Spotlighting Canada's Private Capital Ecosystem [New Research]

An interview with CVCA CEO and Hockeystick Advisor, Mike Woollatt.

Toronto-based Mike Woollatt is the CEO of the Canadian Venture Capital and Private Equity Association (CVCA).

As the voice of Canada’s venture capital and private equity industry, the CVCA is focused on broadening industry awareness through market research and networking opportunities, while also advocating on its behalf  to ensure sound public policy that encourages a favourable environment for investment.

 It currently represents more than 200 corporate members and 1,000 individual members.

The CVCA recently released its annual report, which highlighted another impressive year for venture capital and private equity — 2016 hit levels of investment not seen since the dot-com boom.

We sat down with Mike to talk about the report and the positive benefits its data has on the private capital ecosystem.

What are the key takeaways from the 2016 report?

2016 was a spectacular year for venture capital investment in Canada. The biggest since 2001. More than $3.2-billion was invested in 530 deals in 2016 and the total VC investment in the country went up 41% from 2015.

private capital ecosystem

Exits overall were down from 2015, which saw near-record numbers of mergers or acquisitions of venture-backed firms. That said, 2017 has gotten off to a hot start as it seems like we’re reporting exits every 2-3 days.

Several hundred-million-dollar-plus sales have been reported or rumoured for SkipTheDishes, Bit Stew Systems, Luxury Retreats International and BlueCat Networks.

The private equity side was a bit muted in comparison.

Oil and gas, which drive Canada’s private equity market, are taking a bit of a time out right now. Generally, they are about a third of the deals and those numbers were lower in 2016.

What do you think is at the heart of Canada’s venture capital growth?

I think it’s a result of two things really.

Federal and provincial governments, as they do in many jurisdictions, have played an increasingly significant and welcome role in creating the conditions and framework for VC investing to succeed through initiatives like the Venture Capital Action Plan (VCAP).

I’d also argue that US investors coming up north have also played a large role in the ecosystem’s growth.

These two factors brought us more so-called “mega deals.” Our report highlights 11 of these $50-million or more deals, which represent a cross-section of Canadian tech and life sciences companies that are reaching global scale.

private capital ecosystem

What impact do you hope this data will have on Canada’s private capital ecosystem?

The CVCA’s mandate, essentially, is to do whatever we can to improve the private capital ecosystem in Canada. We can tell the story much better in terms of the great things venture capital and private equity do for business through our reports.

Canada’s data in private equity and venture capital is relatively poor when you compare it to other countries. Partially because of the private aspect, but there also hasn’t been a very robust effort in terms of producing a thorough data set on private capital deals in Canada.

We’re fixing that.

My hope is that by sharing this information, players in the private capital ecosystem will be better equipped to make the best possible decisions. Also, it’s pretty great to regularly spotlight Canadian innovation.

What challenges has the CVCA faced with data collection and reporting?

80% of data science is grunt work around data collection, cleaning and transforming. With data being such an integral part of our mandate, we’re always looking to streamline and simplify the process of collecting and reporting this information.

Checking on the deals and doing due diligence, particularly on the larger deals, commands a lot of time to ensure it’s right. I think that's why other providers don't do it as much. 

private capital ecosystem

Our members request that sort of data regularly, so perfecting this great value-add service is crucial for us.  

Are government initiatives like VCAP working?

VCAP celebrated its third anniversary in January and the program has had an overwhelmingly positive impact on Canada’s innovation ecosystem. It’s a private-sector-led, returns-oriented mandate with an entrepreneurial spirit.

With VCAP, the Government of Canada invested $340-million, which in turn allowed four private sector limited partners to raise $1.4-billion. The funding has been used for a variety of purposes including generating high-skilled jobs, advancements in research and development and nurturing sales.

It is strongly needed as a key strategic element in the government’s Innovation Agenda.

In a recent interview, you commented that the “VC market in Canada has come a long way but is yet to be fully sustainable.” What do we have to do to make it fully sustainable?

A key to sustainability frankly is returns. Returns and investors exposed to those returns.

That’s what VCAP did. Expose new or returning investors to the asset class and let the private sector drive returns through the program. 

This ecosystem is a bit starved — Canada's not set up to fund innovation. We constructed a very conservative country with big vehicles, outsized vehicles.

But last week’s budget announcement brings us that much closer to having a sustainable VC market. The government announced a much needed $400-million investment that’ll support Canada’s innovation ecosystem through the new Venture Capital Catalyst Initiative (VCCI).

While we have some work to do with figuring out the best way forward with VCCI, I’m very pleased with this initiative as it was specifically designed to catalyse Canadian venture capital.

For details about the CVCA’s upcoming events, please visit their website.

MikeWoollatt.pngMike Woollatt is CEO of the Canadian Venture Capital and Private Equity Association (CVCA). Previously Mike was an entrepreneur who co-founded, amongst other businesses, Beaconsfield Group – a successful management consulting and public affairs firm. He has held senior executive roles at various major Canadian corporations including Bell Canada, CTVglobemedia, and Canwest Global Communications. Before entering the private sector, Mike worked for the Government of Canada as an economist in the Department of Finance and as a policy advisor to the Minister of Finance. Mike has also worked overseas as an economist on World Bank-funded projects and was a College-level economic Instructor. He holds a BA and MA in Economics from the University of British Columbia.

serial entrepreneur