Angels Recognized as Key to the Canadian Venture Funding Ecosystem But More Needs to Be Done

Early this year Deloitte released its “Global Trends in Venture Capital 2007 Survey” analyzing the trends in global venture capital.

The verdict: Outlook Grim.

“The outlook for the Canadian venture capital industry is bleak given its ecosystem is broken and there is no immediate solution at hand. The Canadian government and the domestic VC community must join forces to bring the industry back from the brink of collapse.”

Receiving a health rating of poor, both the Series A and B phases of venture capital represent massive breakdowns in the Canadian venture finance ecosystem.

This is, of course, of great concern to the Angel community as it increases the risk they face given there is great uncertainty regarding where the next round of financing might come from for their investments and is an oft cited barrier to initial investment.

This Seed-to-Series-B capital vacuum, has been one of the major driving forces behind the Angel community banding together and co-investing with each other. Canadian Angel investee companies with great potential such as Signallink or Origin Biomed have crossed the continent raising funds from multiple Angel investor groups. Other companies such as these have secured rounds of funding as high as $10 and $11 million in Angel capital.

Co-investment aside, Deloitte makes a number of other recommendations to make the Angel capital investment phase stronger, including:

• Further decreases in the capital gains tax rate
• Flow-through shares
• Angel tax credit for direct investment
• Retail venture capital program – tax credit for investment in funds
• Matching co-investment angel funds

The National Angel Organization recently made similar recommendations to the Federal Government. Watch this space for future updates!