By Charles Plant
Q1 Capital

In December 2005, Cyrium Technologies, a Canadian company founded in 2002 whose strategy is to become a leader in the design and production of high efficiency photovoltaic solar cells, raised $3 million (all numbers in Canadian dollars) from BDC and Pangea Ventures. Meanwhile, in the US, Nanosolar Inc., a firm founded in 2001 to develop light-weight, flexible and easily adjustable low-cost solar electricity cells. had completed a second round of $22 million to follow on their first round of $8 million. These two companies, while not competing directly, operate in the same industry with similar objectives and similar development issues. The US firm, however, is able to develop its business with one key advantage: it has ten times the capital of the Canadian firm.

In 2005, Venture Capital companies in the US invested $27 billion in seed, early stage and expansion stage companies. In Canada, the total was $1.8 billion or 7% of the US total. On the surface it would appear that Canada lags the rate of US investment by only 3% based upon population; However, behind these numbers lies another problem. The US VCs invested in just over 3,000 companies whereas in Canada there were 639 companies who received funding or 21% of the US number. The Canadian investment was spread over a much greater number of companies proportionately than in the US.

The result of spreading the investment out over a wide number of companies is that the average Canadian company did not receive the same level of support as the average US firm. In the US, the average investment per firm was $8.9 million whereas the average Canadian investment was $2.8 million. By the time a company has received seed, early stage and expansion funding in the US, it has brought in (...read more...)