Venture capital in the Canadian life science industry

Venture Capital (VC) is essential to the Canadian economy and has been a critical success factor for many now-thriving Canadian companies. According to the Canadian Venture Capital & Private Equity Association (CVCA), new VC investment in Canada went up to $2.3 billion or 24% in 2015, from the previous year; VC investments were at their highest levels since 2007; and, 536 VC deals were completed, up 12 percent over the prior year. In addition, the average amount of VC financing received by Canadian companies in 2015 was $4.2 million, a decrease from the $4.7 million averaged the year before. In the life sciences sector in Canada, VC investments grew to $647 million in 2015, an increase of 35% above the $479 million invested the previous year.

As part of a global trend, pharmaceutical multi-national establishments (MNEs) are increasing their participation in the Canadian VC markets to access R&D opportunities in Canada. Since 2011, pharmaceutical MNEs, alone or in partnerships, invested in four new Canadian Life Sciences VC funds.

Business Development Bank of Canada (BDC) provides VC to Canadian life sciences firms and leverages risk capital. BDC Healthcare Venture fund is focused on Early and Seed Stage Life Science companies, with initial investments from $500,000 to $5 million, and up to $20 million over the life of the investment. As of 2012, BDC VC investments in in the Life Sciences sector accounted for the greatest share of BDC's VC investment in any sector.

The federal government plays a significant role in VC through investments in Canadian innovative firms, by leveraging private sector investment, and through policies and programs that facilitate financing of business innovation. The Venture Capital Action Plan (VCPA), announced in January 2013, is a comprehensive strategy to deploy $400 million in new capital over the next 4 to 7 years. The plan includes: $250 million to establish a new, large private fund of funds; $100 million to recapitalize existing large private led funds of funds; and, up to $50 million in three to five existing high-performing Canadian VC funds. This plan helps to further strengthen the business environment for innovative Canadian firms. Since 2013, $71 million of VCAP has been committed to life sciences while the Business Development Bank of Canada (BDC) has doubled its life science VC funding to $270 million. The federal government accounts for 15% of life science VC investments in Canada.

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