UPDATE 2-Canada venture capital investment at 4-yr high

Tue Feb 14, 2012 10:12am EST

* Venture capital investment up 34 pct in 2011 to C$1.5 billion

* 24 pct more firms received venture capital in 2011

* Information technology firms got the most

* Average investments rising but still lag pre-crisis levels

By Pav Jordan

TORONTO, Feb 14 (Reuters) - Venture capital investment rose to a four-year high in Canada in 2011, driven by broad bets on innovation sectors and dominated by activity in information technology, the Canadian Venture Capital and Private Equity Association (CVCA) said on Tuesday.

Venture capital investment rose to C$1.5 billion ($1.5 billion), up 34 percent from 2010 and the highest level since 2007, when it was C$2.1 billion.

Canadian venture capital has helped launch some of Canada's most successful companies, including BlackBerry maker Research In Motion.

But investment has slowed recent years as capital flowed to more established industries and some innovators chose to launch their ventures in the United States, where 3,000 companies shared $28.5 billion in risk capital funding last year.

Venture capital went to 444 Canadian companies in 2011, a six-year high.

Canadian venture-capital fund-raising was C$1 billion in 2011, little changed from 2010. In the United States, it was$18.2 billion, up 32 percent from 2010.

FOCUS ON INFORMATION TECHNOLOGY

Canadian information technology sectors attracted C$692 million in capital, or 46 percent of the total.

Biopharmaceuticals, medical devices and other life sciences attracted C$343 million, or 23 percent. Alternative energy and other clean technology sectors took 16 percent, or C$245 million.

"Knowledge-based industries, which are the foundation of Canada's future economic competitiveness and productivity, were the clear beneficiaries of market trends last year," CVCA President Gregory Smith said in a statement.

The average size of 2011 investments was C$3.4 million, up slightly from C$3.2 million the year before but well below the C$5.1 million of 2007, before the global financial crisis.

Exits, where investors sell investments either to other investors or to strategic buyers, slowed.

Strategic buyers accounted for the bulk of disclosed exits, although two companies, both Ontario-based, went public despite bumpy stock markets.

In August, renewable chemicals company EcoSynthetix sold about C$100 million of shares in an initial public offering (IPO) to finance research and development.

And in May, cloud software company NexJ Systems completed a C$43.65 million IPO.

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