Nintendo President Satoru Iwata was the keynote speaker at the 2006 Game Developer Conference. What's Nintendo's big mantra these days? "Disruptive Development." Iwata boasted that Nintendo sold 6 million DS handhelds in one year far surpassing competitor's efforts. The hugely successful "Brain Age" game sold more than five million copies.

Digital gaming entertainment sales long ago eclipsed those of the film industry. More importantly for Canadian investors, Toronto has an exceptional pool of talented developers and digital animators that form the basis for a strong industry cluster. For example, the city is home to two of the worlds top digital animation software companies, Alias and Side-Effects. Educational institutions like Sheridan College and the University of Toronto's ITDC created a pool of well-trained digital animators.

As more entertainment content migrates from analogue to digital distribution channels this cluster will invariably see strong financial growth. Is our VC industry responding to the opportunity?