Q-News

May 2009

April: Getting Warmer?

Posted in Mike's Commentary

Despite the fact that April was another dismal month it was good to find a number of venture firms that we haven’t seen in a while make investments.  Edgestone was back with its $14.2 million investment in BreconRidge; Telus Ventures invested in Skypoint Capital; BDC Venture Capital played a part in a $17 million raise for Teradici Corporation; and Jefferson Partners made an $11.6 million investment in Storage Appliance Corporation.

 

Recently released results from the CVCA only confirm what we have been reporting on a monthly basis.  The arrow continues to be pointed in a southeasterly direction and with first quarter commitments of capital to the Canadian venture industry down 74% to $149 million versus $418 million during the comparable period in 2008, the near-term prospects for recovery are bleak.  Nonetheless, we are seeing some positives such as Teralys Capital, the new $700 million fund of funds announced by the Government of Québec, the Caisse de Dépôt and the Fonds de Solidarité.  We are also seeing an increasing number of articles highlighting the state of the Canadian Venture Capital industry and the long-term negative impact on the Canadian technology sector, employment, wealth and growth.  Eventually, like regression to the mean, the squeaky wheel will get the grease.

 

With most of our current initiatives being M&A focused it’s good to see the recent strength in the public markets.  Not that we expect to see immediate changes to valuations in the private markets (I think that we are going to have to see positive movement into the fall before that happens) but prospective buyers that we are speaking with sound a little more buoyant and positively predisposed to discussing and reviewing opportunities.  Of course, that could all change in a moment as we experienced last week when a Fortune 1000 company that was set to acquire one of our clients pulled out of the process due to a 19% decline in first quarter revenues and a $200 million swing in profitability.

 

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