Thank you very much, Madam Chair, members of Parliament. Thank you for inviting us to talk about technology innovation. We're happy to do so.
I'll profile the venture capital operations of the BDC and how they support technological innovation in the health care sector.
As you know, BDC is a commercial crown corporation, the only bank in Canada that is exclusively dedicated to entrepreneurs. We have 28,000 clients, in virtually every sector of the economy.
A small portion of these 28,000 clients are building innovative companies, developing or disruptively applying leading-edge technology. These high-tech entrepreneurs have a high tolerance for risk and ambiguity. These are the businesses BDC venture capital supports.
The past decade has been very difficult for venture capital. The global financial crisis reduced the amount of available risk capital and exit opportunities, and overall lowered returns for venture capital. For instance, in 2010 the Canadian Venture Capital and Private Equity Association reported that venture capital firms invested $1 billion. In 2011 and 2012 respectively, venture capital investments were up slightly, at $1.5 billion each year. That might sound like a lot of money, but these figures are down from a high of nearly $4 billion in the late 1990s. And it’s not only money. To succeed, entrepreneurs also need expertise, mentoring, and networks. All are in very short supply.
A few years ago we did a root and branch study of the venture capital industry to see how we could help stimulate and strengthen it. Following this review, we began to reorganize ourselves in order to better support the Canadian venture capital ecosystem. Crucially, we’ve emerged as an honest broker, trusted to bring together a variety of potential customers, investors, and strategic partners. The road to a robust venture capital industry requires patience and perseverance. That is why I'm pleased to report that our new strategy appears to be showing results. But given the unpredictable nature of venture capital, the road to recovery will continue to be potentially volatile.
BDC's venture capital role in technology innovation is best understood as helping through targeted investments to bring about an industry-wide turnaround in Canada's high-tech entrepreneurs and their industry. We invest in three ways. First, we invest directly in companies through targeted internal funds. These include internal funds in health care, information technology, and energy-clean tech. Our knowledge of the health care sector is broad and deep. Our focus is to support innovation that improves health care efficiency.
Across the world, aging populations are increasing the demand for health care services, while younger people are dealing with chronic diseases like diabetes and obesity. At the same time, the supply of trained physicians and nurses is falling. Consequently, governments and hospitals are trying to make the most of their resources. They are focusing on efficiency and productivity and seeking innovative ways to improve delivery. Fortunately, we have the tools at our disposal that support a rethink of health care. The ubiquity of wireless, mobile, and cloud computing enable new ways of communication, interaction, and data analysis. Advances in genetics, genomics, and diagnostic technology are creating a deeper understanding of disease causes and enable faster and more accurate diagnoses.
Recall that today's entrepreneurs think globally when they scan for opportunities. Helping meet the global need for better health care services is a powerful incentive and way for Canada's high-tech entrepreneurs to succeed. To support Canadian innovation to expand globally, our health care fund will grow new companies and enter new markets.
The second way we invest is indirectly into funds, which in turn invest into companies. All of these funds have decision-making partners based in Canada. Many are managed by Canadians, and all invest significant capital in Canadian start-ups. We're also working hard to attract top-tier international VC funds to Canada that in turn commit to invest a large portion of their funds into Canadian technology. We hope the emergence of a greater number of large, skilled venture capital funds will help return the industry to profitability, thereby restoring investors' faith in the asset class. The recently announced venture capital action plan is an example of a step in the right direction to accelerate reaching that goal.
Third, our strategic investments and initiatives team helps seed very early stage entrepreneurs by mentoring them and helping them grow global businesses. Across Canada, we've helped establish some of the top private accelerators. These are three- to four-month programs where select start-ups are provided with intense learning opportunities to help them grow to a higher level. We've also recently announced a partnership with the Department of International Trade's Canadian technology accelerator, or CTA, program. With hubs set up in four U.S. cities, CTAs allow start-ups to make connections with potential investors in the U.S. Two of these CTAs are completely dedicated to health care in Philadelphia and San Francisco, while the CTA in Boston incorporates health care companies into its program as well.
In sum, we invest directly in companies, indirectly in funds, and strategically into the networks of mentors and investors that make the whole VC ecosystem work. One thing is certain: turning an innovative idea into a healthy company that brings benefits to Canadians—commercialization—is never straightforward or sure. It takes patience and perseverance, money, skills, and networks.
We, BDC, are doing our part to improve Canadian entrepreneurs' chances of successfully commercializing their ideas. It is what we are here for, and we do it in several ways.
Thank you.