The profile of venture capital exits in Canada1

This chapter introduces a new dataset that depicts a comprehensive profile of 518 venture capital (VC) exits in Canada over the period 1991-2004. The rich details in the data provide new insights into the ways VCs exit their investments, and how exit patterns depend on market conditions in the exit year, the characteristics of the VC investor (private limited partnership, corporate, and government), the characteristics of the investee firms (industry and stage of development at first investment), and the characteristics of the transaction (capital requirements, syndication, and security design). The data show that VC governance affects the capacity for firms to achieve successful outcomes. The data further indicate VC-backed IPOs are more likely than acquisitions for common equity investments, investments in which the investee firm and VC investor are resident in the same province, and larger investments. The data also indicate a strong influence of government sponsored Labour-sponsored venture capital corporations (LSVCCs) on VC exit outcomes in Canada. As of 2004, LSVCCs comprise approximately 50% of capital under management in Canada, and are an inferior government-sponsored organizational structure that crowds out private VC funds. The data are consistent with the view that the dominant presence of LSVCCs in Canada has given rise to a high proportion of less successful exits by means of buybacks and secondary sales, and fewer IPOs and acquisition exits.