C HAPTER 6: T HE S YNERGY B ETWEEN A NGEL N ETWORKS A ND C ORPORATE V ENTURING
Similarly, Coralie Lalonde, another Ottawa angel investor with Katsura Investments, states: “Many angels have lost private equity investments because of financing terms that wipe out their ability to achieve a return on their investment, regardless of how well the company does.” (Lalonde, Ottawa Citizen February 2003) Anecdotes about declining valuations are not surprising in light of recent 2001 data on Canadian venture capital and private equity returns. The Canadian Venture Capital Association (CVCA) showed a negative return of 10.7% for all venture capital in 2001. (Note: Recognizing the importance of industry performance data, Macdonald & Associates, in conjunction with CVCA, has begun, for the first time, releasing Canadian investment performance data. 2002 return data was not available as part of the March 5, 2003 press release.)
Canadian Private Equity Performance (As of 12/31/2001) Percentage IRR FUND TYPE 1 Yr 3 Yr 10 Yr Early stage -7.2 22.5 17.5 Balanced venture capital -12.2 14.3 12.8 All venture capital -10.7 15.7 13.3 Buyout & Mezzanine 10.6 9.2 15.7 All private equity -7.9 14.6 13.7 Source: CVCA, Macdonald & Associates Limited
More recent U.S. 2002 performance data also paints a bleak picture. For the period ending Sept. 30, 2002, one-year returns for U.S. venture capital funds were negative 22.3%. The table below provides evidence of this cold investing environment in 2002 for all U.S. private equity.
U.S. Private Equity Performance (As of 09/30/2002) FUND TYPE 1 Yr 3 Yr
10 Yr
-28.6%
Early stage All venture
19.4% 34.2%
-22.3 -12.3
15.1
26.3 15.1
All private equity
1.0
Source: Thomson Venture Economics
That being said, the situation in Canada appears to be improving. According to the CVCA, Canada, relative to the U.S., showed positive improvements in the capital deployed (i.e., change from Q3 to Q4, 2002) and the percentage of funds allocated to support early-stage investments (i.e., early stage $ share), that is often follow-on financing to angel-backed investments.
Canada vs. U.S. Venture Capital Activity (As of 12/31/2002) Canada U.S. $ Invested $1.6 B USD
$21.2 B USD
35%
Drop in $ Invested from 2001 Change from Q3 to Q4, 2002
49% -7% 19%
+51%
42%
Early Stage $ Share New Capital Raised
$2.1 B USD
$6.9 B USD
Source: CVCA, Macdonald & Associates Ltd.
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