A regional roundup of VC financing reveals rising numbers

There are still three months before the year-end figures will be in but we can all but confirm that Atlantic Canada enjoyed a record-setting year for venture capital investment.

Last week Canada’s Venture Capital & Private Equity Association (CVCA) and Thomson Reuters released their VC stats for Canada, and the good news is that the country is doing reasonably well this year in VC investment. The better news is that Atlantic Canada is doing brilliantly.

In the first three-quarters of this year, venture capital firms have pumped $66.2 million into Atlantic Canadian companies—that’s more than triple the $21.3 million the region received in all of 2010. There are a few more financings in the works, so I’m certain that the region will book more VC investment this year than the record $68 million in 2009.

Admittedly, the 2011 financings have been dominated by a couple of major plays in Nova Scotia, but that isn’t the whole story. Almost half the financing to date comes from Dartmouth-based Unique Solutions Design Ltd.’s $30-million financing from Toronto-based Northwater Capital's Intellectual Property Fund. Unique Solutions, which installs scanning booths in malls to help consumers find clothes that are the right fit, is using the money to open more booths in the U.S.

The other big investment this year was the $8-million investment in LED Roadway Lighting of Halifax by Nova Scotia Business Inc. and Cycle Capital of Montreal. (LED Roadway founder and CEO Chuck Cartmill also invested in the round, but it’s my understanding is that amount isn’t included in the VC stats.) The company, which makes installations for energy-efficient outdoor lights, is using the funds to expand internationally and having considerable success in Brazil.

But the follow-on rounds of these two companies don’t completely explain the impressive stats. When Atlantic Canada set a financing record two years ago, 17 companies received investment. Already in the first three-quarters of 2011, 12 companies were funded. So we’re on track for about 16 companies to receive funding, which is in the same ballpark as 2009.

Nova Scotia has tallied $46.2 million from January to September, up more than fourfold from $10.4 million in all of last year. Last year was, admittedly, a pretty sorry performance in Nova Scotia.

New Brunswick is also doing well, assuming that its investments are bona fide VC fundings. Companies in that province have so far raised $18.6 million this year, driven largely by two investments in the second quarter worth $15.9 million.

I’ve asked, but no one in New Brunswick can tell me which two companies received these investments. One source guessed that they could be mining financing, which purists say isn’t really a VC investment because it isn’t commercializing new technology.

Newfoundland and Labrador, which received no VC investment last year, has landed $1.4 million in three investments this year. Prince Edward Island hasn’t attracted any VC financing since 2005.

Overall, the country is experiencing a pickup in VC investment, although CVCA president Gregory Smith cautions that Canadian companies still receive about 40% less investment than their U.S. competitors. VC investment in Canada in the first nine months totalled $1.15 billion, slightly edging out the $1.13 billion raised last year.

One final note of regional pride: Atlantic Canada has accounted for almost 6% of the VC investments in Canada so far this year, an uncommonly strong number; last year the figure was less than 2%. Here’s to the uptick continuing.