Canadians spend a considerable amount of time bemoaning the lack of venture capital in the country and worrying that the historically poor returns delivered by Canadian VCs will create a downward spiral of technological investment. It appears that is not a just a Canadian problem but a worldwide one. Statistics from the US were summarized in an International Herald Tribune article which stated that:

• Success in the venture industry has been highly concentrated among fewer than 40 venture firms out of some 800 in business
• The venture capital association reported that, as of the end of 2006, the average rate of return for venture funds was only 1 per cent over five years
• Every year since 1997, the profit distributions from venture firms have been lower than the amount that they have invested
• The financial “home runs” the industry is famous for have predominantly come from a handful of firms. From 1986 to 2002, only 32 firms accounted for 56 per cent of money distributed.

Maybe as Steve Dow, a general partner at Sevin Rosen Funds stated, “The traditional venture model seems to us to be broken.” If the VC business model is in fact broken then we might be better off focusing on improving the business model itself instead of looking for special reasons for poor Canadian returns.

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