 99 companies. In 2000, $1.5 billion was invested in 177 companies. In 2001, $1.39 billion was invested in 140 companies. In 2002, $583 million was invested in 106. In 2003, $352 million was invested in 97 companies. In 2004, $347 million was invested in early-stage financings for 88 companies.
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Figure 4: Seed and Startup Dollars Invested and Companies Financed in Canada

This vertical bar and line graph illustrates VC activity in seed and startup transactions in Canada by amount invested (in millions of dollars) and number of companies financed from 1996 to 2004. In 1996, $15 million was invested in 21 seed stage companies, and $122 million invested in 84 start-up companies. In 1997, $11 million was invested in 27 seed-stage companies, and $233 million in 105 start-ups. In 1998, $23 million was invested in 59 seed-stage companies, and $183 million in 148 start-ups. In 1999, $74 million was invested in 52 seed-stage companies, and $282 million invested in 150 start-ups. In 2000, $107 million was invested in 78 seed-stage companies, and $1.08 billion invested in 217 start-ups. In 2001, $93 million was invested in 40 seed-stage companies, and $801 million invested in 190 start-ups. In 2002, $100 million was invested in 41 seed-stage companies, and $524 million invested in 169 start-ups. In 2003, $34 million was invested in 33 seed-stage companies, and $220 million invested in 102 start-ups. In 2004, $40 million was invested in 37 seed-stage companies, and $306 million invested in 93 start-up companies.
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Figure 5: Dollars invested and Companies Financed in Canada by Stage

This stacked bar graph illustrates the amount of VC dollars (in millions) invested in seed, startup, other early-stage, and expansion and other late stage deals in Canada from 1996 to 2004 as a percentage in overall activity, as well as the number of companies financed in the same time period. In 1996, $1.03 billion in total was invested in 490 companies. In 1997, $1.63 billion in total was invested in 718 companies. In 1998, $1.56 billion in total was invested in 812 companies. In 1999, $2.65 billion in total was invested in 815 companies. In 2000, $5.78 billion in total was invested in 1006 companies. In 2001, $3.72 billion in total was invested in 743 companies. In 2002, $2.53 billion in total was invested in 681 companies. In 2003, $1.66 million in total was invested in 647 companies. In 2004, $1.76 billion in total was invested in 589 companies.
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Figure 6: Dollars invested and Companies Financed in Ontario by Stage

This stacked bar graph illustrates the amount of VC dollars (in millions) invested in seed, startup, other early-stage, and expansion and other late stage deals in Ontario from 1996 to 2004 as a percentage in overall activity, as well as the number of companies financed in the same time period. In 1996, $487 million in total was invested in 165 companies. In 1997, $700 million in total was invested in 228 companies. In 1998, $554 million in total was invested in 223 companies. In 1999, $1.32 billion in total was invested in 241 companies. In 2000, $3.38 billion in total was invested in 328 companies. In 2001, $2.07 billion in total was invested in 237 companies. In 2002, $1.30 billion dollars in total was invested in 189 companies. In 2003, $759 million in total was invested in 174 companies.
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Figure 7: Early-Stage Dollars invested and Companies Financed in Canada by Sector

These stacked bar graphs illustrate the amount of VC dollars (in millions) invested in companies financed in the early-stages in Canada between 1996 and 2004 according to sector (by percentage). All numbers are approximate.

The first graph illustrates the amount of VC dollars (in millions) invested in early-stages in Canada between 1996 and 2004 according to sector. In 1996, of the $295 million dollars invested in early-stage financing, 40% was in the life sciences sector, 25% in IT, 4% in other technologies, and 31% in the traditional sector. In 1997, of the $557 million invested, 35% was in life sciences, 25% in IT, 4% in other technologies, and 36% in the traditional sector. In 1998, of the $563 million invested, 39% was in life sciences, 32% in IT, 7% in other technologies, and 22% in the traditional sector. In 1999, of the $912 million invested, 20% was in the life sciences sector, 55% was in IT, 4% was in other technologies and 21% in the traditional sector. In 2000, of the $2.57 billion invested, 16% was in life sciences, 71% in IT, 2% in other technologies, and 11% in the traditional sector. In 2001, of the $2.28 billion invested, 17% was in life sciences, 73% was in IT, 5% was in other technologies, and 5% was in the traditional sector. In 2002, of the $1.11 billion invested, 22% was in life sciences, 64% was in IT, 5% was in other technologies, and 9% in the traditional sector.

The first graph illustrates the amount of companies that received financing in early-stages in Canada between 1996 and 2004 according to sector. In 1996, of the 181 companies financed, 25% were in life sciences, 37% in IT, 4% in other technologies, and 34% in the traditional sector. In 1997, of the 275 companies financed, 26% were in life sciences, 39% in IT, 6% in other technologies, and 29% in the traditional sector. In 1998, of the 343 companies financed, 26% were in life sciences, 37% in IT, 5% in other technologies, and 32% in the traditional sector. In 1999, of the 347 companies financed, 25% were in life sciences, 41% were in IT, 6% were in other technologies, and 28% in the traditional sector. In 2000, of the 502 companies financed, 24% were in life sciences, 53% were in IT, 5% in other technologies, and 18% in the traditional sector. In 2001, of the 413 companies financed, 26% were in life sciences, 53% were in IT, 6% in other technologies, and 15% in the traditional sector. In 2002, of the 366 companies financed, 29% were in life sciences, 45% in IT, 9% in other technologies, and 17% in the traditional sector. In 2003, of the 339 companies that were financed, 24% were in life sciences, 46% were in IT, 7% in other technologies, and 23% in the traditional sector. In 2004, of the 312 companies financed, 25% were in life sciences, 45% in IT, 9% in other technologies, and 21% in the traditional sector.
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Figure 8: Early-Stage Dollars invested and Companies Financed by Canadian Province

These stacked bar graphs illustrate early-stage VC financing by Canadian province from 1996 to 2004. The first graph illustrates the total number of dollars invested (in millions) from 1996-2004, broken down into percentage by province. The second graph illustrates the total number of companies financed from 1996-2004, broken down into percentage by province. In 1996, $295 million in total was invested in 181 companies in early-stage financing. In 1997, $557 in total was invested in 275 companies. In 1998, $563 million in total was invested in 343 companies. In 1999, $912 million in total was invested in 347 companies. In 2000, $2.57 billion in total was invested in 502 companies. In 2001, $2.28 billion in total was invested in 413 companies. In 2002, $1.11 billion in total was invested in 366 companies. In 2003, $836 million in total was invested in 339 companies. In 2004, $871 million in total in early-stage financing was invested in 312 companies.
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Figure 9: Early-Stage Dollars Invested by Major Urban Centre

This stacked bar graph illustrates early-stage VC financing (in millions) from 1996 to 2004 according to major urban centre, which is broken down as follows: Vancouver, Quebec City, Toronto, Calgary-Edmonton, Kitchener-Waterloo, Rest of Ontario, Montreal, Ottawa, and Rest of Canada. In 1996, $295 million in total was invested in early-stage financing. In 1997, $557 in total was invested. In 1998, $563 million in total was invested. In 1999, $912 million in total was invested. In 2000, $2.57 billion in total was invested. In 2001, $2.28 billion in total was invested. In 2002, $1.11 billion in total was invested. In 2003, $836 million in total was invested. In 2004, $871 million in total was invested in early-stage financing.
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Figure 10: Early-Stage Dollars Invested and Companies Financed in Canada by Investor Type

These stacked bar graphs illustrates the amount of VC invested (in millions of dollars) between 1996 and 2004 in companies for early-stage financing according to investor type, which is broken down into the following categories: corporate, government, institutional, retail, private independent, foreign, and other. In 1996, $295 million in total was invested in early-stage financing in 181 companies. In 1997, $557 in total was invested in 275 companies. In 1998, $563 million in total was invested in 343 companies. In 1999, $912 million in total was invested in 347 companies. In 2000, $2.57 billion in total was invested in 502 companies. In 2001, $2.28 billion in total was invested in 413 companies. In 2002, $1.11 billion in total was invested in 366 companies. In 2003, $836 million in total was invested in 339 companies. In 2004, $871 million in total was invested in early-stage financing in 312 companies.
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Figure 11: Seed Dollars Invested and Companies Financed in Canada by Investor Type

These stacked bar graphs illustrate the amount of VC seed dollars (in millions) invested in companies in Canada from 1996 to 2004 by investor type. The first graph illustrates the amount of seed dollars invested (in millions) as a percentage of the total investments in Canada between 1996 and 2004 according to investor type. The second graph illustrates the amount of companies financed in the seed stage according to investor type. The investor types are corporate, government, institutional, retail, private independent, foreign and other. In 1996, $15 million in total was invested in 21 companies in the seed stage of financing. In 1997, $11 million was invested in 27 companies. In 1998, $23 million was invested in 59 companies. In 1999, $74 million was invested in 52 companies. In 2000, $107 million was invested in 78 companies. In 2001, $93 million was invested in 40 companies. In 2002, $100 million was invested in 41 companies. In 2003, $34 million was invested in 33 companies. In 2003, $34 million in total was invested in 33 companies. In 2004, $40 million in total seed stage dollars was invested in 37 companies.
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Figure 12: Dollars Invested and companies Financed in Canada by Foreign Investors by Stage

These stacked bar graphs illustrate the amount of dollars invested in Canada by foreign investors from 1998 to 2004 by stage. The first graph illustrates the amount of dollars invested per year (in millions) by foreign investors according to stage. The second graph illustrates the number of companies financed in Canada by foreign investors between 1998 and 2004 by stage. In 1998, foreign investors invested $41 million in total in 25 companies at various stages. In 1999, foreign investors invested $497 million in total in 47 companies. In 2000, foreign investors invested $1.45 billion in total in 91 companies. In 2001, foreign investors invested $1.07 billion in total in 94 companies. In 2002, foreign investors invested $682 million in total in 74 companies. In 2003, foreign investors invested $336 million in total in 53 companies. In 2004, foreign investors invested $479 million in total in 61 companies at various stages.
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Figure 13: Dollars Invested and Companies Financed in the United States by Stage

These stacked bar graphs illustrate the amount (in US dollars) invested in companies in seed, start-up, other early stage, expansion, or other late stages of financing from 1996 to 2004. The first graph illustrates the dollars invested (in billions of US dollars) in each stage as a percentage of the total dollars invested per year. The second graph illustrates the number of companies financed per year according to stage. In 1996, $11.51 billion was invested in 2284 companies. In 1997, $14.9 billion was invested in 2760 companies. In 1998, $21.35 billion was invested in 3213 companies. In 1999, $54.6 billion was invested in 5045 companies. In 2000, $105.89 billion was invested in 7208 companies. In 2001, $41.02 billion was invested in 4095 companies. In 2002, $21.58 billion was invested in 2693 companies. In 2003, $18.95 billion was invested in 2535 companies. From 1996 to 2004 the majority of money invested was in expansion or other late stage companies.
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Figure 14: Average Amount Invested Per Early-Stage Firm, Ontario, Canada and the United States

This vertical bar graph illustrates the average amount of VC invested (in millions of Canadian dollars) in firms in Ontario, Canada and the United States from 1998 to 2004. In 1998, $2 million was invested in Ontario early-stage firms, $1.6 million in Canadian early-stage firms, and $7.4 million in total in U.S. early-stage firms. In 1999, $4.3 million was invested in Ontario firms, $2.6 in Canadian firms, and $9.6 million in U.S. firms. In 2000, $8.5 million was invested in Ontario firms, $5.1 million in Canadian firms, and $13.1 million in U.S. firms. In 2001, $9.9 million was invested in Ontario firms, $5.5 million in Canadian firms, and $10.8 million in U.S. firms. In 2002, $5.5 million was invested in Ontario firms, $3.0 million in Canadian firms, and $7.6 million in U.S. firms. In 2003, $3.6 million was invested in Ontario, $2.5 million in Canadian firms, and $6.1 million in U.S. firms. In 2004, $3.9 million was invested in Ontario early-stage firms, $2.8 million on Canadian early-stage firms, and $6.1 million in U.S. early-stage firms.
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Appendix B: A Brief Description of Stages of Company Development

The following chart of the various stages of company development is based on standard research methodologies used in Canada and the United States for tracking activity in the venture capital market. The chart is divided into six blocks of information (listed by bullets) that describe the various stages of venture capital. Pre-seed: typically, an innovative idea is developed in a research setting; early assessment of commercial potential occurs; and particular attention is paid to intellectual property concerns. Seed-stage: first steps in an evolving business entity; typically, the business/product remains in conceptual phase; and the focus is on R&D and/or initial product development. Start-up stage: from concept to company formation; key elements of business management infrastructure are developed; the focus is on continued development of one or more products; and often, this phase is pre-revenue. Other early-stage: from company formation to commercial operation; business management infrastructure is further developed; activity often includes initial marketing, sales and revenues; and product development may include prototype testing (IT) or clinical trials (life sciences). Expansion-stage: company moves to full commercial operation; marketing and sales volume intensified, with one or more revenue-generating products; often, the business is breaking-even or profitable; and some product development may still be taking place. Other late-stage: an established company with full productive capacity; the focus is on a range of high growth objectives; typically, there is a regular profit stream; and if the company is troubled, it may attempt a restart.
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Figure 16: Seed and Startup Dollars Invested and Companies Financed in Ontario

These vertical bar and line graphs illustrate the amount of VC invested in seed and start-up companies from 1996 to 2004. In 1996, $1 million was invested in 3 seed companies, and $29 million was invested in 15 startup companies. In 1997, $5 million was invested in 11 seed companies, and $66 million in startups. In 1998, $7 million was invested in 16 seed companies, and $55 million in 35 startups. In 1999, $26 million was invested in 18 seed companies, and $106 million in startups. In 2000, $59 million was invested in 28 seed companies, and $638 million in 59 startups. In 2001, $72 million was invested in 17 seed companies and $479 million in 47 startups. In 2002, $49 million was invested in 12 seed companies, and $267 million in 40 startups. In 2003, $25 million was invested in 11 seed companies, and $73 million was invested in 26 companies. In 2004, $10 million was invested in 9 seed companies and $102 million invested in 22 startup companies.
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Figure 17: Early Stage Dollars Invested and Companies Financed in Ontario by Sector

These stacked bar graphs illustrate the amount of dollars (in millions) invested in companies in the life sciences, IT, other technologies, or traditional sectors from 1996 to 2004. In 1996, $111 million dollars in early-stage financing was invested in 48 companies in Ontario in various sectors. In 1997, $167 million was invested in 75 companies. In 1998, $188 million was invested in 95 companies. In 1999, $424 million was invested in 99 companies. In 2000, $1.5 billion was invested in 177 companies. In 2001, $1.39 billion was invested in 140 companies. In 2002, $583 million was invested in 106 companies. In 2003, $352 million was invested in 97 companies. In 2004, $347 million in early-stage financing was invested in 88 companies in Ontario in various sectors.
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Figure 18: Early Stage Dollars Invested and Companies Financed in Ontario by Investor Type

These stacked bar graphs illustrate the number of early stage dollars invested in Ontario companies according to investor type from 1996 to 2004. Investors are divided into corporate, government, institutional, retail, private independent, foreign, and other investors. In 1996, $111 million dollars in early-stage financing was invested in 48 companies in Ontario by various investors. In 1997, $167 million was invested in 75 companies. In 1998, $188 million was invested in 95 companies. In 1999, $424 million was invested in 99 companies. In 2000, $1.5 billion was invested in 177 companies. In 2001, $1.39 billion was invested in 140 companies. In 2002, $583 million was invested in 106 companies. In 2003, $352 million was invested in 97 companies. In 2004, $347 million in early-stage financing was invested in 88 companies in Ontario by various sectors.
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Figure 19: Seed Dollars Invested and Companies Financed in Ontario by Investor Type

These stacked bar graphs illustrate the number of seed dollars (in millions) invested in Ontario companies according to investor type from 1996 to 2004. Investors are divided into corporate, government, institutional, retail, private independent, foreign, and other investors. In 1996, $1 million dollars in seed stage financing was invested in 3 companies in Ontario by various investors. In 1997, $5 million was invested in 11 companies. In 1998, $7 million was invested in 16 companies. In 1999, $26 million was invested in 18 companies. In 2000, $59 million was invested in 28 companies. In 2001, $72 million was invested in 17 companies. In 2002, $49 million was invested in 12 companies. In 2003, $25 million was invested in 11 companies. In 2004, $10 million in seed stage financing was invested in 9 companies in Ontario by various investors.
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Figure 20: Dollars Invested and Companies Financed in Ontario by Foreign Investors by Stage

These stacked bar graphs illustrate the amount of dollars (in millions) invested in Ontario by foreign investors from 1998 to 2004 by stage: seed, start-up, other early stage, and expansion or other late stage. The first graph illustrates the amount of dollars invested per year (in millions) by foreign investors according to stage. The second graph illustrates the number of companies financed in Ontario by foreign investors between 1998 and 2004 by stage. In 1998, $15 million was invested by foreign investors in 6 companies at various stages. In 1999, $387 million was invested in 29 companies. In 2000, $1.0 billion was invested in 53 companies. In 2001, $802 million was invested in 56 companies. In 2002, $544 million was invested in 41 companies. In 2003, $196 million was invested in 25 companies. In 2004, $261 million was invested by foreign investors in 32 companies at various stages.
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