Q-News

November 2008

October...More Trick than Treat

Posted in Mike's Commentary

A little late getting the newsletter out this month.  I was really hoping that by delaying a couple of days we might be able to report a few more news releases announcing October financings.  Unfortunately that was not the case and the results for October are abysmal.  Not only were there only nine reported financings, but only one was for an Ontario-based company.  Usually Ontario ranks number one or two for monthly financings so this level of activity should be of particular concern to all members of the Canadian investment community.  One more bullet point in the long list of reasons Ontario has officially became a “have-not” province.  On the upside, Newfoundland is apparently planning a big party to celebrate it’s new status as a “have” province and Air Canada flight attendants have been told to smile more. Yes, that’s really going to give the company a valuation bump!

At least we’re not living in a bubble.  Thomson Reuters reported last month that the global financial crisis has caused venture capitalists to dramatically reduce their deal closings.  TR’s data showed that US-based venture firms invested in just 250 companies in October, down from 565 companies in September of this year and 518 companies in October 2007. One would have to go all the way back to January 2004 (when there were investments in 232 companies) to find a worse month for closings. The only other October on record with fewer deals was in 1993.

TR reported that the amount of capital that VCs invested also plummeted in October, with US-based firms putting $2.5 billion to work, down from $3.8 billion in September of this year and $3.2 billion in October 2007.  This $2.5 billion October 2008 total is the smallest amount that US VCs have invested since February 2006, when they invested about $2.4 billion. Normally October racks up more investment days and many more investment dollars.  The last time the monthly total was lower was in October 2004, when about $2.4 billion was invested.

Two events of note took place during the month.  The Innovation Synergy Centre in Markham held the third and final chapter in their Money Chase series.  The event was well attended with 175+ investors and early-stage entrepreneurs hoping to consummate a happy marriage.  The other event was hosted by Alberta’s Minister of Advance Education and Technology, the Honourable Doug Horner, who detailed Alberta’s new co-funding initiatives.  While it’s sometimes difficult to shed a tear for our oil-enriched brethren from the west, Alberta has been a virtual dead zone for institutional venture capital and kudos have to go to a provincial government for recognizing the importance of technology entrepreneurs and economic diversification.  Alberta’s taken some bold steps towards making things happen so let’s hope that something substantial can come of their initiative.

Given the current market upheaval I know that many are beginning to feel like Sisyphus (maybe without the shaved head) who was condemned to forever roll a rock to the top of a mountain, where the stone would fall back to the bottom.  There is no more dreadful punishment than futile and hopeless labor.

 

While few can remember such a swift and precipitous decline in asset values let’s not forget that we are in a cyclical business and one of our choosing.  Entrepreneurs will always need money to grow their businesses, investors, at least those who will not be suffering from Post Traumatic Stress Disorder, will always be looking for a way to generate extraordinary returns, and those who work diligently through these challenging times will come out winners……we hope!

 

Hang in there and do your best to enjoy the upcoming holiday season

Send to a Friend

Like this article? Send it to a friend using the form below.
Your Name:
Your email address:
Friend's Name:
Friend's email address:
Message: