In the Canadian Venture Capital and Private Equity Association's recent report on investment in Canada, the graphics alone tell the story about the dearth of activity in Manitoba.
Its Canadian Market Overview report covers the first half of the year for both venture capital and private equity investments. It was a record quarter and record first half for deals across the country with $2.15 billion in venture capital, surpassing the previous high of $1.67 billion.
It's not surprising that most of those investments were targeted at companies in Toronto, Montreal and Vancouver with a good number in the Kitchener-Waterloo-Cambridge area of southern Ontario as well.
A number of maps are included in the 34 page report indicating the numbers and value of deals in the provinces they landed in.
Manitoba's space on the maps is empty for several of the entries: top 10 cities where deals were done, venture debt deals, private equity buyout or add-on deals and private equity growth deals. There was $4 million in venture capital investments in Manitoba through the first six months of this year (out of a total of $2.15 billion) and $3 million in private equity deals out of a total of $4.9 billion.
There was more activity in the Maritimes and in Saskatchewan in some of the categories that were being recorded, although not in every one.
But a cursory review would give you the distinct impression that Manitoba is venture capital/private equity desert.
That impression would not be a surprise to anyone who has been around this province for a few years.
Manitoba is not all alone in that regard. Alberta has been very quiet lately, which may be expected considering the challenging state of the oil and gas industry. There was a lot more deals in Saskatchewan.
That's not to say there's never been a deal in Manitoba. In the fourth quarter of last year there was a respectable $29 million invested in Manitoba. That's when Bold Commerce closed its $22 million deal with two Toronto funds. The e-commerce company has been a rising star for most of its seven-year history.
The ability of its four founders to use its revenues to grow the company for as long as it did allowed Bold to grow to a size and scale that made it an attractive target. Just this week it was named as one of the top 10 growth companies in the country by an organization called CIX.
Marshall Ring, the CEO of Manitoba Technology Accelerator, has been helping companies get off the ground in Manitoba for more than a decade.
He's now somewhat philosophical about the lack of venture capital and believes the Bold model is ultimately the one that works here.
"Bold is a case in point," he said. "They bootstrapped the company and built it to scale then attracted external (venture capital) and the company has been able to stay here and thrive."
He is now of the impression that venture capital investment here has to be earned, regardless of whether or not there is a dedicated Manitoba fund.
Various players in Manitoba have been trying to crack the code for some time. More than a year and a half ago, the province issued a request for pre-qualifications seeking out potential fund management partners with the hopes of eventually launching one or two venture capital funds likely with a minimum of $40 million each.
But there has not been a peep out of the province since then on that file.
One Winnipeg business person, who submitted a proposal and has not heard back, diplomatically said, "I know the province looked at it and I believe they may still be digesting what they want to do with respect to venture capital funds."
Darrell Pinto, the vice-president research and industry advancement at theCanadian Venture Capital and Private Equity Association's, said a locally domiciled fund might help in Manitoba, but it would not be the ultimate solution.
"Even Canadian or U.S. VC investors are not necessarily locked into their own particular geography," Pinto said in an interview. "If there was a VC fund in Manitoba chances are they would be looking across Canada and maybe even south of the border to target companies."
Pinto said that 15 to 20 years ago there was not much venture capital being invested in Toronto, Montreal and Vancouver either.
"All the venture capital in the world used to be concentrated in Silicon Valley," he said.
Pinto believes those three Canadian cities changed the dynamic by creating very successful community-wide support systems.
"They have done a great clustering job," he said. "A number of different stakeholders, all of whom have a part to play, collaborated to build this ecosystem up. It is not a single government or a set of universities or an entrepreneur that that can create that healthy ecosystem by themselves."
He said once you have one or two successes it becomes easier to tell the narrative about that strong ecosystem.
Winnipeg is gaining momentum. Bold Commerce and a handful of other companies help tell that story. But there's still a long way to go.
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.