March 18, 2009 / 2:49 PM / 11 years ago

Ontario to help emerging tech firms raise capital

TORONTO (Reuters) - The government of the Canadian province of Ontario announced a C$250 million ($200 million) fund on Wednesday that will invest in emerging technology companies amid a credit market crunch that has made it tough to raise venture capital.

Starting in July, the fund will begin investing in clean technology, life sciences, and digital media and communications technology companies.

The money will be doled out over five years and the fund will match small to medium private-sector investments and receive an interest in the companies it backs.

News of the fund comes about a month after a report that found that financing activity in Canada’s venture capital market dropped to its lowest level in 12 years in 2008 as the economic downturn choked the flow of funds to small start-up companies.

Venture capital financing is the lifeblood of many early-stage companies. Without investors willing to shoulder the relatively high risk associated with start-ups, such companies can flounder long before delivering a product to market.

Ontario Research and Innovation Minister John Wilkinson told reporters on Wednesday that if there isn’t enough venture-capital available in the province, “we run the risk of losing a whole generation of great new companies.”

He said if there isn’t adequate funding, companies will either run out of money and fail, or move to jurisdictions where venture capital is more plentiful.

Last year, a total of C$1.3 billion in venture capital was invested in Canada, down from C$2.1 billion in 2007, according to a report by Canada’s Venture Capital and Private Equity Association and news and data company Thomson Reuters.

Aside from the drop in value of financings, the number of companies that received capital was also lower, falling to 371 from 412 in 2007, the report said.

($1=$1.25 Canadian)

Reporting by Wojtek Dabrowski; editing by Peter Galloway

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