Canadian venture capital investors have about $10 billion of dry powder to spend and cash-hungry startups are going to need it soon, according to the government’s bank for small business.
(Bloomberg) — Canadian venture capital investors have about $10 billion of dry powder to spend and cash-hungry startups are going to need it soon, according to the government’s bank for small business.
Many VC-funded companies face the risk of running out of money in the next 12 months without new financing, despite efforts to slow their rate of cash burn, said a report by Business Development Bank of Canada’s venture capital unit. “We anticipate that companies in our portfolio and across the ecosystem will put a premium on cash in the coming months.”
Venture capital investments in Canada fell sharply last year, mirroring global trends, as higher interest rates caused investors to radically cut their valuations for early-stage companies. Deal volumes declined last year to C$10 billion ($7.3 billion), about a third lower than in 2021, BDC Capital said. There were fewer transactions and the average one was 24% smaller.
BDC Capital, which has direct or indirect investments in more than 700 companies and 130 funds, said VC investors will continue to increase their focus on follow-on rounds in existing portfolio companies, “insulating their best investments from any further market shifts”.
“While the current environment is challenging, we are confident in the ability of the industry to build on its foundation and continue to grow,” Jérôme Nycz, executive vice-president at BDC Capital, said in a statement accompanying the report.
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