VC Market in North America
Venture capital firms are becoming more numerous around the globe. The VC industry is seeing growth because of the many startup businesses and entrepreneurs continue to spawn innovative ideas but lack funding to proceed. A VC firm such as Effi Enterprises, founded by Efraim Landa, offers the capital funding needed for a growing business. This is often a substantial amount of money that is invested in the company which has an above normal potential for growth in exchange for equity in the company. The general idea behind venture capital firms offering capital for companies is that they will be able to have an IPO within the next 10 years. Innovative thinking and entrepreneurship can be a huge economic boost to a region and has been key to many successful businesses in North America.
The History of VC Funding in North America
It may seem as though venture capital firms have been in existence in the mainstream forever. However, most feel that the beginning of the VC industry in North America can be attributed to General Georges Doriot. He founded the American Research and Development Corporation in 1946. Experts agree that their greatest successful venture was the Digital Equipment Corporation. In 1968, DEC went public. One of their other pioneering successes was establishing Fairchild Semiconductor. This is regarded by many as the very first VC startup. Early on most VC investments were provided by very wealthy individuals. But in 1958 the Small Business Investment Act was passed and that allowed the SBA to license companies to invest in entrepreneurial companies in the US. In the 60’s and 70’s Venture capital firms grew and continued to invest heavily but took a down turn after the crash of the market in 1974. By 1978 the venture capitalist firms had experienced a rebound and invested about $750 million USD. The 80’s and 90’s were dotted with ups and downs but with the internet making its surge into the market, the VC industry is still thriving in markets across North America.
Present State of the Venture Capital Market
The VC market can be very volatile with swings up and down based on the climate of the market. North American VC firms have experienced both ups and downs but the VC market in the US is very different from that of Canada. For one thing, Canadian venture capital firms were very engaged in the early 2000s but there was too much money poured into very risky startups at the same time the dot-com bubble began to expand. The VC market in Canada saw the bottom drop out. However, over the last 5 years even though Canadian firms are smaller than US counterparts, they still exist. Entrepreneurs in Canada express many concerns about the availability of VC funding. One thing that has been beneficial lately is that large US venture capitalists (angel investors) have provided funding to entrepreneurs and startups. There are only 5 or 6 VC firms in Canada that have the funds to invest in startups who need to raise between $1 and $10 million. Basically, if they cannot obtain the necessary VC funds in Canada, they must seek help from venture capital firms in the US.
Future of the North American Venture Capital Market
Plans are underway to repair the financing problems experienced by Canadian businesses. As the US economy slowly recovers, there are more VC firms willing to invest in businesses that show potential. And of course, this also provides a great boost to the local economy as well. The two go hand in hand. It is expected that VC funding will continue to be a huge financial factor for the business sector. The VC firm invests the funding to encourage the growth of a business and in exchange receives a percentage of equity in the company. This can be a much more appealing alternative than seeking out business loans which will have to be paid back with interest. The VC market is expected to continue to grow across North America.
Posted on January 24, 2013, in Business financing, economics, financial history, investing, VC financing, Venture Capital and tagged business financing, VC market, Venture Capital. Bookmark the permalink. 1 Comment.