KELLY LOUISEIZE
Despite the lagging first and second quarter of this year, market and statistics gurus believe the numbers may show signs of recovery in the third quarter with investments in life sciences, software and clean tech companies.
Although venture capital markets have in most sectors taken a tumble over the last two years, Mary Macdonald of Macdonald & Associates Ltd. explains the Canadian market has been affected more due to a lack of “mega deals” in the IT sector.
“It has been exacerbated by the fact that the telecommunications sector has been hit hard and that is a big part of where the Ontario money has gone,” Macdonald adds.
According to her Web site, seven financings for mega deals that amounted to $10-million plus were completed in the past quarter, almost half the amount that was documented a year ago.
When SARS hit, “it impacted people’s ability and willingness to do business.”
However, Macdonald is hearing anecdotally that people are starting to do more transactions and evidence of that should be found in the third and fourth quarter.
“My guess is that the recovery will be more moderate in its pace than the last pick up and the downturn has been.”
One of the main factors that may be different in this quarter is the absence of large telecommunication deals.
“I am not convinced that we will see the $750-million transactions in the foreseeable future.”
What she does expect to see is a sustained interest in the life sciences, like biotechnology and medical equipment and health services. In the second quarter it was the hub of the Canadian industry fuelling $51 million from 42 companies.
“Everybody sees that sector as a growth sector for a bunch of reasons. Science has developed to the point where people are hopeful they could actually do something about cancer, and we are getting older.”
Coupling those two factors, Macdonald believes there will be more expenditures in that area.
In addition, where telecommunications has previously driven the IT numbers, software is now showing signs of
strength.
“In the software sectors, people can do deals for a lot less money and the demand for software continues, whereas the demand for telecommunications equipment has certainly diminished because the customers do not have the
money to buy the products.”
Those two sectors are expected to gain momentum along with a new market called “clean tech.”
Clean technology refers to energy and environmental technologies along with clean up and conservation processes.
