VCs search for gold in Vancouver

JACK KAPICA

Gold once lured prospectors to the West and Vancouver in search of fortunes, but today the region is attracting venture capitalists.

On Thursday, a group of investment companies from the San Francisco Bay area is in the city panning for investment possibilities.

The Fundraising Forum, a Silicon Valley-based group that plays matchmaker between entrepreneurs and investors, is shepherding investors from Sequoia Capital, Sierra Ventures, Hitachi Corporate Ventures and Canaan Partners around Vancouver for some prospecting.

The group’s aim is to connect with local venture-capital investors and examine investment opportunities. They are looking at a carefully screened list of promising entrepreneurial operations.

This follows heightened interest in Seattle, where Vancouver technology companies have been raising interest. Over the past two years, Seattle venture capitalists have been looking carefully at the Vancouver market and building relationships with investors there.

Despite an industry-wide economic slowdown, the Vancouver area has attracted a number of high-technology start-ups in recent months. The activity has also lured U.S. venture capital looking for the Next Big Thing - or what organizers of this week’s VC event are calling “a collection of next maybe-not-quite-so-big-but-certainly-attractive things.”

“Everybody was focusing on problems in their own back yards, but Vancouver has seen tech formation continue to percolate,” said Steven Hnatiuk of Yaletown Venture Partners, a new venture-capital fund specializing in information and energy technology companies in British Columbia and Alberta.

“We’re seeing something like 400 new technology companies forming yearly,” he added.

Most recent venture financing in British Columbia has been later-stage financing, he said, but there is not as much capital for seed and early-stage deals.

“Vancouver is a natural extension of the north-south corridor that begins in the Silicon Valley and runs up to the northwest and now across the border,” Seattle-based Cascadia Capital director Kevin Cable said.

Provincial statistics show that the technology industry now consists of 5,500 companies, employing 46,000 people and generating more than $6-billion (Canadian) in revenue.

Collectively, the province’s two major universities rank among the top dozen North

American universities in terms of the number of start-up technology companies formed at them and the number of U.S. patents issued to their students.

Venture capital investment in B.C. companies has reached more than $500-million in 2000 and again in 2001, and remains near 1999 levels despite retrenchment throughout North America.

The PricewaterhouseCoopers’ 2002 Global Private Equity Report ranks Canada as the second most active technology venture investment market in the world after the United States.