Things are still looking grim for Canadian venture capital and fantastic for Canadian private equity.
According to figures released Tuesday by Thomson Financial and the Canadian Venture Capital Association, the median cumulative internal rate of return since inception for Canadian VC funds was negative 2.8% as of Dec. 31, 2006 — the same level as 2005.
Canadian VC specialists attribute the weak performance to the small size of Canadian VC funds and the fact that so many were formed at the top of the market in the late 1990s. Gilles Durufle, a consultant who has studied Canadian VCs, said in a speech at Tuesday's Canadian Venture Capital Association meeting that many VC fund managers have improved their practices lately, but "it takes more than one or two years for changes in investment behavior to translate into changes of values of exits."
The performance of buyout funds was much better with a median IRR of 8.5% since inception and 21% in the top quartile. In 2005, the numbers were 11.9% and 16.6%, respectively. —Peter Moreira
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