British Columbia has all of the necessary tools to become a global leader in clean technology innovation, but when it comes to venture capital’s role in supporting the sector, something is lacking.
In a recent interview with Business in Vancouver, Wal van Lierop of Chrysalix, a venture capitalist who invests exclusively in clean tech and clean energy, said that enough tier one venture capital is available to help build start-ups into growing companies.
In terms of total venture capital (VC) investment dollars, British Columbia received approximately 29.2% of the reported VC in Canada last year ($554 million of $1.9 billion). VC investment in B.C. is well above that in Alberta ($52 million) and Quebec ($295 million), and second only to Ontario ($932 million).
But according to a roundtable of CEOs, Canada’s venture capital system promotes a philosophy of safe and incremental growth as opposed to making riskier bets that can result in exponential success—something that venture capitalists in Silicon Valley are accustomed to.
B.C. cleantech investors aren’t generating the type of exits they want. The largest Canadian exit in 2014 was Kinaxis, which raised $100.6 million when it went public. Nest, on the other hand, was acquired by Google for $3.2 billion last year. These small exits deter entrepreneurs from staying in Canada to try to grow and expand their startups.
There are an estimated 9,000 early-stage tech companies in BC. But according to van Lierop, “As a [venture capitalist], I know that probably 8,000 of these 9,000 will never make it.”
Cleantech companies are capital intensive and take a long time to bring their products to market. While there’s ample support for early-stage companies, the lack of major exits for VC players in the province has resulted in a marketplace that lacks the patience to shepherd firms to the next stage of revenue growth.
According to Michael Delage, vice-president of technology and corporate strategy of General Fusion, “There are very, very few funds in Canada that can lead a financing for mid-late stage companies.”
Without strategic changes brought on by the private sector and government, business will continue as usual. Stronger support for late-stage capital is required, and a few big exits for the VC community would go a long way to building a more mature market place.
But it isn’t just about money, said Delage, “More capital is required, but most important is for the federal and provincial governments to work together to find ways to make Canadian companies more competitive and improve the number of big wins in the sector.”
The Ups and Downs of Cleantech Venture Capital in B.C.